Taxation
Content
The tax laws apply to both individuals and corporations.
The Greenlandic tax system is based on a flat-rate taxation of business profit for both resident and non-residents corporations. The Greenlandic tax system is based on a net income principle, where the taxable income is calculated as a total net amount after deductions. The net income principle means that all income is treated equally, regardless of whether the income comes from employment, self-employment, investment income or pensions, etc.
The rules of taxation of businesses can be complicated, thus it is recommended to retain guidance from the Greenlandic Tax Authorities or professional consultants.
The net income principle, mentioned above, is based on a global income principle, according to which, Greenlandic corporations are taxable to Greenland on their worldwide income which generally means that the total aggregate revenue generated by a tax-paying entity from all sources that includes foreign, domestic, passive and active income from operations and investments is included in the Greenland taxable income - expect income from real estate outside of Greenland which is exempted. With the global income principle, a double taxation between Greenland and another country can occur.
However, according to Greenlandic tax law, relief is generally available to credit foreign tax paid on non-Greenlandic source profits against the Greenlandic tax on the same profits. A corporation is resident in Greenland for tax purposes if i) it is registered in the Danish Business Register as resident in Greenland, ii) has its principal seat of business in Greenland or iii) if it has its effective seat of management in Greenland.
The effective seat of management is typically the place where the management decisions concerning the company’s day-to-day operations are made.
Tax liability for non-resident corporations
Non-resident corporations are tax liable in Greenland on business profits derived through a permanent establishment in Greenland.
Generally, Greenland may be assumed to rely on the principles of the Organisation for Economic Co-operation and Development (OECD) model tax treaty in the determination of whether a permanent establishment exists.
The corporation tax rate is 25% for both Greenlandic and non-resident foreign companies (proportional tax).
Corporation tax can be settled by paying voluntary tax on account by no later than 31 December in the income year.
If tax on account is not paid, or if the final tax due exceeds the tax paid on account, the tax will be demanded with a surcharge of 6% of the difference between the tax on paid account and the final corporation tax due.
It is therefore possible for the company to avoid the surcharge if the company pays tax on account corresponding to the final amount due.
The Greenlandic withholding tax on dividends is between 36%-44%, with dividends paid being deductible for corporation tax purposes. This means that, for foreign companies, the remitted income is in practice taxed with the withholding tax rate of 36%-44%, and the effective tax rate for distributed income is thus 36%-44%. In other words, special for Greenland is that the Greenlandic withholding tax is deductible and corporation tax is not payable on profits distributed. This means that the sum of the corporation tax and the withholding tax corresponds to the withholding tax rate. For Danish, Norwegian and Icelandic companies that receive dividends from a Greenlandic company, the withholding tax rate is reduced to 35% by double taxation treaties.
This means that the sum of the corporation tax and withholding tax is subject to a maximum of 36-44%.
Furthermore, the extraction of minerals is subject to various royalty rates. These royalty rates are listed on the website of the Ministry of Mineral Resources: Govmin.gl
Local income taxes
There are no municipal or local corporation taxes or similar in Greenland. However, withholding tax rates differ by municipality.
According to Greenlandic tax legislation, taxable income is generally calculated as income determined for accounting purposes, adjusted for several items as prescribed by tax legislation.
Greenlandic permanent establishments of foreign companies are generally taxed under the same rules and rates as Greenlandic resident companies.
There is no branch profits remittance tax or similar tax on branch profits.
If a foreign company has more than one address or permanent establishment in Greenland, these are treated as separate taxable entities with no possibility of consolidation.
For tax purposes, a representative office is not considered a permanent establishment of the foreign corporation, and thus is not subject to Greenlandic taxation. However, to maintain this tax status, the representative office must not have authorization to enter sales agreements, as this will result in a taxable presence in Greenland.
Example of corporate income tax calculations below:
| Income year - 1 | Income year - 2 | |
| DKK | DKK | |
| Profit/loss before tax | 1,500,000 | 1,500,000 |
| + Book depreciation, cf. annual report | 250,000 | 250,000 |
| +/- Other adjustments | - 50,000 | - 50,000 |
| Taxable income before tax depreciation | 1,700,000 | 1,700,000 |
| Tax depreciation: | ||
| - Ships and airplanes (10%, straight line basis) | - 100,000 | - 85,000 |
| - Buildings (5%, straight line basis) | - 100,000 | - 100,000 |
| - Goodwill (30%, declining-balance basis) | - 20,000 | - 17,000 |
| - Operating equipment (30%, declining-balance basis) | - 360,000 | - 304,500 |
| Taxable income | 1,120,000 | 1,193,500 |
| Dividend paid to owners of capital (deductible) | - 1,000,000 | - 1,000,000 |
| Taxable income after deduction of dividend paid | 120,000 | 193,500 |
| - Corporation tax for the year (25%) | 30,000 | 48,375 |
| - Corporation tax surcharge (6% of tax for the year if no tax on account is paid) | 1,800 | 2,905 |
| Total corporation tax for the year | 31,800 | 51,277 |
| - Withholding tax on dividends (44% of total dividend paid) | 440,000 | 440,000 |
| Total corporation tax for the year (corporation tax + dividend tax) |
471,800 | 491,277 |
- Operating assets can be depreciated by 30% a year on a declining-balance basis.
- Ships and airplanes can be depreciated by 10% on a straight-line basis.
- Buildings and installations can be depreciated by 5% on a straight-line basis.
- Goodwill can be depreciated as an operating asset (i.e. by 30% on a declining-balance basis).
Depreciation allowances that are recaptured as part of a capital gain on the sale of an asset are generally fully taxable.
Companies are allowed depreciation relief corresponding to gains on divested depreciable assets. However, the rule states that this may not reduce the company’s income to less than zero (or less than the balance of depreciable assets in the case of operating assets).
Tax depreciation is not required to correspond to book depreciation.
Dividends received are generally included in taxable income.
When making dividend distributions, Greenlandic companies must withhold dividend tax, which is why these dividends are not included in taxable income for the recipient.
Dividends received by Greenlandic companies from foreign companies are also tax free, provided that the recipient has held at least 25% of the shares in the distributing company for at least one year.
Dividend distributions
Unique for Greenland is that dividends distributed are deductible for the distributing company. However, this does not apply if the dividends received are tax-exempt.
Gains and losses from disposals of bonds, shares, financial contracts and sales of real property and other depreciable assets are included in taxable income.
Losses on financial contracts may only be deducted from gains on financial assets, and losses may be carried forward for five years and offset against gains on financial assets.
Tax losses can be carried forward for up to five years. Tax losses may not be carried back and utilized in previous income years. Tax losses are forfeited at ‘significant’ change of ownership or, unusually, certain main activities of the company. However, Greenlandic Tax Agency may allow that tax losses are not forfeited in the event of a significant change of the composition of the group of shareholders or unusual activities. ‘Significant’ is interpreted as 33.3% of ownership interest.
If the company has been granted an exploration or exploitation license under the Greenland Parliament Act on mineral resources and activities of significance for these (Mineral Resources Act), a loss for the license in question may be carried forward to without time limit.
Tax consolidation
Joint taxation and tax consolidation is not possible in Greenland.
Double tax treaties and other treaties
For these situations, Greenland has entered fully fledged double taxation treaties with Denmark, the Faroe Islands, Iceland and Norway. Furthermore, Greenland and Canada agreed that some provisions in the Canadian-Danish double tax treaty should apply for Greenlandic companies, e.g. how dividends from a Greenlandic company are to be taxed in Canada.
Moreover, Greenland has entered into restricted double taxation treaties with the Cayman Islands, Isle of Man, Bermuda, Jersey, Guernsey and the US. The treaties primarily concern shipping and airlines.
The Greenlandic income tax law and the double taxation treaties combined can allow for a relaxation of this tax, as the country of residence and the source country allocate tax rights based on the type of income.
Additionally, Greenland has entered into FATCA (Foreign Account Tax Compliance Act), AEoI (Automatic Exchange of Information), MCAA (Multilateral Competent Authority Agreement) and 46 separate tax information exchange agreements (TIEA).
Controlled foreign companies (CFCs)
According to the Greenlandic CFC rules, a Greenlandic company which owns more than 50% of the shares (or the voting rights) of low-tax foreign subsidiary in which financial assets on average account for more than 10% of the foreign company’s total assets, the Greenlandic company must include the foreign subsidiary’s CFC income when determining the taxable income in Greenland. CFC income, financial assets, low-tax foreign companies (etc.) are regulated under the Greenlandic Tax Act.
Greenland has no list that exempts subsidiaries resident in certain countries.
Withholding taxes
According to the Greenlandic tax legislation, the following withholding taxes apply (2023 figures):
- Dividends: 36% to 44%. The withholding tax rate depends on the local municipality (may be reduced by double taxation treaty).
- The Greenlandic withholding tax on dividends is 36%-44%, with dividends being deductible from income for corporation tax purposes. This means that the effective corporation tax and withholding tax is subject to a maximum of 36%-44%.
- Interest: There is no withholding tax on interest.
- Royalties: 30% tax must be withheld by the payee of royalties of any kind, e.g. consideration for the use or the right to use any copyright for literary, artistic or scientific work, etc. The royalty withholding tax may be reduced by treaty – e.g. to 10% according to the double tax treaty with Denmark.
The withholding tax rates in the double tax treaties are as follows:
| Recipient | Dividends | Interest | Royalties |
| Denmark | 35% | 0% | 10% |
| Norway | 35% | 0% | 10% |
| Iceland | 35% | 0% | 15% |
| The Faroe Islands | 35% | 0% | 25% |
Foreign tax credit
According to Greenlandic tax law, relief is generally available for tax paid to a foreign state on income generated outside Greenlandic against the Greenlandic tax paid on the same profits. If relief is offered by treaty, the level of relief is capped at the level offered by the double taxation treaty. There are only treaty provisions to this effect with Canada, Denmark, the Faroe Islands, Iceland and Norway.
Transfer pricing
Greenlandic transfer-pricing rules apply to transactions between related parties (e.g. intra-group transactions). The rules apply when a company or individual directly or indirectly owns more than 50% of the share capital or 50% of the voting rights in another company.
Companies are obligated to disclose in the annual tax return (S40 form regarding controlled transactions) certain information regarding the type and volume of intra-group transactions.
Larger companies must prepare and store transfer-pricing documentation for five years. Small companies must prepare documentation on transactions with related parties located in countries without a transfer-pricing-relevant double taxation treaty.
The documentation must generally be submitted to the Tax Agency by no later than 60 days after request.
Income year - taxable period
The taxable period is the calendar year. Permission can be granted to use a 12-month period other than the calendar year, provided that the period starts on the first day of a calendar month.
Tax return
Tax returns are completed on the basis of audited financial accounts with adjustments for tax. Tax returns should be filed no later than four months following the end of the income year, meaning 1 May for companies using the calendar year as the income year. However, if the company submits tax returns via the official web portal for tax return submissions, the deadline is 15 June.
Payment of tax
Corporation tax is due for payment by 20 November of the following year, when a tax surcharge of 6% must be paid on the difference between and tax paid on account and the final corporation tax.
VAT
There is no VAT in Greenland.
Property taxes
There are no property taxes in Greenland.
Import duties
There are import duties on cars, alcohol, cigarettes, food, etc. The rates vary depending on the goods and assets in question.
Operating materials are generally not subject to duties when imported to Greenland. However, this does not apply for a number of vehicles, including vans and lorries.
Payroll taxes - social security contributions
All private employers in Greenland are obligated to pay contributions to a post-education scheme and parental fund - the AMA scheme. AMA is set every year in the Finance Act. In 2023 the AMA is 1.1% of total payroll.
For more information about parental leave and the parental fund go to: https://amaat.gl/
In addition, Danish, Greenlandic, and Faroese employers have to pay Danish social security payments (ATP) for non-Greenlandic residents, i.e. residents in Denmark, the Faroe Islands and foreigners. However, foreign employees are exempt unless they are working in Greenland for more than six months.
Individuals
Individuals who are not resident in Greenland and who receive payment for work services performed in Greenland for less than six months are subject to limited taxes.
However, individuals are not tax liable in Greenland if the following three conditions are met:
- the individual in question remains employed by an employer who
- is not resident in Greenland, and
- the stay does not exceed 14 consecutive days, including the day of arrival and departure. Individuals from Denmark, the Faroe Islands, Iceland and Norway may be able to stay in Greenland for up to 183 days within a 12-month period without becoming subject to tax in Greenland under double tax treaties entered into by Greenland.
Individuals subject to tax in Greenland who, in the context of an employment relationship, perform work in connection with project planning, building and construction projects as well as installation and assembly work outside existing towns and settlements or the construction of airports on behalf of the Government of Greenland and who have not been liable to tax in a municipality in Greenland for the preceding six months, are liable to a final tax charge (gross tax) to the Greenland treasury of 35% on income earned during the employment. Similarly, individuals subject to tax in Greenland who, in the context of an employment relationship, mainly perform specific work connected with the prospecting, exploration or exploitation of mineral resources, see the Mineral Resources Act, and who have not been liable to tax in a municipality for the preceding six months will be liable to a final tax (gross tax) payable to the Greenland treasury of 35% on income earned during the employment.
Foreigners subject to the gross tax scheme for expat employees are not taxable on foreign-sourced interest and dividends if their Greenlandic-sourced wage income is less than DKK 350,000 in the year in question.