Hoppa yfir valmynd
Ministry of Finance and Economic Affairs

Act No 87/1992 on Foreign Exchange

This is an English translation.

The original Icelandic text, as published in the Law Gazette (Stjórnartíðindi), is the authoritative text. Should there be discrepancy between this translation and the authoritative text, the latter prevails.

Foreign Exchange Act, no. 87   17 November 1992

Progress of the Case in Parliament. Bill of Legislation.

Entered into force 23 November 1992. EEA Agreement: Annex XII Directive 88/361/EEC. Amended with Act no. 82/1998 (entered into force 1 October 1998), Act no. 128/1999 (entered into force 1 February 2000; EEA Agreement: Annex XI Directive 97/5/EC), Act no. 134/2008 (entered into force 28 November 2008), Act no. 27/2009 (entered into force 1 April 2009), Act no. 73/2009 entered into force 14 July 2009), Act no. 98/2009 (entered into force 1 October 2009, except Articles 69 and 70, which entered into force 1 January 2010), Act no. 78/2010 (entered into force 30 June 2010), Act no. 81/2011 (entered into force 29 June 2011), Act no. 120/2011 (entered into force 1 December 2011); EEA Agreement: Annex IX Directive 2007/64/EEC), Act no. 126/2011 (entered into force 30 September 2011), Act no. 127/2011 (entered into force 30 September 2011), Act no. 17/2012 (entered into force 13 March 2012), Act no. 21/2012 (entered into force 16 March 2012), Act no. 16/2013 (entered into force 11 March 2013), Act no. 35/2013 (entered into force 5 April 2013), Act no. 67/2014 (entered into force 6 June 2014), Act no. 27/2015 (entered into force 8 June 2015), Act no. 58/2015 (entered into force 17 July 2015), and Act no. 60/2015 (entered into force 17 July 2015).

If mention is made in this Act of a Minister or Ministry without further specification, this shall be understood to mean the Minister of Finance and Economic Affairs or the Ministry of Finance and Economic Affairs, under whose auspices this Act is administered. Information on the functions of the ministries, pursuant to presidential decree, can be found here.

  

Article 1

For the purposes of this Act:
Resident refers to:

l. Any individual permanently resident in Iceland in accordance with the provisions of the Act on Legal Domicile, irrespective of nationality; the same shall apply to an Icelandic national and his dependants residing in other countries who is employed there by the Icelandic State with an embassy, permanent delegation or consulate and accepts remuneration from the Icelandic Treasury, or is employed by an international organisation to which Iceland is party;
2. Any legal person registered as legally domiciled in Iceland, stated to be resident in Iceland in its articles of association, or in effect managed in Iceland; Icelandic branches of legal persons domiciled outside Iceland are regarded as residents.
Non-resident refers to all other individuals or legal persons than residents.
Domestic currency refers to Icelandic bank notes, coins, cheques and other references to payment, drafts and other orders for payments denominated in Icelandic currency, commemorative coins, and gold, silver and other precious metals, provided they are used as currency in Iceland.
Foreign currency refers to foreign bank notes, coins, cheques and other references to payment, drafts and other orders for payments denominated in foreign cumrency, commemorative coins, and gold, silver and other precious metals, provided they are used as currency in other countries.
Foreign exchange transactions refer to the act of exchanging domestic currency for foreign currency, foreign currency for domestic currency or one foreign currency for another foreign currency, and to credit transactions which are analogous to delivery or reception of currency.
Capital movements refer to the transfer or movement of capital between countries in relation to:
1. direct investments,
2. the issue, sale or purchase of shares, debt instruments, drafts, unit shares in mutual funds and other long-term and short-term securities,
3. lending, borrowing and payment or receipt of amortisation on loans,
4. granting of guarantees and all forms of security for payment,
5. the opening and use of bank accounts,
6. forward contracts, options and currency and interest-rate swaps,
7. transfers of capital owned by private individuals and families.
Short-term capital movements refer to capital movements between countries in relation to:

l. the issue, sale or purchase of debt instruments and drafts with an original maturity of up to one year, and all other short-term securities,
2. the issue, sale or purchase of unit shares in mutual funds which invest in short term securities,
3. lending and borrowing for a shorter period than one year,
4. deposits in and withdrawals from accounts with depository institutions.

Furthermore, short-term capital movements shall include the import and export of short-term securities and other analogous transactions.
Long-term capital movements refer to all other capital movements than short-term capital movements.
Direct investment refers to a financial or other contribution to the equity capital of an enterprise, or the purchase of a share in an enterprise, made with the aim of acquiring an effective influence on its management. Long-term loans to a company from its owners are also regarded as direct investment.
Portfolio investment refers to all other investment than direct investment, in particular investment in securities made for the primary purpose of obtaining a return, instead of acquiring an effective influence on the management of an enterprise.
Domestic securities refer to any transferable claims issued by a resident, such as shares, dividend coupons, debt instruments, interest coupons, and unit shares in mutual funds, as well as transferable instruments conveying a title to property other than real estate or individual chattels.
Foreign securities refer to any transferable claims issued by a non-resident, such as shares, dividend coupons, debt instruments, interest coupons, and unit shares in mutual funds, as well as transferable instruments conveying a title to property other than real estate or individual chattels.

 

Article 2

Foreign exchange transactions relating to the import and export of goods and services shall be unrestricted, as well as capital movements and foreign exchange transactions relating to them, unless otherwise stipulated in statutes.

 

Article 3

Notwithstanding the provisions of Article 2, the Central Bank of Iceland may decide in consultation with the Ministry of Commerce to restrict or suspend for a period of up to six months any or all of the following categories of capital movements if short-term capital movements to and from Iceland create, in the Bank's opinion, exchange-rate and monetary instability:

1. Sale or purchase of short-term securities.
2. Deposits in and withdrawals from accounts with depositary institutions.
3. The issue, sale or purchase of unit shares in mutual funds which invest in short-term securities.
4. Lending or borrowing for a period of less than one year not relating to international trade in goods and services.
5. Import and export of short-term securities and of domestic and foreign currency.
6. Other short-term capital movements analogous to those stated in subparagraphs 1-5 above.

 

Article 4

Notwithstanding the provisions of Article 2, the Minister of Commerce may issue a Regulation imposing restrictions upon foreign exchange transactions relating to any or all of the following categories of capital movements, provided that consideration is made of the provisions of the Act on Investment by non-residents in Business Enterprises and the Act on the Rights of Ownership and Use of Real Estate, and of international agreements to which Iceland is party:

l. Direct investment by non-residents in business operations in Iceland;
2. Sale or purchase by non-residents of shares in domestic enterprises.
3. Real estate purchases in Iceland by non-residents.

Such restrictions may not, however, extend to the transfer from Iceland of capital realised by a non-resident on the sale of a share in an enterprise, liquidation of an enterprise or sale of real estate in Iceland.

 

Article 5

Notwithstanding the provisions of Article 2, the Minister of Commerce may issue a Regulation imposing restrictions upon foreign exchange transactions relating to any or all of the following categories of capital movements up to and including 31 December 1994:

l. Sale or purchase by residents of debt instruments and drafts denominated in foreign currency with an original maturity of up to one year, and the issue of such securities by residents in other countries.
2. Sale or purchase by non-residents of debt instruments and drafts denominated in Icelandic króna with an original maturity of up to one year, and the issue of such securities by non-residents in Iceland.
3. The issue in other countries of debt instruments and drafts denominated in Icelandic krónur with an original maturity of up to one year.
4. The issue, sale or purchase of unit shares in mutual funds which invest in short-term securities.
5. Lending or borrowing for a period of less than one year not relating to international trade in goods and services.
6. Deposits with and withdrawals from accounts with depositary institutions.
7. The import and export of short-term securities, bank notes and coins.
8. Other short-term capital movements analogous to those stated in subparagraphs 1-7 above.
9. Forward contracts, options, currency and interest-rate swaps and other related foreign exchange transactions in which the Icelandic króna is one of the denominated currencies.

The Minister may furthermore issue a Regulation which stipulates rules governing the obligation to exchange or surrender foreign currency acquired by residents on the sale of goods and services or by other means. This authorisation shall cease to apply from 1 January 1995 inclusive.

 

Article 6

Foreign governments, local authorities and other foreign governmental authorities are prohibited from issuing debt instruments in the Icelandic market except with the permission of the Central Bank of Iceland.

 

Article 7

The Central Bank of Iceland may grant exemptions from such restrictions as might apply to capital movements, cf. Article 4, Article 5 or interim provisions, upon an application to that effect. A special 1% duty shall be levied on the sum involved in each instance when an exemption is granted. Capital movements on behalf of the Treasury and those relating to foreign exchange transactions by authorised foreign exchange dealers shall always be exempt from this duty. The duty shall be paid to the resident acting as broker in the foreign exchange transaction, or to the Central Bank of Iceland. Revenues from the duty shall accrue to the Treasury.

 

Article 8

The Central Bank of Iceland may act as intermediary in foreign exchange transactions and buy and sell foreign currency. Other parties are prohibited from acting as intermediaries in foreign exchange transactions in Iceland unless authorised to do so by statute or by the provisions of international agreements to which Iceland is party, or licenced to do so by the Central Bank.
The Central Bank shall issue further rules relating to the conditions for foreign exchange transactions that apply to the parties named in the second sentence in paragraph l. These shall include provisions governing the scope and limits of foreign exchange transactions of each body, regular provision of information to the Central Bank, a satisfactory internal supervision and information system, and conditions for the competence of employees. Furthermore, these rules shall provide for the withdrawal of licence to buy and sell foreign currency as regards parties other than those authorised to do so by statute or by the provisions of intentional agreements to which Iceland is party.

 

Article 9

A Regulation may be issued stipulating that sale or purchase of securities between a resident and non-resident shall be conducted through the brokerage of parties authorised to trade in securities in Iceland by statute or by the provisions of intentional agreements to which Iceland is party. Furthermore, the Regulation may declare specific categories of legal persons to be exempted from such a demand, and that the Central Bank may permit individual residents to trade in securities with non-residents without any intermediary.

 

Article 10

All parties conducting foreign exchange transactions and capital movements on behalf of their clients shall have clear and readily accessible information available about such services, together with details of commission and duties reserved in such trading.
The Minister may issue a Regulation stipulating rules on the implementation of paragraph 1.

 

Article 11

It is obligatory to provide the Central Bank of Iceland with all information that it might request concerning foreign exchange transactions in order to fulfil its necessary role in supervision and compilation of economic statistics, cf. the provisions of the Central Bank Act. The Bank may issue further rules on the implementation of foreign exchange transactions, such as the obligation to register and notify about accounts held by residents with depositary institutions in other countries, presentation of documents, general provision of information and design of forms.

 

Article 12

Persons charged with the implementation of this Act shall be bound to secrecy as regards the conditions pertaining to individual clients and other facts of which they may acquire knowledge in the course of performing their duties and which are confidential according to law or the nature of the matter, unless a judicial decision is passed to the effect that such information shall be divulged in court or to police, or that the law requires the disclosure of such information. The duty not to divulge confidential information is not affected by the cessation of employment.

 

Article 13

Violations of the provisions of this Act shall be punishable by fines or custody if no greater penalties are stipulated for such infringements under the provisions of other laws. In the event of violations on behalf of legal persons, the above mentioned penalties may be imposed on their management, and furthermore the legal persons may be fined or their rights to operate withdrawn. Attempted violation of the provisions of this Act, or complicity in such a violation, is also liable to punishment under the terms of Chapter III of the Criminal Act.

 

Article 14

The Minister of Commerce is responsible for the implementation of this Act. He may issue a Regulation establishing more detailed provisions for its implementation.

 

Article 15

This Act takes immediate effect. At the same time, Act nr. 63/1979 on Foreign Exchange and Trade as subsequently amended shall cease to apply.

 

Interim Provisions

The Minister of Commerce may issue a Regulation imposing restrictions upon any or all of the following categories of capital movements, until such time as the Treaty on the European Economic Area takes effect with respect to Iceland, although no later than 31 December 1993:

l. Sale or purchase by residents of shares and debt instruments denominated in foreign currency with an original maturity of at least one year, and the issue by residents of such securities in other countries.
2. Sale or purchase by residents of unit shares in non-resident mutual funds which invest in long-term securities.
3. Sale or purchase by non-residents of debt instruments denominated in Icelandic krónur with an original maturity of at least one year.
4. The issue abroad by residents of shares and debt instruments denominated in Icelandic krónur with an original maturity of at least one year.

 

 

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Disclaimer: This section of the site details available translations on legislation relating to the Government Offices in Iceland. In case of any discrepancies between the translations and the original text in Icelandic, the original text as published in the Icelandic Legal Gazette prevails.

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