Broadly speaking, Iceland does not offer direct subsidies for business investment. Its prime incentives lie in the favorable environment for businesses in general, including low corporation tax, competitive labor costs and payroll costs, and low electricity prices. Local communities may offer certain further incentives.

However, as a member of the EEA, Iceland has access to EU research funds for R&D programs and joint ventures undertaken with companies from at least one other EEA country. Grants are issued for specific projects on a case-by-case basis by bodies including the New Business Venture Fund and Science Fund.20

The Icelandic Securities market is young, but it has grown rapidly over the last ten years. During that period is has established itself as a reliable and efficient market. The stock market has presented Icelandic companies with fresh ways to raise new capital. The total market value of the 75 listed companies at year-end 1999 stood at approximately ISK 370 (425USD) billion, with individual companies ranging in market value from ISK 92 (106USD) to 40 (46USD) billion.41 The majority of the companies listed on the Icelandic stock market are either in the banking or fishing industries. It appears that of the listed companies there are only 5 technology companies and 2 venture capital firms. 

However, interest in technology investments in Icleand is rapidly growing, especially from abroad. Government officials have stated that some 30-40 percent of the national telecommunications operator, Iceland Telecom is to be offered to foreign investors in March 2001. Iceland Telecom’s privatization will be the largest sell-off ever carried out in the country. For the first time, foreign investors will be allowed to be core shareholders of the company. 

International interest in the Icelandic IT sector is further reflected by the amount of foreign direct investment into this area. 1999 was a record year in terms of direct investments in the IT industry, with millions of dollars invested by major international investors.

The bulk of finance used by foreign companies investing in Iceland has traditionally been raised in international finance markets. Foreign-owned subsidiaries or branches may raise funds in any country without restriction and have full access to Iceland's finance market.

Icelandic domestic finance companies offer a broad standard range of services, including:

• Medium-term and long-term financing: Longer loans may be negotiated directly with banks and other credit institutions, and are generally indexed. There has been an increasing trend towards raising longer-term capital through bond issues.
• Leasing, hire purchase, factoring: and a full array of other financial services are available in Iceland within the banking and non-bank sectors.
• Export guarantees: may be negotiated with banks.20