Greenland is a self-governing region within the Kingdom of Denmark. The Greenlandic government is actively working to attract investments to Greenland to diversify the economy and integrate it into the world economy.
Greenland originally joined the EU with Denmark in 1973 but left in 1985.
Two-thirds of Greenland lies above the Arctic Circle, and its northern tip is less than 500 miles from the North Pole. Its land area is over 50 times that of Denmark but has the lowest population density in the world, with approximately 56,000 inhabitants (or 1/100th the population of mainland Denmark). Greenland can be reached by air from Denmark or Iceland. There are currently no direct commercial flights to or from the United States. Transportation infrastructure in Greenland is focused on air and sea due to the climate and geography. Greenland has no railroads or roads to connect towns and settlements, and passengers and goods are transported between regions by sea or air only.
Greenland’s GDP was estimated at DKK 19.9 billion (USD 3.05 billion) in 2019. A large proportion of the Greenlandic labor market consists of public jobs in municipalities or with the Government of Greenland (GoG) or companies wholly owned by the GoG. Denmark’s annual block grant equals roughly 20 percent of GDP.
Fishing is Greenland’s single most important commercial industry and is dominated by two companies, the GoG-owned Royal Greenland and the privately-owned Polar Seafood. The government is promoting the development of tourism and the mineral extractives sector.
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 additional 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. Before 2009, Greenland had 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, indexed to inflation, which accounts for about 20 percent of Greenland’s GDP and half of the Greenlandic government’s revenue. In 2020, this grant was DKK 3.9 billion (approx. USD 597 million).
The Greenlandic government seeks to increase economic growth and government revenues by promoting the further development of fisheries, extractive resources, and tourism while periodically 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. Over the past decade, rising prices for fish and shellfish, the predominant Greenlandic exports, have generated solid earnings for large parts of the fisheries sector in recent years. Catches of prawn, by far the most important single species, have increased following years of decline.
Greenland’s capital city Nuuk and its primary tourist destination Ilulissat have seen extensive construction activity in recent years. A planned expansion of their respective airports will lead to further growth and facilitate growth in 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, three smaller mines (ruby, anorthosite, and ilmenite) are in varying stages of production. One company was granted an exploitation license to restart a gold mine in southern Greenland. Two small Australia-based companies are vying to extract rare earth elements in southern Greenland. The resources in both of these projects are globally significant, and each would rank in the top five worldwide if they were developed. One of the projects, Kringlerne, received an exploitation license in late 2020. The other project, Kvanefjeld, has faced significant local- and national-level political opposition due to environmental concerns over potential uranium contamination, and efforts to obtain an exploitation license have stalled as of spring 2021.
Greenlandic Economic Outlook
The Greenlandic economy has exhibited strong growth in recent years, mainly driven by large catches and high prices of fish and shellfish, but also supported by consumption, investments, and recently the resource extraction industry. The Greenlandic Economic Council (GEC) – an independent advisory council – estimated that real GDP grew on average by 2.4 percent annually from 2014 to 2018. The Council estimated that GDP grew by 2.7 percent in 2019 and contracted by -0.2 percent in 2020. Before the COVID-19 pandemic, GDP growth for 2020 had been forecast at 3.8 percent. The GEC has forecast 2.1 percent growth for 2021. A strong economy in recent years has led to labor shortages, both geographically and by sector, especially in connection with large construction projects. The Council estimated unemployment declined from about 10 percent in 2014 to a projected 5.4 percent in 2020, while the Bank of Greenland calculated the ratio of job-ready jobseekers to only around 3 percent of the total workforce, but with significant regional variations and low geographic mobility. Currently, 70 percent of all available jobs are in the capital Nuuk, and 90 percent of all available jobs are in just three locations: Nuuk, Sisimiut, and Pituffik (Thule Air Base).
The long-term health impact of the COVID-19 pandemic is currently unknown, but Greenland has had a very limited number of infected citizens. Its lock-down initiatives – which included the suspension of commercial flights into Greenland beginning March 20, 2020 – will have a detrimental economic impact, with tourism and exports expected to decline. Lockdowns and travel restrictions from the COVID-19 pandemic effectively wiped out the 2020 tourism season. Simultaneously, the crisis curtailed demand in the food service sector (restaurants, cafés and canteens, etc.) due to the lockdown, but businesses managed to sell their goods to retail businesses instead.
The public budget has run surpluses since 2015; however, the 2020 budget is expected to be in deficit due to the COVID-19 crisis. The Greenland Government adopted a number of financial support measures, which increased public expenditure in 2020. Spending on social benefits and emergency aviation also increased, while fisheries taxes fell. The Greenlandic economy continues to be bolstered by a yearly block grant from the Danish Government at DKK 3.9 billion (USD 597 million) in 2020. The Greenlandic economy is characterized by the unusual condition of having higher public than private consumption. Public consumption in Greenland was 44.8 percent of GDP in 2019, compared to 24 percent in Denmark.
The Greenland Parliament (called “Inatsisartut”) and the Government of Greenland (“Naalakkersuisut”) adopted a Budget Law in 2016, which mandates that the budget not be in deficit over four years. The 2020–2023 budget barely upheld the Budget Law requirement. Recent years’ budget surpluses have been used to consolidate the public coffers and the municipalities. The government and government-owned enterprises had a gross debt of approximately 24 percent of GDP in 2019, up from 22 percent of GDP by the end of 2018.
The GEC reported in 2017 that “projections for the public finances show a major sustainability problem.” The Council has reaffirmed that finding in subsequent reports. The GEC has warned 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 has also noted that a realistic plan to close the gap between expected expenditures and revenues could require the Government to cut social spending. For Greenland to become a more self-sufficient economy, the GEC asserted that the extractive and tourism sectors would need further development. The GEC noted that Greenland has not sufficiently addressed its sustainability challenges and estimated that the public budget would need to be reinforced by DKK 1 billion (USD 153 million) annually by 2040 to accommodate the aging population. Activity in natural resource exploration has increased only gradually since the global industry downturn in 2015. However, the two mines currently in operation have generated optimism that more small-scale mining operations could follow.
The vast majority of Greenlandic exports and imports pass through Denmark to and from the rest of the world but are reported as trade between the two. Some 92 percent of Greenlandic exports, measured in local currency, were fish products, with the remainder being mainly raw materials and machinery. Royal Greenland and Polar Seafood are the two main seafood exporters. Royal Greenland’s largest country market is China, and one-third of its revenues are generated in Asia, half in Europe, and ten percent in North America. Polar Seafood has its main markets in Scandinavia, China, and Japan. Similarly, Greenland imports goods from all over the world, primarily through Denmark and to a lesser extent via Iceland.
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. Greenland’s government-owned telecommunications company predominantly uses Ericsson equipment and announced that it would continue to do so for future upgrades, including 5G.
Establishing a Company in Greenland
Danish business (CVR) registration through indberet.virk.dk is required to conduct business in Greenland. Furthermore, companies planning to have employees must register as an employer with the employer register Sulinal: https://sulinal.nanoq.gl. In July 2018, an updated Companies Act entered into force which opened up new ways of establishing a company, e.g., with reduced share capital requirements with the possibility of partial payment of the share capital, the possibility of establishing entrepreneur companies with a share capital of DKK 1 (USD 0.15), etc. Foreign companies may start their businesses in Greenland either through a subsidiary (both ApS and A/S type companies) or via a registered branch office.
ApS and A/S
An ApS (private limited company) or A/S (public limited company) is a separate legal entity with limited liability for its shareholders. The main difference between a private (ApS) and a public (A/S) limited company is that the shares of a private limited company cannot be issued publicly. Therefore, an ApS cannot be subject to listing or otherwise issue shares to the public to secure more capital. In addition, there are a few differences concerning capital and management requirements. Under the Companies Act, the minimum share capital requirement for an ApS is DKK 40,000 (USD 6,100). The minimum share capital requirement for an A/S is DKK 400,000 (USD 61,000). However, under the Danish Companies Act, it is possible to incorporate an A/S and only pay 25 percent of this amount (i.e., DKK 100,000 or USD 15,000), leaving the company with a receivable on the shareholders for the outstanding amount (i.e., DKK 300,000 or USD 46,000). A founder of a company may be both foreign or Greenlandic individuals or corporate entities. Both types of companies can be registered via the Danish Business Authority’s online system. No registration fees are required.
Registered Branch Office
A foreign company may typically establish a registered branch office in Greenland instead of establishing a Greenlandic company. A branch of a foreign company may be created through an application with the Danish Business Authority. Companies within the EU and European Economic Area (EEA) may set up a branch in Greenland and Denmark without further approval from the Danish Business Authority. However, companies outside of the EU/EEA must obtain approval before registering.
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.
The Greenlandic tax system is based on flat-rate taxation of business profit for both resident and non-resident 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. As the rules of taxation for businesses can be complicated, it is recommended to retain guidance from the Greenlandic Tax Authorities or professional consultants.
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 25 percent (down from 30 percent in 2019); an additional surcharge of six percent of the tax payable brings the total corporate tax rate to 26.5 percent.
The taxation of royalty payments is 30 percent. Greenland has no value-added tax (VAT) system, property tax, 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 each year for four years, and operating equipment can be depreciated at a rate of 30 percent annually. Assets with a cost of less than DKK 100,000 (USD 15,304) may be depreciated in the year of acquisition.
Greenlandic permanent establishments of foreign companies are taxed under the same rules and rates as Greenlandic resident companies. There is no branch profits remittance tax or other similar tax on branch profits. If a foreign company has more than one location or permanent establishment in Greenland, these are treated as separate taxable entities with no possibility of consolidation.
The Greenlandic labor force was 27,141 persons in 2019. Average unemployment for 2019 was 5.1 percent – lower than the OECD average of 5.4 percent, and a decrease from 10.3 percent in 2014. Unemployment has decreased significantly, especially in Nuuk. However, more than a third of 16 to 25-year-olds are neither employed nor in school. According to Statistics Greenland, 49.2 percent of the Greenlandic workforce in 2019 have an education beyond municipal primary and lower secondary school. Of the workforce, 27.4 percent have vocational education, while 15.6 percent have a tertiary education. Among the unemployed, 84 percent have no education beyond municipal primary and lower secondary school.
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 (USD 765 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 enjoy the same legal protections as Greenlandic workers, including the same USD 13.85 per hour minimum wage and retention of the right to strike. However, employers may deduct up to USD 180 from foreign workers’ pay each week to cover the cost of company-provided lodging, food, and clothing.
Investment in Natural Resources
Greenland possesses sizable discovered and undiscovered mineral resource potential. Some deposits are among the largest in the world. The country’s resources include iron and ferroalloys (iron, nickel, molybdenum, tungsten, and others), base metals (copper, zinc, and lead), specialty metals (rare earth elements, uranium, niobium, tantalum, and others), precious metals (platinum, gold, and others) and gemstones (diamonds, rubies, and sapphires). Mining industry experts anticipate that Greenland’s retreating ice will make the island’s rich stores of raw materials more easily accessible. However, exploration and exploitation projects will still face higher costs because of remote locations, lack of infrastructure, harsh climate, and distance to world markets.
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 certain 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 Greenland’s natural resources’ exploitation becomes commercially viable, Greenland will keep the first DKK 75 million (USD 11.48 million) in annual revenues derived from these resources. Additional revenues will be 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 3.9 billion (approximately USD 597 million). Once the block grant’s total value is reached, any additional revenue will be subject to negotiations between the Danish and Greenlandic governments. The Greenlandic Government welcomes this 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 2020, Greenland maintained its favorability ranking as 41st out of 77 jurisdictions in the annual mining survey from Canadian Fraser Institute. The survey highlights political instability and the lack of qualified officials as creating uncertainty for investors.
Greenland General Business Information
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 . Information about doing business in Greenland can be found at https://www.businessingreenland.gl/en . 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 government has the competencies, in a non-discriminatory manner, and with reasonable compensation. There have been no recent expropriations of significance in Greenland.
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 building, not the land on which it sits.
There have been no significant 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.
Contact for More Information on Greenland
Political and Economic Specialist
U.S. Consulate Nuuk, Greenland