New investment is a concession introduced on 30 October 2009 with an amendment to the Rules on Foreign Exchange, which have now been incorporated into the Foreign Exchange Act, no. 87/1992. A provision on new investment can be found in Article 13(m) of the Act. The new investment programme represents a concession under which foreign and domestic investors may import foreign capital to Iceland and invest it domestically without locking in their funds because of the capital controls provided for in the Act. The new investment programme was therefore the first step in liberalisation of the capital controls. In colloquial terms, registered new investment is sometimes referred to as a “yellow ticket”.
According to the Foreign Exchange Act, new investment is investment commencing after 31 October 2009 and based on new inflows of foreign currency that is converted to domestic currency at a financial undertaking in Iceland. Inward direct investment with foreign currency is therefore excluded from this definition of new investment, as a foreign exchange transaction must take place. In undertaking new investment, investors are taking a position in the Icelandic króna for the term of their investment. There are restrictions on permissible types of investment, however, and on the origin of the capital used for such investments. Derivatives and derivative-related contractual provisions are not classified as new investment, as their value can be subject to substantial and unforeseen changes, which would make an impact on payment flows if such instruments were exempt from the capital controls. Comparable views apply to investments in claims against entities undergoing winding-up or insolvency proceedings. In addition, investments related indirectly to investments in derivatives and claims against entities in winding-up or insolvency proceedings are not classified as new investment, as indirect investments could be subject to substantial and unforeseen changes, just as direct investments are. Sales proceeds and other payments in connection with direct investment and investments in foreign securities and other financial instruments are not considered new inflows of foreign currency in the sense of new investment.
Foreign currency account balances dating from before 31 October 2009 and held in domestic financial institutions, export revenues, and other foreign currency subject to repatriation requirements pursuant to Article 13(l) of the Foreign Exchange Act, no. 87/1992, are not classified as new inflows of foreign currency; therefore, the new investment concession cannot be used in connection with such capital.
An investor wishing to invest in Iceland and avail him- or herself of this concession must contact a domestic financial institution, which will assist in preparing a notice of investment that is then sent to the Central Bank. It is emphasised that the notice of investment must be received by the Central Bank of Iceland within three weeks of the date the new inflows of foreign currency are converted to domestic currency at a financial institution in Iceland. The notice must be accompanied by documents demonstrating that the proposed investment is a new investment in the sense of Article 13(m) of the Foreign Exchange Act, no. 87/1992.
When liquidating the investment, the investor must obtain the assistance of a domestic financial institution, which will prepare a request for disbursement that is sent to the Central Bank of Iceland for confirmation. Once the Central Bank has confirmed the request for disbursement, the foreign exchange transactions and transfers of the funds reverting to the investor upon the sale of the investment are exempt from the statutory restrictions on foreign exchange transactions and cross-border movement of capital.
From the time new investment was first authorised through 31 May 2015, a total of 1,116 new investments totalling 93.5 billion krónur were registered. Of that amount, 472 investments totalling 37.7 billion krónur have been liquidated in full and 60 investments totalling 9.6 billion have been partially liquidated. In all, the full or partial liquidation of 532 new investments totalling 47.2 b.kr. has been approved. It should be noted that each investor may hold more than one registered new investment.