- Greenland’s status within the Kingdom of Denmark is outlined in the Self Rule Act (SRA) of 2009, which details the Greenlandic government’s right to assume a number of responsibilities from the Danish government, including the administration of justice, business and labor, aviation, immigration and border control, as well as financial regulation and supervision. Greenland has already acquired control over taxation, fisheries, internal labor negotiations, natural resources, and oversight of offshore labor, environment, and safety regulations. Denmark continues to have control over the Realm’s foreign affairs, security, and defense policy, in consultation with Greenland and the Faroe Islands. Denmark also retains authority over border control issues, including immigration into Greenland. Greenland is not a part of the EU or Schengen Area, and special rules apply for foreigners arriving from a Schengen country. Denmark provides Greenland with an annual block grant of DKK 3.9 billion — roughly $600 million — that accounts for a quarter of Greenland’s GDP and more than half of the public budget.
- The Greenlandic government seeks to increase revenues by promoting greater development of fisheries, extractive resources, and tourism, and by trimming the public sector through privatization of enterprises currently owned by the government. Key initiatives include improving access to financing for new businesses and enhancing Greenland’s corporate tax competitiveness. Rising prices for fish and shellfish, the predominant Greenlandic exports, have generated strong earnings for large parts of the fisheries sector. Catches of prawn, by far the most important single species, have increased recently following years of declines. Catches of mackerel are also increasing.
- Capital city Nuuk has seen extensive construction activity in recent years and a planned expansion of the airport will lead to further growth and facilitate expansion of tourism. Other efforts to develop tourism include increases in accommodation (hotel rooms), a reduction in passenger tax for cruise ships, and a focus on promoting foreign language education to create a more multilingual workforce. The government is calling for stricter safety requirements for navigation in Greenlandic waters.
- In the mineral extractives sector, two smaller mines (ruby and anorthosite) have begun producing in 2017, while two other companies have applied for permission to extract rare earth elements in southern Greenland, in one case combined with the extraction of uranium, which is estimated could one day become the world's fifth-largest uranium mine and second-biggest rare earths operation. The government endorses maintaining the previous government’s relaxation on a ban on uranium mining, and states that all IAEA and EURATOM standards must be met. However, the issue of uranium mining in Greenland remains sensitive.
Greenland Economic Outlook
- Greenland is currently enjoying an economic upswing, though its highly specialized economy – over 90 percent of exports is fisheries – faces significant challenges. The economy contracted between 2012 and 2014, grew by 1.7 percent in 2015 and by 7.7 percent in 2016 to $2.765 billion. The Danish Central Bank estimates nominal GDP growth of 3-4 percent in 2017, and in 2018 economic growth is expected to be 2 percent. The 2016 upswing was driven by an increase in the prawn quota off West Greenland, increasing municipal construction budgets, the expansion of the port in Nuuk, and the government-financed construction of a prison in Nuuk, along with the construction of court buildings in several coastal towns. There are also indications that private consumption contributed positively to GDP growth in 2016 and will, together with increasing mineral exports, continue to do so in 2017 and 2018, but the data is not yet available. Increased public spending at government and local levels has had an expansionary effect in 2016 and 2017. The Greenlandic economy is characterized by the unusual condition of having higher public than private consumption. Consequently, government consumption is of proportionally greater importance to the economic trend.
- The Greenland Parliament (called “Inatsisartut”) and the Government of Greenland (Naalakkersuisut) adopted a Budget Act for 2018 with an estimated balanced annual budget in the period 2018-2021. The most recent budget showed a deficit of DKK 145 million ($21.5 million) for the same period. The municipalities and government have no net debt, but including government-owned enterprises, the net debt totaled DKK 1.9 billion ($280 million) in 2015, which corresponds to approximately 13 percent of GDP.
- The Greenland Economic Council (GEC) - an independent advisory council - concluded in the Council’s 2017 report that, “Projections for the public finances shows a major sustainability problem.” The Council warns of the effects of increasing public expenditures as larger portions of the population age into retirement, resulting in fewer wage earners in the labor market. The GEC reported that the Greenlandic Government’s 2017 Growth and Sustainability Plan was an ambitious but realistic plan to close the gap between expected expenditures and revenues, although it would require the Government to cut social spending. The GEC has advised that development of a more self-sufficient economy requires further development of the extractive and tourism sectors. Natural resource exploration has declined in recent years in line with lower worldwide mineral prices. However two mines began production in 2017, generating some optimism that more small scale mining operations could follow.
- Greenland exported DKK 2.702 billion ($410 million) in the first nine months of 2017, a two percent decrease from the same period in 2016, mainly attributable to a decrease in export value of machines and transport equipment. Some 96 percent of Greenlandic exports, measured in local currency, were fish products, with the remainder being raw materials and machinery. Exports went primarily to Denmark (87 percent), followed by Portugal, and Iceland. Greenland imported goods worth DKK 2.972 billion ($451 million) in the first nine months of 2017, primarily machinery (27 percent), foods (20 percent), intermediate products (17.6 percent), and fuels (12.5 percent). Imports came from Denmark (79 percent), Sweden, and China among others. Imports from the United States represented 0.9 percent of total imports. Due to its vast geographic expanse, Greenland’s physical and telecommunications infrastructure is less interconnected and developed than in other parts of the Kingdom of Denmark. The labor force was comprised of 26,844 people in 2015, and the average unemployment rate was 9.1 percent, though that in the capital was significantly lower. The Greenlandic government is actively trying to attract investments to Greenland to diversify the economy and integrate it into the world economy as part of a long-term path toward eventual independence from Denmark.
Establishing a Company in Greenland
- A foreign company can establish a commercial enterprise in Greenland in one of the following ways: through a subsidiary, a registered affiliate, a representative office, or a taxable entity. A subsidiary is only liable for its own assets. The capital requirement for establishing a corporation (A/S) is DKK 500,000 (approx. $75,900) and for establishing a private limited liability company (ApS) is DKK 125,000 (approx. $18,970).
- An established company planning to do business in Greenland must obtain a GER (Greenland’s Company Register) registration number. This also applies to subsidiaries. A registration number can be acquired from the Greenlandic Tax Authorities.
- A registered affiliate has no capital requirements, but only a company with a legally registered office in the EU, USA, Canada or the Nordic countries can open an affiliate, which is not treated as an independent company, but rather as an extension of the main company for legal purposes. This means that the head office is liable for all the affiliate’s assets.
- A representative office is not regulated or defined; however, a representative office may not enter contracts or deliver services. It is, rather, intended to be a marketing office, or an office to establish contacts with the goal of eventually entering the market.
- An exploration license is viewed as a taxable entity. There is more lenient regulation in the extraction industry regarding company composition: if a foreign company is granted an exploration license, it is not required to register as an affiliate, but the license is taxable, and therefore the firm must submit tax information like a regular company. However, a loss can be carried forward and written off against future profits. A GER registration is required.
- A foreign company can do business in Greenland in a consecutive or non-consecutive 90 day period over 12 months without being required to register as a business.
- Greenland has double taxation agreements with Denmark, the Faroe Islands, Iceland, and Norway. Greenland has signed a Foreign Accounts Tax Compliance Act (FATCA) agreement with the United States.
- The corporate income tax rate is 30 percent; an additional surcharge of six percent of the tax payable brings the total corporate tax rate to 31.8 percent. Companies which are operating under the Mineral Resources Act can apply for an exemption of the surcharge, thereby lowering the tax rate to 30 percent.
- Taxation of royalty payments is 30 percent. Greenland has no value added tax (VAT) system, sales tax, or similar taxes. There are, however, some payable duties, such as taxes for cruise liners, ports duties, etc. There are four types of depreciation in the Greenlandic tax law. Buildings can be depreciated five percent annually. Ships, planes, and hydrocarbon prospecting can be depreciated 10 percent annually. Mineral licenses can be depreciated 25 percent annually, and operating equipment can be depreciated at a rate of 30 percent annually. Assets with a cost of less than DKK 100,000 ($15,170) may be depreciated in the year of acquisition.
- The Greenlandic labor force was 26,844 persons in 2015 (most recent figure). Average unemployment for 2015 was 9.1 percent – higher than the OECD average of 6.78 percent, and a decrease from 10.3 percent in 2014. Anecdotally, unemployment has decreased significantly since, especially in Nuuk. According to Statistics Greenland, 39 percent of the Greenlandic population in 2015 have an education beyond primary school. Of those, 56.4 percent have a vocational education.
- In December 2012, Greenland passed legislation known as the “Large Scale Act,” which allows companies to use foreign labor during the construction phase of development when project costs exceed DKK 5 billion ($759 million) and workforce requirements exceed the local labor supply. The Act is intended for potential mining or infrastructure projects in Greenland. The Act lays out the framework for politically-negotiated Impact Benefit Agreements (IBA) for the Government of Greenland and the employer to agree on the exact conditions of employment for foreign labor. The scale of Greenlandic labor utilized will be negotiated for each project and will vary depending on local capacity and the negotiated agreement for each project.
- Foreign workers will enjoy the same legal protections as Greenlandic workers, in theory, including the same $13.85 per hour minimum wage and retention of the right to strike, but employers may deduct up to $180 from their pay each week to cover the cost of company-provided lodging, food, and clothing.
Investment in Natural Resources
- Greenland possesses significant mineral deposits, including rare earth elements, zinc, lead, molybdenum, uranium, gold, platinum, ruby and pink sapphires, and other critical minerals. Greenland is also believed to have large quantities of iron ore and copper, although there has been limited exploration to date. Despite a harsh climate and ice coverage in Greenland, satellite images record a significant disappearance of surface ice from the island. As the trend continues, mining industry experts anticipate the retreating ice will make the island’s rich stores of raw materials more easily accessible, though still faced with the challenges of remote location and lack of infrastructure.
- Greenland’s policy framework is relatively attractive for most mining activities. In October 2013, the Greenlandic Parliament abolished the country’s 25-year “zero-tolerance” policy towards uranium and other radioactive minerals, lifting the ban on mining where uranium is present. This decision will facilitate the exploitation of rare earth mineral deposits, which are often found co-mingled with radioactive minerals in Greenland.
- With the 2009 SRA, Greenland gained rights to its mineral and hydrocarbon resources, and it acquired the regulatory authority over these on January 1, 2010. The SRA also created a revenue mechanism: if exploitation of Greenland’s natural resources becomes commercially viable, Greenland will keep the first DKK 75 million ($11.38 million) in annual revenues derived from these resources, with further revenues split equally between the Danish and Greenlandic Governments. Denmark’s share will be transferred by deducting the equivalent amount from the annual block grant to Greenland of DKK 3.6 billion ($546 million). Once the full value of the block grant is reached, any additional revenue will be subject to negotiations between the Danish and Greenlandic governments. The Greenlandic Government welcomes this lucrative scenario, but remains aware of the potential adverse impacts that a rapid influx of wealth from these activities could have on Greenlandic society.
- Most of Greenland’s identified rare earth deposits are licensed by the Mineral License and Safety Authority and some have reached advanced stages of exploration. In 2017, Greenland advanced to a position as 34th out of 91 in the annual mining survey from Canadian Fraser Institute. Greenland had been ranked 55th out of 104 mining jurisdictions surveyed in terms of investment attractiveness. In December 2013 Greenland was deemed the “best country to do mining in,” together with Mongolia, Azerbaijan, and Australia, at Europe’s Mines & Money conference.
Greenland General Business Information
Prepared by the International Trade Administration. With its network of more than 100 offices across the United States and in more than 75 markets, the International Trade Administration of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.
- OPIC programs are not applicable to U.S. investments in Greenland. Information about the Greenlandic Government can be found at: http://naalakkersuisut.gl/en. Information from the Greenlandic Government on natural resource exploration and extraction can be found at: http://www.govmin.gl.
- Statistics on Greenland can be found at: http://www.stat.gl/default.asp?lang=en
- By law, private property can only be expropriated for public purposes in areas where the Greenlandic Self-government has the competencies, in a non-discriminatory manner, and with reasonable compensation. There have been no recent expropriations of significance in Greenland and there is no reason to expect significant expropriations in the near future.
- In Greenland it is not possible to acquire private ownership of land, but a right of use may be sold for an area, e.g. if you buy property, you own the house, not the land on which it sits.
- There have been no major disputes over foreign investment in Greenland in recent years. While it is common that disputes are settled in Greenlandic courts, the Danish Supreme Court remains the highest appeals court for disputes in Greenland. If a dispute is very specialized and within the purview of the Danish Administration of Justice Act, the parties involved can choose the Danish Maritime and Commercial Court as a court of first instance.
- While Greenland’s democratic institutions and legal framework in general are strong, there have been some concerns about legislation being passed by parliament without significant hearing processes and public input.