Taxation

Corporate tax issues of special interest to the oil industry investing in Greenland have been summarised by Nunaoil. The highlighted points below are assessed to be of special interest for foreign investors in hydrocarbon activities and are given in accordance with Greenland legislation and practice applicable in 2000.

Nunaoil accepts no responsibility for any losses that may be sustained by the direct use of the information given.

• International oil companies are allowed to undertake exploration activities i Greenland through a branch registered in Greenland.
• A public limited company must be incorporated in Greenland when an exploitation license is granted. The company can only carry out activities under the granted license and these activities may be taxed on a consolidated basis. The company cannot be taxed together with other companies.
• Accumulated deficits from the exploration phase may be transfered to a public limited company. Assets may be transfered to the public limited company at book value. 
• Corporate tax rate is 30% and is due on 1 November in the subsequent year.
• Shareholder dividend tax is 30% irrespective of shareholders domicile and is paid by the company when dividend is distributed.
• The following is deductible in taxable corporate income computation:
  • Operating expenses.
  • 100% of capital expenses in the year asset is put into operation.
  • For assets related to secondary treatment of hydrocarbons, e.g. oil refinery and LNG-plant, 110% of capital expenses is deductable in the year the asset is put into operation.
  • Interest on loans. There are no specific rules on thin capitalization. The Arm‘s Length principle does, however, apply.
  • Shareholder dividend.
  • Sales tax.
  • Royalties, rentals etc payable to the government according to the license.
  • Realisation of capital losses (capital gains are income).
  • Allocations for financing of abandonment costs.
• The Arm‘s Length principle is generally applicable in Greenland tax-law. Differences in transfer pricing between mother and daugther companies and prices prevailing between completely independent companies is computed as taxable income. There exist no specific rules on CFC-taxation.
• Deficits can be carried forward for an unlimited period in computation of taxable income. (Deficits cannot be indexed for inflation).
• Deficits can be carried back up to 5 years in computation of taxable income.
• No VAT applies in Greenland.
• No Import Duties apply in Greenland, but there is a tax on import of general cargo by ship of 18% of the shipping costs (not of the value of the imported goods). The tax is expected to be phased out over the coming years. The tax is collected by the shipping company Royal Arctic Line who has a government concession on all transportation of general cargo by ship to and from Greenlandic harbours.
  However, the above does not apply to bulk goods (e.g. oil and gas) deriving from or used in exploitation concessions for oil and gas, and it does not apply to cargo (e.g. equipment used off-shore) not entering Greenlandic harbour.
• Turnover Tax, Property Tax, or Capital Tax do not apply in Greenland.
• No general Sales Tax applies in Greenland, but Sales Tax is imposed on special items like alcoholic beverages, tobacco products, confectionery, perfume and vehicles.
• Personal tax rate is typically flat 40% with a granted personal deduction of approx. DKK 50,000 per year. (DKK 100,000 per year for married couples).
• Up till now there are only double tax agreements with Denmark and the Faroes, where tax paid in Greenland is credited in the respective countries.