On June 14, 1994 Iceland issued this stamp (Facit #842) to commemorate the 50th anniversary of the country's independence as a republic.
The coat of arms as shown on the stamp is not the official coat of arms of Iceland. The rising sun above the national colors is a symbol of "a new day". The official coat of arms is shown in the second pic. The coat of arms before June 17, 1944 has the Danish crown above the national colors.