Iceland Work Permits & Visas: Types & How to Sponsor

Milani Notshe

Research Specialist

Last Updated

July 11, 2025

In This Guide

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Sponsoring a Visa in Iceland: What Employers Need to Know

Are you an employer looking to sponsor international talent in Iceland? Navigating Iceland’s visa and work permit process can be complex — especially without a local legal entity or dedicated HR team.

This guide breaks down everything you need to know about employer-sponsored work visas in Iceland, including processing times, documentation, and local compliance rules. Whether relocating a team member or hiring locally, Playroll simplifies visa sponsorship through an end-to-end employer of record platform.

Key Takeaways

Employers must be registered with the Directorate of Labor to sponsor foreign workers.

The work permit process usually takes 8–10 months.

Common work visas include the Short-Term Work Visa and the Long-Term Work Visa, with fees around ISK 20,000.

Independent contractors follow a separate process and do not require employer sponsorship.

Work permits are typically location-specific and require approval for job changes.

Who Needs a Work Permit in Iceland

In Iceland, citizens from the European Economic Area (EEA), European Free Trade Association (EFTA), and Faroe Islands do not require a work permit. However, nationals from outside these regions must obtain a work permit to work legally. Employers hiring non-EEA/EFTA nationals must secure the appropriate permits before the employment begins.

Types of Work Visas in Iceland

Iceland offers various work permits tailored to different employment needs.

Visa Type	Description
Temporary Work Permit for a Job that Requires Expert Knowledge	For foreign experts with specialized skills not available locally. Requires proof of expertise and a signed employment contract.
Temporary Work Permit for Labor Shortages	Issued when no EEA/EFTA nationals are available for specific roles. Employers must demonstrate recruitment efforts within the region.
Temporary Work Permit for Students	Allows international students to work part-time while studying in Iceland.
Temporary Work Permit for Family Reunification	Permits family members of foreign workers to obtain employment in Iceland.

Common Hiring Scenarios for Iceland

When hiring talent inIceland, employers typically choose one of three pathways depending on the role, duration, & legal requirements. Below are the most common models.

Use Case 1: Sponsoring a Foreign Employee via Work Permit or Visa

This is the most common route for companies hiring full-time foreign talent in Iceland. To sponsor this visa, an employer (or Playroll as the Employer of Record) must have a registered legal entity in-country and issue a compliant offer of employment.

Key Employer Considerations:

Sponsorship is required — contractors or freelancers cannot apply under this visa.
Employees must remain in the approved work location unless authorized to relocate or change employers.
Processing timelines vary (approximately 8–10 months), depending on the consulate or embassy.

This is best for: Long-term roles with in-office or hybrid presence in Iceland.

Use Case 2: Hiring a Foreign Contractor in Iceland

Independent professionals in Iceland can legally work with international clients without employer sponsorship, but must comply with local tax registration and reporting laws.

With Playroll’s Contractor Management solution, you can:

Draft fully compliant local contractor agreements.
Automate contractor invoicing and cross-border payments, in Icelandic Króna (ISK) or USD.
Mitigate risk of permanent establishment and contractor misclassification.

This is best for: Freelancers, consultants or project-based roles, especially if the worker already lives in Iceland.

Use Case 3: Relocating an Existing Employee to Iceland

Transferring an existing team member to Iceland? You’ll still need to navigate the same visa and payroll setup process. Even if the employee works for you elsewhere, a local employer of record is required to stay compliant.

EOR’s, like Playroll, handle all local steps, including:

Work permit sponsorship and immigration paperwork,
Registration with local authorities and payroll systems,
Enrollment in mandatory benefits and statutory schemes.

This is best for: Internal transfers or remote-first companies looking to expand into Europe, or talent retention offerings for global mobility programs.

Not Sure What to Pay in Iceland? Compare fair, local salaries with our free benchmarking tool.

Requirements for a Work Permit in Iceland

Employers must meet specific criteria to obtain a work permit for their foreign employees.

Employment Contract: A signed agreement outlining job responsibilities and terms.
Proof of Qualifications: Evidence of relevant expertise and credentials.
Labor Market Test: Demonstrate the inability to find suitable EEA/EFTA candidates.
Valid Passport: The applicant's passport must be valid for at least three months beyond the intended stay.
Health Insurance: Proof of comprehensive coverage in Iceland.
Clean Criminal Record: Police clearance from the applicant’s home country.

Iceland Work Permit Application Process

Step 1: Secure a job offer from an Icelandic employer.
Step 2: The employer submits the application to the Directorate of Immigration with all necessary documentation.
Step 3: The application is assessed by the Directorate of Labour.
Step 4: Await decision; processing times can vary based on completeness.
Step 5: Apply for a residence permit after work permit approval.

Process for Visa Sponsorship in Iceland

Employers in Iceland are responsible for sponsoring work permits for non-EEA/EFTA nationals. This includes demonstrating the position cannot be filled locally, submitting complete applications, and ensuring compliance with labor laws.

What Are the Fees for a Work Permit or Visa in Iceland

Fees vary based on the permit type and applicant circumstances.

Visa Type	Application Fee
Work Permit Application	€80–€90
Processing Fees	€30–€50
Travel Insurance	€50–€100

Processing Time for a Work Permit or Visa in Iceland

First-time applications typically take 8–10 months, while renewals are processed within three months. Delays may occur for incomplete submissions.

Work Permit Renewal Periods in Iceland

Temporary permits are issued for specific durations. Employers must apply for renewals at least four weeks before expiration, fulfilling all original permit requirements.

Visa Requirements for Digital Nomads in Iceland

Iceland’s long-term remote work visa allows non-residents to stay up to six months while working for foreign employers.

Proof of foreign employment or self-employment.
Meet minimum income thresholds.
Comprehensive health insurance.
Clean criminal record.

Common Challenges and Tips for Employers Hiring in Iceland

Employers may face challenges such as labor law compliance, integration issues, and delays. Early preparation and expert consultation are recommended.

Hire Global employees without hassle with an EOR solution

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. That’s the advantage of using a trusted Employer of Record like Playroll. They can:

Handle your international payroll: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
Alleviate compliance concerns: Different countries each have their own federal and local laws governing employee payments. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. This is extremely important since a compliance slip-up can result in heavy fines or even a lawsuit.
Hire and pay international contractors: Sometimes a particular project or role doesn’t require hiring a full-time employee. An EOR gives employers the flexibility to also hire contractors as needed, and avoid the potential for misclassification under local labor law.

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Playroll does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect Playroll’s product delivery in any given jurisdiction. Playroll makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

ABOUT THE AUTHOR

Milani Notshe

Milani is a seasoned research and content specialist at Playroll, a leading Employer Of Record (EOR) provider. Backed by a strong background in Politics, Philosophy and Economics, she specializes in identifying emerging compliance and global HR trends to keep employers up to date on the global employment landscape.