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An Iceland Foundation can be formed for two purposes: foundations engaging in business and non-commercial foundations (like charitable).
Foundations engaging in business are governed by the Act on Foundations Engaging in Business Operations of 1999 (the “Act”).
Iceland is located in the North Atlantic Ocean. English is spoken by many of its citizens.
An Iceland Foundation can enjoy the following benefits:
• Foreign Participation: Founders and the beneficiaries can all be foreigners.
• Asset Protection: All assets and funds are owned by the foundation protecting the founder and beneficiaries from their creditors.
• Estate Planning: Foundations have a perpetual lifespan offering many generations of the founder’s heirs the benefits.
• English: While not an official language, most Icelandic citizens speak English.
• Fast Formation: A foundation can be formed very quickly and registered within one day.
Iceland Foundation Name
Foundations cannot assume a name exactly alike or closely resembling an Iceland company or legal entities name.
Foundations’ names must end with the word “Foundation” to avoid confusion with trusts or other legal entities.
Definition of a Foundation Engaged in Business
A Foundation Engaged in Business is one which:
• Obtains earnings from selling goods and services; or
• Holds the majority of shares (or votes) in a Private (or Public) Limited Company or other for profit companies or corporations.
On the other hand, a foundation is considered not engaged in business if:
• The business activities are limited compared to other foundation activities; or
• The income is only a small part of the foundation’s capital and reserves.
While non-commercial foundations do not have to register with the government, foundations engaged in business are required to do so. The government maintains a special Foundation Registry for this purpose.
The Director of Internal Revenue maintains the Foundation Registry under the Act. The Minister of Finance (“Minister”) provides the manner of registration for foundations.
The following information is required for registration:
• Foundation’s name;
• Office address;
• Purpose of foundation;
• Establishment funds amount and payment method (cash or like kind)
• Manner of obtaining signatures for documents;
• Names, addresses, and ID numbers for directors, managers, and any power of attorney holders; and
• Beginning of fiscal year.
The Registrar will publish a notice of the foundation’s registry in the Legal Gazette and issue a Certificate of Registration.
Articles of Association
An Articles of Association (also called an Organizational Charter) of the foundation must include:
• Foundation’s name;
• Registered office address;
• Founder’s name and initial contributed funds;
• Total initial funds;
• Whether like kind contributions will be accepted in lieu of cash;
• Describe any special rights of the founder(s);
• Description of the directors and representative council including how many, hoe they are appointed, terms of office, how new members are appointed, how they may be removed and compensated;
• Beginning of the fiscal year;
• How profits and losses will be apportioned;
• How amendments to the Articles of Association will occur, foundation’s liquidation, and disposal of assets upon dissolution.
To establish a foundation to engage in business, a minimum initial funding of 1 million ISK will be required. This amount may change due to consumer price index changes as set by the Minister.
If like kind in lieu of cash contributions are made, a statement by an auditor assessing their current value will be filed.
A foundation has the option to appoint a representative council. The Articles of Association will describe the council member’s appointments, compensation, powers, and duties.
The representative council appoints the directors and its board of directors. The council also determines the compensation for the directors. If there is no representative council, the board of directors will assume their responsibilities.
Directors and manager may not become a majority in the representative council.
Board of Directors
A minimum of three persons will be appointed to form the foundation’s board of directors. Their term of office will be four years unless the Articles of Association provides otherwise.
The Articles of Association should describe how directors will be appointed. A majority voting for a resolution will prevail.
The board of directors is authorized to appoint a manager (or more). The chairman of the board of directors cannot be appointed as a manager. If directors are appointed as managers, they cannot consist of a majority in the board of directors.
Managers shall be residents of Iceland. At least half of the board of directors must be Icelandic residents.
Directors and managers will avoid any conflicts of interests with the foundation including participating in contracting between themselves and the foundation. Conflicts of interests regarding doing business with third parties must also be avoided.
The Board will manage the foundation and hire managers with delegation of their powers to perform for managerial functions.
The beneficiaries can be from any country as citizens and residents. The Articles of Association will provide all their rights and benefits associated with the foundation’s income, profits, losses, and distribution of assets.
Non-commercial foundations are exempt from all taxes because their income is only spent for the public good (like a charity). On the other hand, foundations engaged in business pay income taxes like a corporation.
The corporate tax rate is 20% of the profits.
Audits and Accounting
The board and the managers shall prepare annual accounting records for every fiscal year as set forth in the Articles of Association.
Appropriate books and accounting records will be maintained.
The council will appoint an auditor and if there is no council, the board will appoint one. If none are appointed, the Minister shall appoint one. The auditor will audit the financial records and the board will approve them for every fiscal year.
The directors, founders, auditors, managers and inspectors will be held liable to the foundation for any damages occurring through their willful or negligent conduct resulting in losses.
There is a 2 year statute of limitations for anyone or company claiming damages and/or losses by the foundation, its founders, directors, managers, auditors, or inspectors.
Everything filed with the Registry of Foundations are public records accessible by the public.
Time for Formation
Foundations documents can be prepared quickly depending upon the speed of the preparer. In addition, the filing with the registry can be done within one day.
An Iceland Foundation can take advantage of the following benefits: foreign founder and beneficiaries, perpetual life, asset protection, estate planning, fast formation, and English is spoken by most locals.