Iceland: residence and citizenship

It closed on 11 May 2026, when Visa Act No. 37/2026 of 4 May 2026 was published with immediate effect. The Act repealed the long-term visa provision of the Foreign Nationals Act, the legal basis of the remote-work visa. Visas already granted stay valid. Even while it was open, the visa led nowhere: it did not count toward permanent residence or citizenship, and it was capped at 180 days, just below the 183-day tax-residency threshold.

Remote workers lost their route. The new short-term residence permit for stays over 90 days is open only to close family members on extended visits and to artists, scientists and athletes. It lasts up to 180 days, is granted once in any 12 months, costs ISK 12,200 and can be revoked for unauthorised work. Remote workers from outside the EEA are left with the standard Schengen short stay.

Approved foreign experts can exclude 25% of their income from the taxable base for the first three years. That means only 75% of what they earn gets taxed, which works out to roughly 11.5 percentage points off a 46.29% marginal rate. There is no salary threshold. But the expertise itself must be genuinely scarce or unavailable in Iceland, in fields such as R&D, innovation, teaching, or specialised project and construction management. Applications go through Rannis, the Icelandic Centre for Research, and must be filed within three months of starting work. That deadline is firm. You also must not have been resident or domiciled in Iceland at any point during the preceding 60 months.

On duration, it is more modest: three years at 75% of the taxable base, against Denmark's seven years at 32.84% and Finland's seven years at 25%. The relief is also narrower than it first looks. Wage-related charges, child benefits and interest relief are still calculated on total gross salary, not the reduced base. That said, Iceland's overall capital position is cleaner than the headline number suggests. There is no wealth tax, abolished in 2015, and capital gains are taxed at just 22%. For the right specialist, the whole package can still be attractive.

There is no wealth tax. It was abolished in 2015. Capital gains are taxed at a flat 22%, low by European standards. Inheritance tax, known as erfdafjarskattur, runs at 10% on net assets above ISK 6,789,790, and drops to 0% for a surviving spouse or cohabitant. The top marginal rate on earned income is 46.29%, made up of 31.35% state tax plus 14.94% average municipal tax, and it applies above ISK 1,398,450 a month. This clean capital treatment is the real draw. The three-year expert relief is secondary, and the remote-work visa closed in May 2026.

It takes longer than the headline seven years suggests. The residence requirement is seven years of continuous legal residence with a permanent residence permit. A backlog has pushed processing to 18 months or more on top of that. So the realistic arrival-to-passport timeline is eight to nine years, for a passport ranked 8th in the world for 2026, below Ireland's or Sweden's. The absence cap is severe too: no more than 90 days out of the country per 12 months. That effectively rules out globally mobile families for the full seven years. Applications go through island.is and require an Icelandic electronic ID, which is itself a chicken-and-egg hurdle for new arrivals.

There is an Icelandic language test at roughly A2 level, covering speaking, listening, reading and writing. It costs ISK 40,000 and is held only about twice a year, so missing a sitting costs six months. That is gentler than, say, Estonia's B1 plus renunciation, and Iceland does permit dual citizenship, a rule in place since 2003. You will also need criminal-record certificates from every country you have resided in since age 15, a real burden for mobile families. Sources conflict on the shortened routes for spouses, cohabiting partners and Nordic citizens, so verify with Utlendingastofnun.

Iceland has permitted dual citizenship since 2003. Naturalising does not require you to renounce your existing nationality. That is a genuine advantage over jurisdictions like Estonia or the Netherlands, which do require renunciation. But weigh it against the practical timeline. You need seven years of residence, with a punishing 90-day annual absence cap. Add to that an 18-month-plus processing backlog, and an A2 language test held twice a year. The passport itself is respectable, but it ranks 8th in the world for 2026, below several EU peers.