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Q and A on Measures in response to COVID19

April 21st 2020

The Government has introduced the second phase of its economic measures in response to the COVID-19 pandemic.

The objectives of the measures are to safeguard the foundations of society, protect households’ and businesses’ income, and ensure strong resilience for the Icelandic economy. As the adverse economic impact of the pandemic materialises, the need to consider social welfare and security increases.

The Government has introduced the second phase of its economic measures in response to the COVID-19 pandemic. Information on the first phase of the measures can be found here.

The objectives of the measures are to safeguard the foundations of society, protect households’ and businesses’ income, and ensure strong resilience for the Icelandic economy. As the adverse economic impact of the pandemic materialises, the need to consider social welfare and security increases.

Individuals: 

Measures focusing directly on individuals fall into two categories. The impact of the pandemic is both economic and social, and it can be felt throughout society. On the one hand, there are measures aimed at helping those groups that are considered to need immediate support because of the social repercussions of COVID-19. On the other hand, the objective is to create temporary study and work opportunities for students, workers on unemployment benefits, and others who may seek out such opportunities. The main measures are the following:

  • Mental health and remote medicine: Strengthening mental health services, healthcare services, and remote services
  • Protection for children and vulnerable groups: A campaign against violence, support for recreational activities, and measures to counteract social isolation
  • Special subsidies: Front-line wage enhancements for healthcare workers
  • Pathways to effectiveness in study and work: A campaign to expand study options and temporary jobs
  • Strengthening innovation and the arts: Increased innovation subsidies, additional months of artistic stipends

Family income was the focal point of the measures introduced in March 2020, which included unemployment benefits to compensate for reduced employment percentage, one-time payments to families with children and to disability pensioners, and a temporary authorisation for third-pillar pension savings withdrawals. Further information on those measures can be found here. Three of the measures being introduced now aim to strengthen companies’ operational foundations in this difficult economic environment, thereby protecting jobs and household incomes. Further information on these measures can be seen under the tab above labelled “Companies”.

The wage enhancements will be in the form of a one-time payment to front-line workers in hospitals, healthcare institutions, and community healthcare centres. Healthcare workers in many parts of the healthcare sector have been under enormous strain due to the extraordinary and demanding conditions currently prevailing, and many of them face the daily risk of being infected with COVID-19. A total of ISK 1bn will be allocated to these payments. The distribution of the payments will be handled by the director of each healthcare institution.
Universities will be enabled to absorb a potential increase in student numbers due to the economic impact of the COVID-19 pandemic. Emphasis will be placed on study programmes that narrow the skills gap in the job market and meet the economy’s need for specially educated workers in understaffed sectors; i.e., professional university-level studies in healthcare and technology sectors, teacher education, and practical studies for students who have Icelandic as a second language.
The summer study option is designed for individuals on full or partial unemployment benefits who can strengthen their skills with further study and continuing education. It is also intended for students who are enrolled in conventional university-level or upper secondary school programmes or who are about to begin such studies.
Summer school will be offered at the upper secondary and the university level. Universities will also be enabled to absorb a possible increase in enrolment this autumn, with emphasis on study programmes that narrow the skills gap in the labour market.

There will be several forms: on-site instruction, distance learning, and a mixed approach:

  • On-site courses may be, for instance, a few hours long, or half-days or full days, over a period of several weeks.
  • Courses taught according to the mixed approach would take place primarily through distance learning, supplemented by occasional meetings with the instructor.
  • Distance learning courses.

Both public and private educational institutions will provide university-level and upper secondary-level study during the summer. The programmes will be advertised on the schools’ websites and elsewhere.
Preparatory study will be offered to students intending to begin university-level studies this autumn. Further information will be posted on the universities’ websites.
The summer study option is designed for individuals on full or partial unemployment benefits and others who can strengthen their skills with further study and continuing education.
At the upper secondary level, there will be introductory courses in innovation, technology, and the arts, as well as courses that are part of the schools’ regular study programmes. Short vocational study programmes will also be offered.
At the university level, offerings will include short practical study programmes at the undergraduate and graduate levels, preparatory studies for students intending to apply to university, and re-education and continuing education for professionals.

At the university level, only summer courses for which ECTS units are awarded are eligible for loans from LÍN. Courses taken during the summer term are considered part of the previous academic year. The student must complete at least 15 ECTS units during the summer term in order to qualify for a summer loan. Loans are never granted for more than 20 ECTS units during the summer term and a total of 80 ECTS units for each academic year. Loans for the summer term must be applied for separately. The application deadline for loans from the Icelandic Student Loan Fund (LÍN) for the summer 2020 term is 15 July 2020.

Upper secondary students who are working towards an academic diploma (matriculation examination) or comparable diploma are not eligible for student loans. However, student loans are granted for certified trade or technical education and other recognised vocational training at the upper secondary level that is organised by the occupational council concerned. Students may also be eligible for student loans when they are working under an apprenticeship contract, if the agreed wages are below the student’s basic cost of living. When the amount of student loans is calculated, the student’s apprenticeship wages are treated the same as any other income under LÍN rules and could therefore lower the loan amount.


According to current legislation, individuals receiving unemployment benefits are permitted to take a maximum of 10 ECTS units at the university level without having their benefits reduced. The part-time option is intended to maintain the employment relationship between workers and employers. It is a temporary measure that expires on 1 June; therefore, it does not apply to study while on unemployment benefits.
Perhaps. It is important to read the universities’ websites and find out whether the study programmes or courses under consideration are eligible for ECTS units. Many courses available in the summer do not confer units and therefore cannot be used to shorten the overall study time. Study that does not confer ECTS units can nevertheless be useful for continuing education.
It is assumed that workers will be able to apply for educational benefits from their labour union if they have accrued the right to do so.
There are no special scholarships or grants available other than those provided through labour unions.
Each school will publish a schedule of fees for the summer session on its website.
According to current legislation, individuals receiving unemployment benefits are permitted to take a maximum of 10 ECTS units at the university level without having their benefits reduced. The part-time option is intended to maintain the employment relationship between workers and employers. It is a temporary measure that expires on 1 June; therefore, it does not apply to study while on unemployment benefits.
All study in excess of 10 ECTS reduces unemployment benefits in proportion to the number of units. For instance, 15 ECTS of study will reduce unemployment benefits by 50%. Those enrolled in study programmes of 20 ECTS or more are not eligible for unemployment benefits.
Universities are authorised to award full or partial credit for ECTS units that a student has earned at another school. It is advisable to contact the school concerned and determine whether, and to what extent, it is willing to award credit for units earned at another educational institution.

At upper secondary schools, it is usually possible to obtain elective credit for the courses. Students who attend upper secondary school should contact their school to determine whether credits for the course concerned can be applied to their major study programme.
Emphasis will be placed on offering courses tailored to the needs of foreign nationals.
The Government wants to help those who must provide additional care for disabled or chronically ill children whose external care is unavailable because of COVID-19. This help takes the form of subsidies for caregivers, based on a temporary increase in caregiving needs. The measure is not income-linked. The subsidies are not taxable and do not affect other benefits.
Due to conditions in the labour market in the wake of the COVID-19 pandemic, it is clear that there will be fewer summer jobs available for those students who usually work over the summer. With financial support from the Government, national and local authorities intend to create up to 3,500 summer jobs for students. The aim is to prevent students from having no summer income, which could make them unable to continue their studies in the autumn.
Contributions to the Icelandic Student Innovation Fund will be increased by ISK 300m this year, so as to enable students to work on innovation projects for up to three months.

Yes. A contribution of ISK 250m to the artists’ stipend fund is planned. With this contribution, it will be possible to ensure that 100 artists receive a six-month stipend in 2020. This funding comes in addition to the ISK 500m provided for in March under Phase I, which was allocated to cultural activities and creative sectors, with emphasis on self-employed artists. According to information that has emerged since then, the outlook is bleaker than previously expected, with bans on gatherings expected to remain in place for longer. This is particularly difficult for self-employed artists.

Innovation companies can hire workers who are on the unemployment register for up to six months at a time, in cooperation with the Directorate of Labour and Innovation Center Iceland. In addition, ways will be sought to enable companies to retain employees under temporary measures for work on innovation projects.

A liaison group from the Ministry of Social Affairs and the Ministry of Education, Science, and Culture is working to create educational opportunities for job-seekers, so as to give them increased support so that they can take advantage of job opportunities later on. The plan is to make it possible to support and contribute to active job-seeking alongside study and training for about 15,000 people during the year.

The funding is intended to cover study and training options within the conventional educational system, within the upper secondary education system, and from public educators and other service providers.


The Government wants to help those who must provide additional care for disabled or chronically ill children whose external care is unavailable because of COVID-19. This help takes the form of subsidies for caregivers, based on a temporary increase in caregiving needs. The measure is not income-linked. The subsidies are not taxable and do not affect other benefits.
This measure will be implemented by local authorities, and families will apply to them for increased support.
In order to qualify for the subsidy, the child must already be classified under care category 1, 2, or 3. Furthermore, the care provided outside the home must have become unavailable because of measures taken in response to the COVID-19 pandemic, or the caregiver must have been forced to stay home with the child because the child has an underlying condition defined by the Directorate of Health as a risk factor for severe COVID-19; i.e., heart or lung disease, diabetes, chronic kidney disease, and cancer.
Unfortunately, it has been demonstrated that national crises are often accompanied by increased alcohol and drug use, violence, and other negative behaviour patterns that must be averted to the extent possible, through preventative efforts and other measures. A special campaign and targeted measures have been initiated to combat violence and provide services to victims. Help and support for victims and perpetrators have been strengthened significantly, and a task force with representatives from stakeholder groups will be launched and will steer these efforts in the coming term.
There has already been an increase in awareness that the current situation makes violence against children more likely, and that violence is less visible because children are not attending school or recreational activities to the same degree as before. Efforts to increase awareness will continue, and regular announcements will be repeated, urging all those who are concerned about a child’s situation to call 112 and the 1717 Helpline, or use the 1717.is online chat function, which has been strengthened considerably and will be supported even further. Anyone with a problem, large or small, can contact the Helpline. The non-governmental organisations that provide advisory services to children and their families have been subsidised, and their activities in this area are therefore being supported. In addition, Children’s House has received additional support so that it can respond to the situation. Children and their families can receive all of the service they need in one place, free of charge, subject to a referral from child protection authorities. The aim is to provide services quickly and securely, so that waiting lists do not grow longer.

Participation in organised sports and recreational activities has significant preventative value and increases the wellbeing of children and teenagers. During periods of economic hardship, there is the risk that one of the first steps families will take is to reduce their children’s participation in athletic and recreational activities. According to figures currently available, an estimated 8,000 children are at risk of dropping out of these activities. As the number of people receiving unemployment benefits rises, it can be expected that this number will increase significantly, perhaps to as many as 12,000 children.

This summer, an additional contribution for children’s recreational activities in the amount of ISK 50,000 per child, or a total of ISK 600m, will be made to families whose combined wages, unemployment benefits, and disability benefits equal less than ISK 740,000. The measures give children more equal opportunity to participate in organised recreational activity in spite of economic hardship.


Special measures have been adopted to ensure that service and support are available to vulnerable groups during and after the COVID-19 pandemic. These groups include elderly people, disabled people, immigrants and refugees, prisoners, homeless people, and children and their families. Special emphasis is placed on counteracting social isolation by strengthening community centres for elderly and disabled people, as well as increasing social support for families nationwide, particularly to include disabled children and their families, as well as children originally from foreign countries.
Contributions to mental health teams in every healthcare region in Iceland will be increased so that the number of psychiatrists and/or other mental health experts can be increased. Mental health teams provide second-tier mental health services; i.e., more specialised service than can be provided at community healthcare centres. The teams are intended for people over age 18 who have a diagnosed mental illness. One of the objectives of strengthening the mental health teams is to enhance their ability to provide care to marginal groups, such as those with dual diagnoses; i.e., those diagnosed with addiction problems alongside other mental health disorders and those with developmental issues and mental disorders.
One of the Icelandic Healthcare Development Centre’s roles is to lead professional development efforts and steer the co-ordination of community healthcare centre services nationwide. Contributions to the Centre will be increased, with emphasis on harmonising work methods and attempting to ensure that Icelanders’ access to mental health services is as equal as possible, irrespective of where they live.
The Development Centre will be tasked with preparing educational materials on drug/alcohol use and addiction for healthcare workers, introducing testing in this area, and developing treatment options within community healthcare centres and at mental health teams’ facilities. The Development Centre will also be tasked with preparing educational materials on mental health issues for nursing home staff, and with preparing educational materials on promotion of mental health in schools.

The measures aimed directly at companies are intended to help them withstand the unusually tight economic conditions that have resulted from the COVID-19 pandemic and the public health measures taken in response to it:

  • Closure subsidies: Operational subsidies due to orders to close business operations
  • Support loans: Operational loans to small companies in distress because of the pandemic
  • Income tax offsetting: Authorisation to carry 2020 losses back to offset 2019 profits

These measures take into account the measures that are already in place. Further information can be found here. Resilience-boosting measures focusing on start-ups and innovation companies have also been introduced. Further information can be found under the relevant tabs above.


The company must satisfy the following conditions:

  1. The business was required to close or was prohibited from providing service according to the Minister of Health’s advertisement banning gatherings from 24 March 2020 through 3 May 2020, due to the pandemic.
  2. The business suffered a decline in revenues of at least 75% in April 2020 as compared with April 2019. If the business began operation after 1 April 2019, its April 2020 revenues will be compared with its average 30-day revenues from the time it began operation through the end of February 2020.
  3.  Its revenues for the 2019 operational year must have been at least ISK 4.2m. If the company began operation after 1 January 2019, its annualised revenues from the time it began operation through the end of February 2020 shall be calculated.
  4. The business may not be in arrears with public levies with a final payment date before year-end 2019, and its levied taxes and fees may not be based on estimates.
  5. The company has not been subjected to winding-up proceedings, nor has its estate been subjected to insolvency proceedings.

Further information on the application process will be posted on the website island.is.
Yes, a business operator may authorise another party to apply for a subsidy.
In general, the subsidy is equal to the company’s operating expense for the period of enforced closure; i.e., from 24 March through 3 May 2020. The subsidy may not exceed ISK 800,000 per employee working for the company in February 2020, or a maximum of ISK 2.4m per company. If the company had one employee, the maximum subsidy will be ISK 800,000; if it had two employees, the maximum will be ISK 1.6m; and if it had three or more employees, the maximum will be ISK 2.4m.
The subsidies will be paid out soon after the application is filed, and no later than two months after a completed application is submitted through the digital application system. It will be possible to apply for the subsidy until 1 September 2020, but not after that date.
Business operators that have received a subsidy due to temporary closure of their activities can also receive a support loan, but the amount of the subsidy will be deducted from the maximum loan amount.
No. All business operators, both individuals and legal entities, that operate a business or work as an independent contractor and pay taxes in Iceland are eligible for the subsidy, provided that statutory conditions are satisfied. However, they must be registered on the Iceland Revenue and Customs employer register and, if applicable, the value-added tax register.
Yes, if the operations began before 1 February 2020.
Yes. Business closure subsidies are considered taxable income according to the Income Tax Act. They are not considered taxable turnover according to the Value-Added Tax Act, however.

A company must satisfy eight conditions in order to receive a support loan:

  1. Its revenues over a continuous 60-day period in 2020 must be at least 40% less they were than over the same period in 2019. If the business began operation in 2019 after the comparison month in 2020, its average 60-day revenues from the day it began operation through the end of February 2020 will be used for comparison.
  2. The company’s 2019 revenues must be at least ISK 9m and no more than ISK 500m. If the company began operation after 1 January 2019, its annualised revenues from the date it began operation through the end of February 2020 shall be calculated.
  3. Wage expenses must have accounted for at least 10% of operating expenses in 2019. If the company began operation after 1 January 2019, its annualised wages and operating expenses from the time it began operation through the end of February 2020 shall be calculated.
  4. The company may not have done any of the following: paid dividends or non-contractual bonuses, bought its own shares, paid subordinated loans before maturity, or paid loans or remitted other payments to owners that were not necessary to maintain operational viability from 1 March 2020 through the end of the period covered by the Treasury guarantee.
  5. The company may not be in arrears to credit institutions by 90 days or more.
  6. The company may not be in arrears with public levies, taxes, or tax penalties; its assessed taxes and levies may not be based on estimates due to failure to file tax returns and other reports for the three years before the application is received (or, if the business is less than three years old, since the business began operation).
  7. The company’s estate may not have been subjected to insolvency or winding-up proceedings.
  8. The business can be expected to be a viable enterprise once most of the direct effects of the COVID-19 pandemic and the Government measures to curb its spread have passed.

No. All business operators, both individuals and legal entities, that operate a business or work as an independent contractor and pay taxes in Iceland are eligible for a support loan, provided that statutory conditions are satisfied. However, they must be registered on the Iceland Revenue and Customs employer register and, if applicable, the value-added tax register.
Further information on the application process will be posted on the website island.is.

Support loans are subject to a maximum of ISK 6m. If the business operator has received a closure subsidy, that amount will be deducted from the maximum loan amount.

However, the loan may not exceed 10% of the business operator’s 2019 revenues. If the business began operation after 1 January 2019, its annualised revenues from the date it began operation through the end of February 2020 shall be calculated.


This measure is aimed at small business operators, and it must be examined in the context of other Government measures in response to the economic impact of the pandemic, particularly to include partial unemployment benefits and deferral of tax payments.
Yes, if the operations began before 1 February 2020.
The loan is granted for a period of 30 months and must be repaid, with interest, in twelve equal payments over the final twelve months of the loan period.
Support loans are non-indexed and bear interest at the Central Bank of Iceland’s seven-day term deposit rate as current at any given time.

No collateral will be required for support loans.

However, the applicant must confirm (i) at the time of the application that the business satisfies the requirements that have been specified or, if applicable, as they will be specified in a ministerial Regulation; (ii) that the information provided and used as a basis for the determination of the loan amount is correct; and (iii) that the applicant is aware that providing incorrect or inadequate information could be punishable by surcharges, fines, or imprisonment.


Credit institutions are authorised to charge a commission that will be deducted from the amount disbursed, so as to cover the cost of loan administration. The commission may not exceed 2% of the loan principal.
The loan will be processed by the credit institution specified by the business operator in the application.
If the business operator enters all of the relevant information in the application on island.is, and if that information satisfies the requirements for a loan, the credit institution will receive the application by electronic means and should be able to disburse the loan within a few days after having received the application.
Business operators that have received a subsidy due to temporary closure of their activities can also receive a loan, but the amount of the subsidy will be deducted from the maximum loan amount.

The loan may only be used to cover the borrower’s operating expenses, and it may not be used to pay down or refinance other loans.
It will be possible to apply for a loan until the end of 2020.

Yes. The previous measures enabled legal entities to defer prepayments of 2019 income tax until the second half of 2020. More specifically, legal entities were authorised to choose whether they made advance payments towards income tax for the 2019 operating year. The due dates for those payments were 1 April, 1 May, and 1 June (with the final payment date one month later).

It is now planned to go a step further and offer limited liability companies the option of deferring payment of their assessed income tax for 2019 when the tax assessment is complete (presumably in October). These businesses will be authorised carry year-2020 losses back once they materialise with the 2021 tax assessment, and use those losses to offset the tax on their 2019 profits. This is done because it is foreseeable that many companies will show an operating profit for 2019 but suffer an operating loss in 2020.


Companies that foresee losses in 2020 can apply for a further deferral of income tax payments until the 2021 assessment (based on 2020 operations) is complete, and can reduce their tax liability by an amount equal to the calculated tax credit on the loss for the year, upon fulfilling statutory requirements. According to current tax law, it is permissible to amortise an operating loss for a given year over the next 10 operating years (loss carry-forward), but it has not been permissible to carry the loss back to offset previous years (loss carry-back). It is now proposed that loss carry-backs be authorised. This measure will strengthen companies’ liquidity and operations and will enable them to respond more effectively to the demanding situation currently prevailing because of the COVID-19 pandemic.
The company must notify Iceland Revenue and Customs of the amount it chooses to defer once the 2020 tax assessment has been made, and no later than 15 November 2020. The notification must be made in the format decided by Iceland Revenue and Customs. Presumably, it will be clear by that time whether the business will operate at a loss in 2020 or not.
Yes. The maximum amount of tax whose payment can be deferred is ISK 20m, which corresponds to a taxable profit (tax base) of ISK 100m. The measure is intended primarily for small and medium-sized enterprises (SME). Some 98% of SMEs that operated at a profit according to the 2019 assessment for operating year 2018 had a total tax liability of less than ISK 20m.
The tax levied in 2020 that is deferred until the 2021 assessment and used to offset a tax credit does not bear interest. If the amount deferred exceeds the amount used to offset the tax credit, penalty interest shall be calculated on the difference, just as if no deferral had taken place.
The provision uses the term “tax credit” (Icel: skatteign), which refers to the tax price of an operating loss. The provision assumes that legal entities may defer assessed tax; that is, the tax base * the 20% tax rate, and use it to offset losses generated in 2020. Because no tax is calculated on operating losses, the term “tax credit” is used. The tax credit is calculated as the operating loss * the 20% tax rate. This makes it possible to use the tax and the tax credit to offset one another.
According to the Income Tax Act, business debt that is forgiven is taxable. During the post-crisis years (until 2014), there were special rules in place regarding debt write-downs for legal entities and self-employed individuals in financial distress. It is assumed that similar rules will apply for 2020, 2021, and 2022. It is proposed to use a mixed approach involving deferral, distribution, and tax-free thresholds, subject to certain conditions relating to forgiveness of debt stemming from business operations.
Yes. The current tax concession system provided for in legislation on support for innovation companies has contributed to profitable research and development (R&D) by innovation companies in recent years. Given the situation now prevailing because of the COVID-19 outbreak, the authorities are presenting further proposals that are needed to sustain the Government’s objective of supporting research and technological development among innovation companies in Iceland. This is done by increasing the percentage of the current deduction from innovation companies’ assessed income tax and by increasing the current thresholds for deduction of such companies’ R&D expense from assessed income tax in 2021 and 2022.
The temporary increase will be 5 percentage points over and above the current deduction from innovation companies’ assessed income tax in 2021 and 2022, for their cost outlays on R&D projects owned by them and recognised by the Icelandic Centre for Research (Rannís). The deduction will therefore increase from 20% to 25%.
On a temporary basis, the current thresholds for deductions of innovation companies’ R&D expense from their assessed income tax in 2021 and 2022 will be increased. On the one hand, the proposal entails that the maximum R&D expense used as a reference for the tax deduction shall increase from ISK 600m to ISK 900m if the company concerned is the owner of the R&D projects. On the other hand, it is proposed that the maximum R&D expense used as a reference for the tax deduction shall increase from ISK 900m to ISK 1,100m if the R&D work has been purchased from an unrelated company, university, or institution. These increased thresholds are within the limits provided for in the General Block Exemption Regulation, no. 651/2014, exempting aid from notification requirements.
Yes. Pension funds will be authorised to hold up to 35% in each innovation fund instead of 20%, but not more than 1% of their total assets. With this increased authorisation, three pension funds would be needed to support a fund instead of the current five, which will make it easier for such innovation funds to obtain financing and will support the Government’s objective of improving the investment environment for innovation in Iceland.
Yes. The reimbursement authorisation has been expanded to include local authorities. Local authorities will receive reimbursement of value-added tax (VAT) paid on labour for new construction, renovation, or maintenance of property, even for non-residential property. This authorisation is comparable to the one in place in 2009-2014.
Yes. The Minister has been authorised to issue a Regulation providing for operational support for privately owned media companies in 2020. Among other provisions, the support plan will take account of wage costs and payments to independent contractors for dissemination of news and related material. Furthermore, the plan will aim to provide proportionally more support to smaller entities and will place a cap on the total support provided to any single entity. The maximum amount of the support is expected to total ISK 350m.
It is proposed that a statutory provision be passed authorising the Local Authorities' Equalization Fund to use funds from its Real Estate Fund to pay general contributions, primary school contributions, and contributions for the disabled in 2020. The purpose of such a provision is to reduce the impact that the Equalization Fund’s loss of revenue due to COVID-19 will have on its general contributions in 2020.
In recent months, the authorities and the Farmers' Association of Iceland have been in negotiations concerning a review of provisions on horticultural farmers’ operating conditions laid down in agricultural products agreements. The discussions are in the final stage and are expected to conclude in April. It is planned to strengthen Icelandic horticultural farming considerably with the review currently underway, and to increase contributions to the agreement substantially.

An additional ISK 200m contribution to the agreement is planned for this year. This creates the conditions to support increased production this year, with the associated investments.
The objective of the agreement is to increase the supply and consumption of horticultural products, in accordance with the authorities’ public health policy, and to enhance public awareness of a healthy lifestyle. Another objective is to support more diverse horticultural offerings year-round, at a fair price to consumers. Allocating increased funding to the agreement fosters increased production of Icelandic horticultural products this year and next year, thereby contributing to the achievement of the above-specified objectives, for the benefit of consumers.

The signing of the agreement is planned for April.

The current crisis is a temporary one. We will regain a foothold, although we do not know how long we must wait for it. The domestic economy is well positioned to face the challenge of building up strong companies in the export market and the domestic market, and to regain access to markets that closed because of COVID-19. It is particularly important to build up sectors that rely on innovation and the inexhaustible supply of human intelligence, which will expedite development, create jobs, and boost output growth. This is the focus of the measures aimed at start-ups, innovation companies, and entrepreneurs:

  • Strengthening innovation and the arts: Increased R&D reimbursements and stipends
  • Financing for start-ups: Matching contributions and investments in start-ups and growth companies
  • Increased food production: A new Foodstuffs Fund to strengthen innovation and marketing

Both the reimbursement percentage and the cap on reimbursements for R&D will be increased. Because of an increased number of applications, contributions to reimbursements of R&D costs will be increased this year, and attempts will be made to expedite reimbursements for 2019. A proposal will be made to increase the reimbursement percentage from 20% to 25%, and to raise the cap on expenses for calculation of deductions from ISK 600m to ISK 900m per company.

Reimbursing innovation companies for R&D has proven an effective way to support these companies. The contributions have increased significantly in recent years, both because the cap on reimbursements has been lifted and because the number of applications has grown markedly.


The technological development fund has been strengthened by ISK 700m, and the application process has been expedited. The increased contributions will result in more grant allocations both this spring and in the autumn.

Three measures centre on increasing investment in start-ups and innovation companies:

  • The establishment of the “Kría” Start-Up and Innovation Fund will be expedited
  • The Stuðnings-Kría (Support-Kría) Initiative will offer contributions to match investments in start-ups
  • The authorisation for pension funds’ investments in venture capital (VC) funds will be expanded from 20% to 35%

Emphasis will be placed on expediting the establishment of the Fund so that it can participate in the establishment of new VC funds as soon as this year.

A bill of legislation on public support for investment in start-ups and innovation companies has been introduced before Parliament. The purpose of the bill is to boost the growth and competitiveness of the Icelandic business sector and foster an active funding environment for start-ups and innovation companies with the establishment of the Kría Start-Up and Innovation Fund, an independent fund owned by the Government.
The Stuðnings-Kría Initiative offers contributions to match investments in start-ups. The investment takes the form of an interest-bearing loan with conversion rights, in cooperation with investors. This programme will operate under the name Stuðnings-Kría (Support-Kría. The measure is intended to provide temporary support to both start-ups and investors during the uncertain situation prevailing in 2020 and, by the same token, to function as a prelude to increased cooperation between the Government and investors, as is intended with the Kría Start-up and Innovation Fund.

There are numerous examples of start-ups that were in advanced stages of funding negotiations with investors or that had received other investment pledges but are now facing substantial financial uncertainty because of COVID-19. In order to meet the needs of viable start-ups, the Government will offer contributions to match investments in start-ups, upon satisfaction of certain conditions.
Alongside Government support for innovation companies, it is important to enable financially strong entities to invest to participate in such investments in a business capacity. In Iceland, venture capital funds generally seek out investment capital from pension funds. In order to promote increased investment by pension funds, their authorisation to invest in venture capital funds will be expanded from 20% to 35%.
In order to strengthen innovation and development in domestic food production, a new Foodstuffs Fund will be established with the merger of the Agricultural Productivity Fund and the AVS Fisheries Research Fund. Allocation of grants will focus in particular on innovation, sustainability, value creation, and measures to boost the competitiveness of Icelandic food production. The Fund will also provide support for international marketing.
The distribution of funding between the two sectors will be similar to the current distribution between the Agricultural Productivity Fund and the AVS Fisheries Research Fund.
In the next few days, a bill of legislation on the establishment of the Fund will be introduced before Parliament by the Minister of Fisheries and Agriculture. It is assumed that a board of directors for the Foodstuffs Fund will be appointed when the bill is passed and that the board will begin immediately to set policy for the Fund and prepare its activities. Preparation for the establishment of the Fund has been ongoing in recent months under the auspices of the Ministry of Industries and Innovation, with stakeholder participation.

It is assumed that a board of directors for the Foodstuffs Fund will be appointed when the bill is passed and that the board will begin immediately to set policy for the Fund and prepare its activities. It is planned to advertise for grant applications in August or September and make the first allocation later this autumn. 

It is not assumed that there will be any restrictions on who can apply to the Fund.
The Fund’s initial capital will total ISK 500m in 2020. In 2021, the funds that currently go to the Agricultural Productivity Fund and the AVS Fisheries Research Fund will be added.

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