58797 Iceland © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax 202-522-2422; e-mail pubrights@worldbank.org. Additional copies of Doing Business 2011: Making a Difference for Entrepreneurs, Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004:Understanding Regulations may be purchased at www.doingbusiness.org. ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy 's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and the Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Iceland. The data used for this economy profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good -practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2011 : Making a Difference for Entrepreneurs presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Iceland is ranked 15 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Iceland - Compared to global good practice economy as well as selected economies: Iceland's ranking in Doing Business 2011 Rank Doing Business 2011 Ease of Doing Business 15 Starting a Business 29 Dealing with Construction Permits 31 Registering Property 11 Getting Credit 32 Protecting Investors 74 Paying Taxes 35 Trading Across Borders 79 Enforcing Contracts 3 Closing a Business 17 2 Summary of Indicators - Iceland Starting a Business Procedures (number) 5 Time (days) 5 Cost (% of income per capita) 2.3 Min. capital (% of income per capita) 12.0 Dealing with Construction Permits Procedures (number) 18 Time (days) 75 Cost (% of income per capita) 19.6 Registering Property Procedures (number) 3 Time (days) 4 Cost (% of property value) 2.4 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 5 Public registry coverage (% of adults) 0.0 Private bureau coverage (% of adults) 100.0 Protecting Investors Extent of disclosure index (0-10) 5 Extent of director liability index (0-10) 5 Ease of shareholder suits index (0-10) 6 Strength of investor protection index (0-10) 5.3 Paying Taxes Payments (number per year) 31 Time (hours per year) 140 Profit tax (%) 6.9 Labor tax and contributions (%) 14.9 Other taxes (%) 5.1 Total tax rate (% profit) 26.8 Trading Across Borders Documents to export (number) 5 Time to export (days) 19 Cost to export (US$ per container) 1532 Documents to import (number) 5 Time to import (days) 14 Cost to import (US$ per container) 1674 3 Enforcing Contracts Procedures (number) 27 Time (days) 417 Cost (% of claim) 8.2 Closing a Business Recovery rate (cents on the dollar) 78.5 Time (years) 1.0 Cost (% of estate) 4 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.14 0.12 0.10 Doing business has 0.08 become easier (DB 0.06 change score) 0.04 0.02 0.00 Doing business has -0.02 become more difficult or more -0.04 France Denmark Germany Finland Norway Iceland costly 6 1. Benchmarking Starting a Business Regulations: Iceland is ranked 29 overall for Starting a Business. Ranking of Iceland in Starting a Business - Compared to good practice and selected economies: 7 The following table shows Starting a Business data for Iceland compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Iceland 5 5 2.3 12.0 Comparator Economies Denmark 4 6 0.0 26.0 Finland 3 14 1.1 7.9 France 5 7 0.9 0.0 Germany 9 15 4.8 0.0 Norway 5 7 1.8 20.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Iceland Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 33 29 Procedures (number) 5 5 5 5 Time (days) 5 5 5 5 Cost (% of income per capita) 2.7 2.6 3.0 2.3 Min. capital (% of income per capita) 14.1 13.6 15.8 12.0 3. The following graphs illustrate the Starting a Business sub indicators in Iceland over the past 4 years: 9 Starting a Business Summary - Iceland This table summarizes the procedures and costs associated with setting up a business in Iceland. STANDARDIZED COMPANY Legal Form: Private Limited Liability Company City: Reykjavik Registration Requirements: No: Procedure Time to complete Cost to complete 1 Search for company name 1 no charge 2 Deposit initial capital in bank account 1 no charge 3 Apply for registration with Register of Limited Companies (Director 1 ISK 94,500 of Internal Revenue) 4 Obtain VAT number from Director of Taxes 1 no charge 5 Notify tax authorities of employment of workers 1 no charge 10 Starting a Business Details - Iceland Procedure 1 Search for company name Time to complete: 1 Cost to complete: no charge Comment: The company name database can be accessed at the Internal Revenue Web site (www.rsk.is). Procedure 2 Deposit initial capital in bank account Time to complete: 1 Cost to complete: no charge Comment: Procedure 3 Apply for registration with Register of Limited Companies (Director of Internal Revenue) Time to complete: 1 Cost to complete: ISK 94,500 Comment: To apply for registration with the Register of Limited Companies, the company must provide five documents: 1. Notification of incorporation form. 2. Agreement of incorporation. 3. Record of the meeting of incorporation. 4. Articles of association. 5. Affidavit on payment of share capital, issued by a certified public account. The register is also in charge of advertising the incorporation notice in the Official Gazette, the official journal. The registration fee is ISK 88,500, the company identification number ISK 5,000, and the fee for publishing the notification in the Official Gazette is ISK 1,000, including VAT. Model incorporation documents and forms (in Icelandic) can be found on the Ministry of Industry and Commerce Web site (www.ivr.is). The notification of incorporation form can be downloaded at no cost from the Internal Revenue Office Web site (www.rsk.is). Procedure 4 Obtain VAT number from Director of Taxes Time to complete: 1 Cost to complete: no charge Comment: Companies that plan to sell goods or services valued at more than ISK 500,000 a year are required to collect and report VAT. Procedure 5 Notify tax authorities of employment of workers 11 Time to complete: 1 Cost to complete: no charge Comment: 12 13 1. Benchmarking Dealing with Construction Permits Regulations: Iceland is ranked 31 overall for Dealing with Construction Permits. Ranking of Iceland in Dealing with Construction Permits - Compared to good practice and selected economies: 14 The following table shows Dealing with Construction Permits data for Iceland compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.8 Singapore 25 Selected Economy Iceland 18 75 19.6 Comparator Economies Denmark 6 69 61.7 Finland 18 66 134.2 France 13 137 23.6 Germany 12 100 61.8 Norway 14 252 43.8 15 2. Historical data: Dealing with Construction Permits in Iceland Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 29 31 Procedures (number) 18 18 18 18 Time (days) 76 75 75 75 Cost (% of income per capita) 18.6 19.2 22.2 19.6 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Iceland over the past 4 years: 16 Dealing with Construction Permits in Iceland The table below summarizes the procedures, time, and costs to build a warehouse in Iceland. BUILDING A WAREHOUSE City: Reykjavik Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain design approval from the Reykjavik construction agency 14 days ISK 308,000 2 Obtain approval of the site manager from the Reykjavik construction 3 days no charge agency 3 Pay water and electricity connection fees to the Reykjavik power company 1 day ISK 253,500 4 Pay telephone connection fees to Iceland's telecommunication company 1 day ISK 2,990 5 Obtain approval of structural, electrical, and mechanical design drawings 14 days ISK 189,800 from the Reykjavik construction board 6 Obtain initial setout of building from the Reykjavik planning authority 5 days ISK 36,000 7 Receive a foundation work inspection by the Reykjavik construction 1 day no charge agency 8 Receive a concrete work inspection by the Reykjavik construction agency 1 day no charge 17 9 Receive steel work for slabs inspection by the Reykjavik construction 1 day no charge agency 10 Receive a frame inspection by the Reykjavik construction agency 1 day no charge 11 Receive a drainage inspection by the Reykjavik construction agency 1 day no charge 12 Receive a structural inspection by the Reykjavik construction agency 1 day no charge 13 Receive a timber scaffolding inspection by the Reykjavik construction 1 day no charge agency 14 Receive an electricity inspection by Reykjavik construction agency 1 day no charge 15 Receive plumbing inspection by the Reykjavik construction agency 1 day no charge 16 Obtain an occupancy permit and request an inspection 21 days ISK 26,600 17 * Receive final inspection by the Reykjavik construction agency 7 days no charge 18 Obtain water meter and final water connection 7 days no charge * Takes place simultaneously with another procedure. 18 Dealing with Construction Permits Details - Iceland Procedure 1 Obtain design approval from the Reykjavik construction agency Time to complete: 14 days Cost to complete: ISK 308,000 Agency: Reykjavik Construction Agency Comment: The architectural drawings must be drawn to a scale of 1:100. A meeting of architects convenese every Tuesday to discuss the applications submitted subject to architectural drawing approval. The architects at Reykjavik Construction agency compare their notes, and if the application is complete and follows the guidelines and regulations of the Building Code the approval will be issued in 1-2 weeks.The cost for this procedure is composed of following: ISK 7,700 (used to be ISK 6,300 in 2007) paid for the application, and ISK 77m3 (ISK 77x3,900m3=ISK 300,300) for the approval of architectural drawings and designs. The approval is valid for 1 year within which BuildCo has to begin construction. Procedure 2 Obtain approval of the site manager from the Reykjavik construction agency Time to complete: 3 days Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: The site manager must be a professional engineer or a master builder. They are generally licensed by the Ministry of Housing. The application for this approval should include an application form, curriculum vitae, education certificate, and the liability insurance payment. Procedure 3 Pay water and electricity connection fees to the Reykjavik power company Time to complete: 1 day Cost to complete: ISK 253,500 Agency: Reykjavik Energy (Orkuveita Reykjavíkur) Comment: Water and electricity connection is administered by Reykjavik Power Company based on a principle of a single window. Its operation and quality management are pursuant to ISO 9000. Procedure 4 Pay telephone connection fees to Iceland's telecommunication company Time to complete: 1 day Cost to complete: ISK 2,990 Agency: Síminn (Iceland Telecom) Comment: The fee has been increased in 2008 to ISK 2,990. 19 Procedure 5 Obtain approval of structural, electrical, and mechanical design drawings from the Reykjavik construction board Time to complete: 14 days Cost to complete: ISK 189,800 Agency: Reykjavik Construction Agency Comment: The company can present these design drawings all at once or separately. The mechanical design drawings include the potable water system, heating and ventilation, and sewerage system.The lowest fee for the approval of electrical drawings of this building is 17.100 Ikr. At this stage when BuildCo receives the approval of the technical aspect of drawings it needs to pay for the inspections to be conducted during construction. The prepayment of inspections during construction is mandatory and the fee is 7200 Ikr/hr. The estimated time for inspection depending on the size and complicity of the project, estimated on the basis of the experience of last 3 years. This project would be about 24 hours for all inspections. The payment is made at this stage to ensure the inspections come during construction. The approval is valid for 1 year within which BuildCo has to build the construction. Procedure 6 Obtain initial setout of building from the Reykjavik planning authority Time to complete: 5 days Cost to complete: ISK 36,000 Agency: Reykjavik public works, landinformation office, Reykjavík GIS Comment: The cost is 36.000 Ikr. Including a tax for the final stake out of the building. For simple buildings, half price is often collected for the first stake out prior to excavation. Procedure 7 Receive a foundation work inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: At each stage of construction before the work is covered, an inspection must be conducted by the municipality. These inspections must be requested with ­a day's notice, and no stoppage in construction may take place. The request can be made via e-mail. The actual inspection takes 2 hours on average. Procedure 8 Receive a concrete work inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 9 Receive steel work for slabs inspection by the Reykjavik construction agency 20 Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 10 Receive a frame inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 11 Receive a drainage inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 12 Receive a structural inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 13 Receive a timber scaffolding inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: OAHS Comment: The procedure is carried out by Occupational Safety And Health (OSHA). Procedure 14 Receive an electricity inspection by Reykjavik construction agency 21 Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: The procedure is carried out by a private company under the consumer agency's supervision. Procedure 15 Receive plumbing inspection by the Reykjavik construction agency Time to complete: 1 day Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: Procedure 16 Obtain an occupancy permit and request an inspection Time to complete: 21 days Cost to complete: ISK 26,600 Agency: Reykjavik Construction Agency Comment: The Reykjavik construction authority contacts all the other agencies that should inspect the building. The number of inspections depends on the size and purpose of the building. For a small warehouse, only the fire, health, and labor inspections are necessary. The municipality coordinates these inspections. Procedure 17 Receive final inspection by the Reykjavik construction agency Time to complete: 7 days Cost to complete: no charge Agency: Reykjavik Construction Agency Comment: The final inspection includes inspections of employee facilities by Icelandic OSHA, inspection of hygienic conditions by the Reykjavik environmental and hygiene agency, and the fire system inspection. Procedure 18 Obtain water meter and final water connection Time to complete: 7 days Cost to complete: no charge Agency: Reykjavik Energy (Orkuveita Reykjavíkur) Comment: 22 23 1. Benchmarking Registering Property Regulations: Iceland is ranked 11 overall for Registering Property. Ranking of Iceland in Registering Property - Compared to good practice and selected economies: 24 The following table shows Registering Property data for Iceland compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Iceland 3 4 2.4 Comparator Economies Denmark 3 42 0.6 Finland 3 14 4.0 France 8 59 6.1 Germany 5 40 5.1 Norway 1 3 2.5 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 25 2. Historical data: Registering Property in Iceland Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 14 11 Procedures (number) 3 3 3 3 Time (days) 4 4 4 4 Cost (% of property value) 2.4 2.4 2.4 2.4 3. The following graphs illustrate the Registering Property sub indicators in Iceland over the past 4 years: 26 Registering Property in Iceland This topic examines the steps, time, and cost involved in registering property in Iceland. STANDARDIZED PROPERTY Property Value: 208,796,110.16 City: Reykjavik Registration Requirements: No: Procedure Time to complete Cost to complete 1 The buyer obtains a non-encumbrance certificate 1 day ISK 1,500 each certificate if from the Land Registry completed at the Registry's office 2 Authorized real estate agent prepares and executes 1 day 1.5-2.5% of property value the sale-purchase agreement (real estate agent fees) 3 Transfer of title is prepared and registered at the 1-2 days ISK 2000 + 0.4% of the Magistrates office official real estate valuation (usually lower than purchase price) for Stamp Duty 27 Registering Property Details - Iceland Procedure 1 The buyer obtains a non-encumbrance certificate from the Land Registry Time to complete: 1 day Cost to complete: ISK 1,500 each certificate if completed at the Registry's office Agency: Icelandic Property Registry Comment: The buyer would usually demand to receive a certificate of mortgages and other possible rights and obligations in relation to the property. Anyone can request a certificate in writing. It costs ISK 1.500 and it takes one visit to the Icelandic Property Registry. Real-estate agencies have on-line access to this information at a cost of ISK 550 per certificate. Procedure 2 Authorized real estate agent prepares and executes the sale-purchase agreement Time to complete: 1 day Cost to complete: 1.5-2.5% of property value (real estate agent fees) Agency: Real Estate Agent Comment: It is not mandatory to use an authorized real estate agent, but almost everyone does. The agent's fees will be around 1.5% and 2.5% of the property value. The sale-purchase agreement is usually registered at the Property Registry if the property is not paid in full at the time of the agreement. The deed is first signed when the property is paid in full. Registration of the salepurchase agreement protects the rights of the purchaser. The total extra cost of registering the sale-purchase agreement is ISK 2.000. The process takes about 2 days. In this case there is no need to register the sale-purchase agreement and it is not a formal requirement. The conditions for registry of the sale purchase agreement are that it contains the following information: the name of the property as officially registered by the municipal authorities, unique property reference number of the land and the property, the legal description set forth by the planning and building authorities and the land and the building's number which has direct reference to its coordinates. This information can be obtained from the Land Registry office in the property's district or from Icelandic Property Register (Cadaster authority). If an authorized real estate agent handles the sale this information is available to him via an electronic data and information system. It is common that the buyer notifies the insurance company. Insurance companies have electronic access to the data base at Icelandic Property Register and there is a daily processing of the title of transfers. The title of the fire-insurance changes the same day as the transfer of title is registered. Procedure 3 Transfer of title is prepared and registered at the Magistrates office Time to complete: 1-2 days Cost to complete: ISK 2000 + 0.4% of the official real estate valuation (usually lower than purchase price) for Stamp Duty Agency: Land Registry Comment: When the buyer has fulfilled his obligations in relation to the sale purchase agreement and the conditions for registrations, the transfer of title is prepared and registered at the Magistrates office. The deed shall be delivered in two signed copies (including one copy on a special 28 accredited paper. The documentation should include the deed signed by the seller and the purchaser and certified by a notary public, or an attorney, a certified real-estate agent or two witnesses. In practice a notary public is hardly ever used. 29 30 1. Benchmarking Getting Credit Regulations: Iceland is ranked 32 overall for Getting Credit. Ranking of Iceland in Getting Credit - Compared to good practice and selected economies: 31 The following table shows Getting Credit data for Iceland compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 67.1 Singapore* 10 United Kingdom 6 Selected Economy Iceland 7 5 0.0 100.0 Comparator Economies Denmark 9 4 0.0 5.4 Finland 7 5 0.0 14.9 France 7 4 33.3 0.0 Germany 7 6 1.0 98.4 Norway 7 4 0.0 100.0 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 32 2. Historical data: Getting Credit in Iceland Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 30 32 Strength of legal rights index (0-10) 7 7 7 7 Depth of credit information index (0-6) 5 5 5 5 Private bureau coverage (% of adults) 100.0 100.0 100.0 100.0 Public registry coverage (% of adults) 0.0 0.0 0.0 0.0 3. The following graphs illustrate the Getting Credit sub indicators in Iceland over the past 4 years: 33 Getting Credit in Iceland The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Iceland. Getting Credit Indicators (2010) Indicator Private credit Public credit Private bureau coverage (% of adults) 5 bureau registry Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative data distributed? Yes No 1 Does the registry distribute credit information from retailers, trade Yes No 1 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? Yes No 1 Is it guaranteed by law that borrowers can inspect their data in the Yes No 1 largest credit registry? Coverage 100.0 0.0 Number of individuals 296,900 0 Number of firms 92,900 0 34 Strength of legal rights index (0-10) 7 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, Yes without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without No requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, Yes proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 35 36 1. Benchmarking Protecting Investors Regulations: Iceland is ranked 74 overall for Protecting Investors. Ranking of Iceland in Protecting Investors - Compared to good practice and selected economies: 37 The following table shows Protecting Investors data for Iceland compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Iceland 5.3 Comparator Economies Denmark 6.3 Finland 5.7 France 5.3 Germany 5.0 Norway 6.7 38 2. Historical data: Protecting Investors in Iceland Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 73 74 Strength of investor protection index (0-10) 5.3 5.3 5.3 5.3 3. The following graph illustrates the Protecting Investors index in Iceland compared to best practice and selected Economies: 9.7 6.7 6.3 5.7 5.3 5.3 5.0 k d ay ar y nd ce d an an an m w an a nl or en m al el Fi Fr N Ic Ze er D G ew N Note: The higher the score, the greater the investor protection. 39 Protecting Investors in Iceland The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Iceland. Protecting Investors Data (2010) Indicator Extent of disclosure index (0-10) 5 2 What corporate body provides legally sufficient approval for the transaction? 2 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 0 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 1 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 5 1 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 1 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 1 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 40 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 0 Whether fines and imprisonment can be applied against Mr. James? 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 6 2 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 2 Whether the plaintiff can directly question the defendant and witnesses during trial? 1 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 0 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 1 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 5.3 41 42 1. Benchmarking Paying Taxes Regulations: Iceland is ranked 35 overall for Paying Taxes. Ranking of Iceland in Paying Taxes - Compared to good practice and selected economies: 43 The following table shows Paying Taxes data for Iceland compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 3 0 Timor-Leste 0.2 Selected Economy Iceland 31 140 26.8 Comparator Economies Denmark 9 135 29.2 Finland 8 243 44.6 France 7 132 65.8 Germany 16 215 48.2 Norway 4 87 41.6 * The following economies are also good practice economies for : Payments (number per year): Qatar 44 2. Historical data: Paying Taxes in Iceland Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 32 35 Total tax rate (% profit) 27.2 26.8 25.0 26.8 Payments (number per year) 31 31 31 31 Time (hours per year) 140 140 140 140 3. The following graphs illustrate the Paying Taxes sub indicators in Iceland over the past 4 years: 45 Paying Taxes in Iceland The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Iceland, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Stamp duty on property 1 0.4% transaction transfer value Value added tax (VAT) 1 online 40 24.5% value added filing Vehicle tax 2 ISK 6,83 for vehicle 0.00 the first weight 1.000 kg., ISK 9,21 for the next 2.000 kg and ISK 2.277 for each ton above 3.000 kg. This is paid jointly with disposal charge of ISK 350 per truck per each 6 month period. Market fee 1 online 0.1% gross salaries 0.00 filing 46 Weight distance tax 3 ISK 3.29 pr. KM driven 0.10 Km per year Municipal tax 6 ISK 102/m2 building area 0.10 + ISK 2.637 in square + 11.374 meters Tax on interest 0 withheld 10.0% interest 0.30 income fuel tax 1 included in 0.90 price of fuel Industrial fee 1 online 0.1% sales 1.40 filing Property tax 1 online 1.65% + assessed 2.60 filing 0.115% value of property Corporate income tax 1 online 40 15.0% taxable profit 6.90 (State income tax) filing Social security 1 online 60 5.34% gross salaries 7.00 contributions filing (January-Jun e) and 7% (July-Decem ber) Pension contributions 12 7.0% gross salaries 7.90 Totals 31 140 26.8 47 48 1. Benchmarking Trading Across Borders Regulations: Iceland is ranked 79 overall for Trading Across Borders. Ranking of Iceland in Trading Across Borders - Compared to good practice and selected economies: 49 The following table shows Trading Across Borders data for Iceland compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 4 439 Selected Economy Iceland 5 19 1532 5 14 1674 Comparator Economies Denmark 4 5 744 3 5 744 Finland 4 8 540 5 8 620 France 2 9 1078 2 11 1248 Germany 4 7 872 5 7 937 Norway 4 7 830 4 7 729 * The following economies are also good practice economies for : Time to export (days): Estonia 50 2. Historical data: Trading Across Borders in Iceland Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 76 79 Cost to export (US$ per container) 1269 1109 1532 1532 Cost to import (US$ per container) 1343 1183 1674 1674 Documents to export (number) 5 5 5 5 Documents to import (number) 5 5 5 5 Time to export (days) 15 15 19 19 Time to import (days) 14 14 14 14 3. The following graphs illustrate the Trading Across Borders sub indicators in Iceland over the past 4 years: 51 52 Trading Across Borders in Iceland These tables list the procedures necessary to import and export a standardized cargo of goods in Iceland. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) Duration (days) US$ Cost Documents preparation 10 240 Customs clearance and technical control 1 52 Ports and terminal handling 7 605 Inland transportation and handling 1 635 Totals 19 1532 Nature of Import Procedures (2010) Duration (days) US$ Cost Documents preparation 10 382 Customs clearance and technical control 1 52 Ports and terminal handling 2 605 Inland transportation and handling 1 635 Totals 14 1674 53 Documents for Export and Import Export Packing list Bill of lading Certificate of origin Commercial invoice Customs export declaration Import Packing list Bill of lading Cargo release order Commercial invoice Customs import declaration 54 55 1. Benchmarking Enforcing Contracts Regulations: Iceland is ranked 3 overall for Enforcing Contracts. Ranking of Iceland in Enforcing Contracts - Compared to good practice and selected economies: 56 The following table shows Enforcing Contracts data for Iceland compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Iceland 27 417 8.2 Comparator Economies Denmark 35 410 23.3 Finland 32 375 13.3 France 29 331 17.4 Germany 30 394 14.4 Norway 33 280 9.9 57 2. Historical data: Enforcing Contracts in Iceland Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 2 3 Procedures (number) 27 27 27 27 Time (days) 393 393 417 417 Cost (% of claim) 7.7 7.8 7.8 8.2 3. The following graphs illustrate the Enforcing Contracts sub indicators in Iceland over the past 4 years: 58 Enforcing Contracts in Iceland This topic looks at the efficiency of contract enforcement in Iceland. Nature of Procedure (2010) Indicator Procedures (number) 27 Time (days) 417 Filing and service 45.0 Trial and judgment 292.0 Enforcement of judgment 80.0 Cost (% of claim)* 8.20 Attorney cost (% of claim) 5.9 Court cost (% of claim) 2.1 Enforcement Cost (% of claim) 0.2 59 Court information: Reykjavík District Court ("Heradsdomur Reykjavikur") * Claim assumed to be equivalent to 200% of income per capita. 60 61 1. Benchmarking Closing Business Regulations: Iceland is ranked 17 overall for Closing a Business. Ranking of Iceland in Closing Business - Compared to good practice and selected economies: 62 The following table shows Closing Business data for Iceland compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.7 Singapore* 1 Selected Economy Iceland 78.5 1.0 4 Comparator Economies Denmark 89.4 1.1 4 Finland 89.4 0.9 4 France 45.2 1.9 9 Germany 53.1 1.2 8 Norway 90.9 0.9 1 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 63 2. Historical data: Closing Business in Iceland Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 16 17 Time (years) 1.0 1.0 1.0 1.0 Cost (% of estate) 4 4 4 4 Recovery rate (cents on the dollar) 80.3 76.6 76.6 78.5 3. The following graphs illustrate the Closing Business sub indicators in Iceland over the past 4 years: 64 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 65 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Denmark Denmark eased business start-up by reducing the minimum capital requirement for limited liability companies from 125,000 Danish kroner ($22,850) to 80,000 Danish kroner ($14,620). Computerization of Denmark's land registry cut the number of procedures required to register property by half. Germany Germany eased business start-up by increasing the efficiency of communications between the notary and the commercial registry and eliminating the need to publish an announcement in a newspaper. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Iceland Iceland made dealing with construction permits more costly by increasing the fees to obtain the design approval and receive inspections. Iceland increased the corporate income tax rate from 15% to 18% and raised social security and pension contribution rates. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. 66 Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 67 68