Iceland

Iceland is not in the European Union, so Regulation (EU) 2018/1806 does not reach it as Union law. It reaches it as a development of the Schengen acquis under the 1999 association agreement between the Council of the European Union and Iceland and Norway, which recital 35 of the Regulation says in terms. On 12 May 2026 a new Act, logum vegabrefsaritanir nr. 37/2026, took the visa provisions out of the Aliens Act and put them in a statute of their own under the Minister for Foreign Affairs. Article 4 of that Act states the rule in eleven words - a foreigner needs a visa to come to the country, subject to article 8 - and article 8 exempts Nordic citizens, nationals of the other Schengen states, holders of a residence permit issued by a Schengen state, and family members of EEA, EFTA and Icelandic nationals who hold a valid residence card. The list of nationalities is in neither article: article 21 says the Act implements Regulation (EC) 810/2009 and Regulation (EC) 767/2008 and names no visa-list instrument at all, and article 8(4) leaves further exemptions to a ministerial regulation. For the length of a free stay the Aliens Act and the Visa Act disagree in form: the Visa Act defines a visa as up to 90 days in any 180-day period from first entry to the Schengen area, while section 49 of the Aliens Act says simply that other foreigners may not stay longer than 90 days from arrival, with time in any other Schengen state counted as time here.

Iceland has no residence permit for living on your own money. Chapters VI to X of the Aliens Act set out every ground on which a permit may be granted - work, study and cultural exchange, family reunification, protection, special connections to the country, and a lawful and special purpose - and not one of them is means-tested income from abroad. What Iceland does have is a stay rather than a residence: section 21 of the Aliens Act lets Utlendingastofnun grant a skammtimadvalarleyfi, a short-term residence permit, where the applicant wants more than 90 days for a purpose that is not in any permit category and does not intend to settle. It runs to a maximum of 180 days, may be granted only once in any 12-month period, cannot found a permanent residence permit, and cannot found a registered domicile. Until 12 May 2026 the same words sat in the same section under a different name: langtimavegabrefsaritun, a long-term visa. Act 37/2026 converted it into a residence permit and added the once-a-year cap and the domicile exclusion to the Act itself. The conditions a remote worker actually has to meet are in Regulation 540/2017, article 5 a - foreign income equivalent to 1,000,000 krona a month, 1,300,000 if a spouse comes too, and a ban on working for Icelandic parties or on the Icelandic labour market - and that regulation still describes the thing it is regulating as a long-term visa.

Working in Iceland takes two permissions under two statutes. Section 50(2) of the Aliens Act says a foreigner who intends to take employment needs a residence permit as well as a work permit where the Foreign Nationals' Right to Work Act requires one, and each of the four work-based residence permits in sections 61 to 64 is conditional on the matching work permit having already been granted. Until 30 June 2026 the work permit came from Vinnumalastofnun, the Directorate of Labour. Act 79/2026 substituted Utlendingastofnun for it throughout the Act in a single amending article and provided in terms that the Directorate of Immigration takes over the Directorate of Labour's duties for administering and issuing temporary work permits, including the applications already in the queue. One body now decides both halves. What the Act does not contain is a salary number. The general condition in section 7(1)(c) is a signed contract securing the foreigner wages and other terms equal to locals in accordance with the Acts and collective agreements in force, and where a job falls outside any collective agreement the same equality test applies with the tax authority's imputed-income reference figures, Statistics Iceland data and independent pay surveys as evidence. Iceland is the only Nordic country in this corpus with no figure at all.

Section 1 of the Income Tax Act 90/2003 makes four groups liable to Icelandic tax on all their income wherever earned. The first is people domiciled here. The third is people who stay here more than 183 days in total in any 12-month period, counting normal absences for holidays and the like. The fourth catches 183 days of work aboard an aircraft or a ship registered in Iceland. The second is the one nobody expects: someone who was domiciled in Iceland, moved abroad and cancelled their domicile remains liable on worldwide income unless they prove they are taxable in another state in the same way as people domiciled there and have discharged those obligations - and that liability lasts three years from the New Year following the day of departure. Whether you are domiciled here is decided by the Director of Internal Revenue by reference to the Act on Domicile and Residence, with an appeal to the Internal Revenue Board. The state income tax has three bands - 16.55 per cent, 23.05 per cent and 31.35 per cent - whose thresholds are re-indexed every January to the change in the consumer price index plus one per cent for productivity growth, a mechanism the Act says is itself to be reviewed every five years, first for the 2027 withholding year. Municipal income tax is charged on top and is not in this Act. A foreign expert recruited by an employer established here, who has not been resident in Iceland for the preceding 60 months, can deduct 25 per cent of employment income for the first three years - but only if a three-member ministerial committee confirms it, on an application made within three months of starting work, and the committee's decision is final in the administrative system.

Health insurance in Iceland is not bought and is not tied to employment. Section 10(1) of the Health Insurance Act 112/2008 makes a person insured if they are resident in Iceland and have been for a stated qualifying period, unless an international agreement provides otherwise. That period was six months, counted before benefits were requested, from 2008 until 1 August 2026. Article 8(1) of Act 50/2026 replaced the words six months before benefits are requested with three months before rights are applied for or benefit payments are requested, and the same article added a real-residence test: the insurance agency must assess whether the person is actually resident here, by reference to the registered domicile in the national register and to data from the tax authorities, and may cancel the insurance of someone who is registered but not actually living here. Insurance ends when the insured person moves their residence away from Iceland, again unless an international agreement says otherwise - and for anyone moving between the Nordic countries the agreement that says otherwise is the Nordic Convention on Social Security concluded at Bergen on 12 June 2012, which Act 119/2013 gives the force of law in Iceland and prints in full as a schedule. The Convention extends Regulation (EC) 883/2004 to people the Regulation does not reach, and adds a right the Regulation does not give: the country you are visiting pays the extra cost of your journey home if illness forces you onto a more expensive means of travel.

Iceland is not in the European Union. Free movement reaches it through the Agreement on the European Economic Area signed at Porto on 2 May 1992, which Act 2/1993 gives the force of law in Iceland and prints in full as a schedule - so the treaty guaranteeing freedom of movement for workers in the EC Member States and the EFTA States is readable in Icelandic inside the Icelandic statute book. Chapter XI of the Aliens Act works it out. An EEA or EFTA national may enter on a passport or an identity card and stay three months, so long as the stay does not become an unreasonable burden on the social assistance system; a jobseeker gets six months, and so do their family members. Beyond three months the right continues on one of four grounds - employment or self-employment, providing or receiving services, sufficient funds with comprehensive sickness insurance, or enrolment in a recognised educational institution with both - and must be registered within three months of arrival, though section 81(4) forbids refusing anyone their rights merely for not holding the certificate. After five years of lawful continuous residence the right becomes permanent and is detached from those conditions, lapsing only on two continuous years abroad. The sentence that belongs to Iceland alone is section 83(3): a stay in another Nordic country shall not be deducted from the period of stay. Where section 49 of the same Act counts time anywhere in the Schengen area against a third-country visitor's ninety days, chapter XI refuses to count Nordic time against an EEA national's three months.

Iceland has two naturalisation routes and they run in parallel. Section 6 of the Nationality Act 100/1952 says Althingi grants citizenship by Act - an actual statute, voted on, with the applicant named - and section 7 then allows the Directorate of Immigration to grant it by administrative decision instead. The administrative power is deliberately narrow: it is confined to cases where it is beyond doubt that the applicant meets the statutory conditions, and the Directorate may always refer an application to Althingi, which may grant citizenship by Act. Decisions under that subsection are also exempt from chapters III to V of the Administrative Procedure Act and from the Information Act. The residence requirement for the administrative route is seven years, four for a citizen of a Nordic country, four from marriage for the spouse of an Icelandic citizen who has held that citizenship at least five years, five for a registered cohabitant, two for someone with an Icelandic parent of five years' standing, one for a former Icelandic citizen, and five for a refugee or a stateless person. Residence means a registered domicile, and it stays continuous only if absences total no more than 90 days in any 12-month period - a continuous absence longer than that is deducted in full. On top of the years there is an Icelandic language test, an identity requirement, a clean enforcement and tax record for three years, self-support with no municipal subsistence grant for three years, a criminal-record bar with a published table of waiting periods running from no wait for a fine under 80,000 krona to fourteen years after security detention, and a national-security bar.

Section 70 of the Aliens Act lets a foreigner have a residence permit in order to come and live with a spouse or cohabiting partner. The sponsor must be someone with a right to family reunification under chapter VIII - an Icelandic or other Nordic citizen with a fixed residence here, or a foreigner holding one of the work, marriage, protection or special-connections permits section 69 names, or a permanent residence permit. Cohabitation must have lasted more than a year, both parties must have been over 18 when the marriage or cohabitation began, and the couple must have the same registered domicile under the Act on Domicile and Residence. The permit is normally granted for one year, may be extended to match the sponsor's permit up to a maximum of two, and can found a permanent residence permit unless the sponsor's own permit cannot. The condition that costs people the most is in section 70(3): where the sponsor holds a permit on the ground of international protection, humanitarian considerations or special connections to the country, that sponsor must have worked or studied here in lawful residence for the last four years before the application is made - subject to three exceptions, including a couple who already had a child or were married before the sponsor moved. Section 69(3) adds a five-year criminal bar on the sponsor, and section 70(8) a marriage-of-convenience test under which a reasoned suspicion, unless clearly rebutted, defeats the application.

Section 65 of the Aliens Act grants a residence permit to someone over 18 who intends to pursue full study in Iceland and meets the entry requirements of the course. Full study means continuous study at university level, including university-level study carried out at workplaces, or other study making comparable demands of prior education; attending individual courses is not full study. The permit is normally for twelve months at a time and renewal needs satisfactory progress, which the Act defines as at least 75 per cent of a full course load over the academic year, with an exemption for uncontrollable circumstances such as accident or serious illness. A master's or doctoral student working on a final project may renew with no credits completed at all if the school confirms progress. Work does not need a work permit: section 13 of the Foreign Nationals' Right to Work Act, as rewritten by Act 79/2026, allows a student permit holder to work as an employee at up to 60 per cent of a full-time post during study, with exceptions between terms, for a graduate in the job-hunting period and for formal workplace training. The same Act of June 2026 shortened the job-hunting permit after graduation from three years to 18 months and added a condition that was not there before: the degree must be a bachelor's, master's or doctorate from an Icelandic university.

Iceland has no residence permit that money buys and no permit for running your own business. The Foreign Nationals' Right to Work Act 97/2002 lists the temporary work permits that exist - expert knowledge, shortage of staff, athletes, special reasons, family reunification, students, specialists under a service or cooperation contract, a new employer, and agreements with other states - and every one of them presupposes an employer and a signed employment contract. Section 6(3) then says in terms that a foreigner may not work in Iceland as a self-employed person unless he is exempt from the work-permit requirement under that Act, and section 50(2) of the Aliens Act repeats it. The exemptions in section 22 are by status, not by capital: nationals of the EEA states, of the EFTA states and of the Faroe Islands under the agreement between Iceland, Denmark and the Faroese Home Rule; people who were Icelandic citizens from birth and lost it; and the foreign spouses and cohabiting partners of Icelandic citizens holding a marriage-based residence permit, among others. So the only way to run a business in Iceland as a foreigner is to be inside one of those categories, and for most of the world that means the EEA. No amount of investment changes the answer, because no provision mentions an amount.

There is no retirement residence permit in Iceland and no pension threshold anywhere in the Aliens Act. The grounds of residence in chapters VI to X are work, study and cultural exchange, family reunification, protection, special connections to the country and a lawful and special purpose, and none of them is retirement. Age appears in the Act in exactly one place as a ground of its own: section 72(2) allows a residence permit for a foreigner aged 67 or over who has a grown child in Iceland, and lets the Directorate waive the requirement of self-support where the child shows it can secure the parent's keep. The same age runs through section 69(1), which counts parents aged 67 and over among a person's closest family members for the purposes of family reunification, so the route is a family one rather than a retirement one: it depends on having an adult child here, not on having income. The other place age does something is chapter XI, where an EEA or EFTA national who reaches pension age or takes early retirement gets the permanent right of residence after three continuous years in Iceland and twelve continuous months of work, rather than the usual five years. For everyone else, retiring to Iceland means fitting one of the ordinary grounds or using the short-term residence permit in section 21, which runs 180 days and cannot be repeated within twelve months.

No ground of residence in the Aliens Act rests on ancestry. An Icelandic parent is not a ground, an Icelandic grandparent is not mentioned anywhere, and the family-reunification chapter runs the other way - it lets an Icelandic citizen bring a spouse, a child under 18 or a parent of 67 or over, not a descendant of an Icelandic ancestor. What descent does in Icelandic law is shorten the clock at two later stages. Section 58(3)(a) of the Aliens Act gives an immediate permanent residence permit, without the usual four years, to someone with an Icelandic parent who has held a residence permit continuously for the last two years, provided the parent has been an Icelandic citizen for at least five years. Section 8(1)(4) of the Nationality Act gives citizenship after two years of residence on the same five-year condition. And for someone who was Icelandic and is not any more there is a declaration rather than an application: section 4 of the Nationality Act restores citizenship by written notification to the Directorate of Immigration to a person who acquired Icelandic citizenship at birth, had a registered domicile here until the age of 18, lost the citizenship, and has had a domicile here for the last two years. Section 58(3)(c) of the Aliens Act gives the same person permanent residence with no prior-residence condition at all.

The Traffic Act 77/2019 says almost nothing about foreign licences. Section 62 hands the whole subject to the minister, who may decide that a licence issued in another EEA state continues to be valid after the holder settles here and that a licence from any other state is valid where Icelandic licences are accepted there. Everything a driver needs is therefore in Regulation 830/2011 on driving licences, last amended on 22 June 2026. A licence from an EEA state or from the Faroe Islands lets the holder drive the AM, A1, A2, A and B categories in Iceland for as long as it is valid in the issuing country, but no longer than the holder's seventieth birthday. A licence from anywhere else is good for 12 months, must be in Latin letters or carry a translation into Icelandic, Danish, Norwegian, Swedish or English, and gives no right to carry passengers or goods commercially. Exchanging a non-EEA licence for an Icelandic one means sitting the theory test for category B and a practical test for every category applied for - unless the issuing state has asked Samgongustofa to allow exchange without a test and has satisfied it that its training and testing are no less demanding than Iceland's. Two states have done so, and the regulation prints their names in a table with a single column: Japan and the United Arab Emirates.

The Payment Accounts Act 5/2023 is Iceland's transposition of the Union's payment accounts directive through the EEA Agreement, and chapter IV of it is what a newcomer needs. Section 14 says a credit institution is obliged to offer consumers basic payment accounts and that a consumer with lawful residence in the European Economic Area has the right to open and use one - and then extends that right, in the same paragraph, to people with no fixed residence, to asylum seekers, and to people who have not been granted a residence permit but cannot lawfully be removed. An application must be dealt with as soon as possible and in any event within ten business days. Section 13 forbids discrimination on a long list of grounds against any consumer lawfully resident in the EEA, in both the opening and the use of an account. Section 15 lists what the account must do - run and close an account in at least Icelandic krona, receive funds, withdraw cash at a branch or an ATM in or outside opening hours, and make direct debits, card payments including online, and transfers within the EEA - and forbids capping the number of transactions. Section 16 requires the service to be free or at a reasonable price, and says reasonableness is judged against national income levels and the average fees charged for payment-account services. Refusal is possible only where opening the account would breach the anti-money-laundering Act or where the consumer already has such an account at another Icelandic institution.

Iceland is outside the Union customs union, so Council Regulation (EC) 1186/2009 - the instrument that gives relief on personal property across the member states - does not reach it. The Icelandic instrument is section 6 of the Customs Act 88/2005, which lists what comes in free of duty, and the relevant item is the fourth: the household goods of people moving their residence to Iceland, provided they had a fixed residence abroad for at least one year before moving here. Two limits sit in the same provision. The relief does not extend to vehicles or other motor vehicles, so a car moved with the household is outside it entirely. And the minister may, by regulation, restrict the relief by reference to use, categories of goods or a maximum value, taking account of how long the person was abroad, the size of the family and other circumstances. A traveller's ordinary baggage is free under the second item of the same section where customs are satisfied it is travel necessities for the person's own use on the journey, and residents returning have separate money allowances for goods bought abroad or in a duty-free shop.