Travel Guide to Iceland
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Legislature and government

Icelandic government 2013 - 2017

The Progressive Party and the Independence Party form the coalition government in Iceland, with 19 members of parliament each. The total number of MP's is 63. The prime minister of Iceland is Sigmundur David Gunnlaugsson for the Progressive Party. He is born in 1975, making him the youngest prime minister in Iceland since the 1930's. Bjarni Benediktsson is the minister of finance and economic affairs, he is the chairman of the Independence party. Bjarni Benediktsson is born in 1970.

There are a total of 9 ministers, which is an increase by one minister since the term before. The Independence Party has 5 ministers but the Progressive Party has 4 ministers. The ministry of the environment was merged into the ministry of agriculture and fisheries. Two ministers are at the ministry of welfare, which has not been done before. One ministry was added since the term before, that was the ministry of social affairs, but since the ministry of agriculture was abolished the total number of ministries stays the same. 

The ministers in Iceland:

Prime Minister - Mr. Sigmundur David Gunnlaugsson - Progressive Party

Minister of foreign affairs - Mr. Gunnar Bragi Sveinsson - Progressive Party

Minister of agriculture, fisheries and the environment - Mr. Sigurdur Ingi Johannsson - Progressive Party

Minister of social affairs - Ms. Eyglo Hardardottir - Progressive Party

Minister of finance and economic affairs - Mr. Bjarni Benediktsson - Independence Party

Minister of the interior - Ms. Hanna Birna Kristjansdottir - Independence Party

Minister of education and culture - Mr. Illugi Gunnarsson - Independence Party

Minister of industries - Ms. Ragnheidur Elin Arnadottir - Independence Party

Minister of health - Mr. Kristjan Thor Juliusson - Independence Party


International Framework

In July 2009, Iceland submitted a formal application for accession to the European Union after Parliament voted in favour of applying for membership. A year later, in July 2010, Iceland's accession negotiations with the European Union were formally opened. Iceland is a founding member of the European Economic Area (EEA)1. This free-trade zone allows the tariff-free movement of goods, services, capital and labour. Companies domiciled in any of the other 30 member countries of the EEA, and in fact in any of the OECD countries, have the same rights to operate in Iceland as companies domicile in Iceland. They only need to apply for the same permits and registration as companies domiciled in Iceland. Companies registered in Iceland are permitted to operate in all the countries of the EEA without any special permits or legislation. The same rules apply to movements of labour. A foreign national who intends to stay in Iceland for a period exceeding three months mus have a residence permit. However, a national of an EEA member country in search of a job may stay in Iceland for six months without a residence permit. A standard tax credit can be obtained within the tax authorities. Iceland is actively involved in the work of major international organizations. It is a member of the United Nations, Council of Europe, NATO, EFTA, OECD, GATT, GATS and WTO, and cooperates particularly closely in cultural and social fields with Scandinavian countries through the Nordic Council. For further information see


Government and Political System

Icelandic government in 2010
The Icelandic government in 2010. Source:

National Government

Iceland is a parliamentary democratic republic. The head of state is the President, elected for a term of four years at a time, whose duties lie outside day-to-day party politics. The government is led by the Prime Minister. Parliamentary elections are held at intervals of no more than four years. There are 63 members of parliament, elected by proportional representation. Since no party has secured a parliamentary majority since the establishment of the Republic in 1944, Iceland has always been ruled by coalition governments. A new administration was formed after the 2009 parliamentary elections, consisting of the collaboration of the Social Alliance (SA) and the Left Green Party with Ms. Jóhanna Sigurðardóttir, leader of the SA, as Prime Minister, and Mr. Steingrímur J. Sigfússon, leader of the Left Green Party, as Minister of Finance. Parliamentary seats were won in the April 2009 elections by the Social Alliance (20), the Independence Party (centre-right) (16), the Left Green Party (14), the Progressive Party (centre) (9), and the Movement Party (4). The next parliamentary elections are expected to be held in May 2013. For further information and updates see


Local Government

Local elections are held every four years. Municipalities are responsible for specific services including basic health care and compulsory education, and are allocated part of income tax revenues to fund their operations, along with property taxes and other smaller levies.


Legal Environment

Legislative Process

Parliament consists of a single chamber of 63 members and a simple majority is required for ordinary bills to be passed into law, while constitutional amendments require a two-thirds majority and take effect if they are then approved by the parliament, which convenes after the following general election. Approved bills are ratified by the President, who has the formal power of vetoing a bill and referring it to a national referendum, although this has only twice been resorted to in the history of the Republic. Bills may be introduced either by the government or ministers responsible for the issues in question, or by private members, including the opposition. After their introduction in parliament, bills are given at least three readings before being voted on, and are usually referred to parliamentary committees in between.



Under the Constitution, sentences may be passed by the courts only. The courts are divided into two levels: the district courts, where most cases are heard, and the Supreme Court, which hears appeals from the district courts. There are eight district courts and one Supreme Court, all hearing private and public cases. A special court called the Labour Court is concerned with labour disputes.


Relationship of Government and Business

Access to official bodies and agencies is easy in Iceland’s small society, with a minimum of red tape. Government policy aims to provide a fair, efficient and competition-driven operating environment for companies within a market economy, and to encourage foreign investment, especially in areas that diversify the economy. Iceland’s corporate income tax of 20% is one of the lowest in Europe and among the OECD member countries. For more than a decade, the government has tailored packages of measures to fit wage contracts negotiated in collective bargaining between employers and unions.


Privatization and Economic Restructuring

It is the stated policy of Iceland’s government to scale down public sector activities in those areas which could be handled by private operators without raising social costs. To an increasing extent, public supplies and services are being contracted out. Tenders are mandatory for all procurement of supplies exceeding ISK 13,422 ,320 (USD 116,940) and procurement of services and works exceeding ISK 17,430,000 (USD 151,856) throughout the EEA/EU countries. Privatization began in the late 1980s and some state-owned enterprises have already been sold, while others have been converted to corporations and the plan is to privatize them in part or whole. Among the incorporated state-owned enterprises are power companies and a post company. Shares in industrial ventures, in which the state participated as a founder, have also been announced for sale.


Regulatory Environment

Operating licenses are required for businesses in certain sectors, for example manufacturing industries, and are granted on fulfilment of clearly defined rules. Details of regulations, monitoring and inspection agencies, etc., vary from one sector to the next, and Invest in Iceland will assist in establishing contacts and offer guidance. Broadly speaking, as a member of the European Economic Area, Iceland operates its regulatory environment on the same principles as the European Union


Source: Doing Business in Iceland 2011 brochure from

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