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Greenland: A Tax-Free Haven for Businesses
In a unique twist, Greenland has no value-added tax (VAT) system or sales tax, making it an attractive destination for businesses looking to minimize their tax burden. However, there are some payable duties, such as taxes on cruise liners and port duties.
Depreciation in the Greenlandic Tax Law
The country’s tax law allows for four types of depreciation:
- Buildings can be depreciated at a rate of 5% annually.
- Ships, planes, and hydrocarbon prospecting equipment can be depreciated at a rate of 10% annually.
- Mineral licenses can be depreciated at a rate of 25% annually.
- Operating equipment can be depreciated at a rate of 30% annually.
Assets with a cost of less than DKK 100,000 (approximately $15,170) may be depreciated in the year of acquisition.
The Greenlandic Labor Force
As of 2015, the Greenlandic labor force stood at 26,844 persons, with an average unemployment rate of 9.1% - higher than the OECD average of 6.78%. However, anecdotal evidence suggests that unemployment has decreased significantly since then, particularly in Nuuk.
- According to Statistics Greenland, 39% of the population has an education beyond primary school.
- 56.4% of those having a vocational education.
The “Large Scale Act”
In December 2012, Greenland passed the “Large Scale Act,” which allows companies to use foreign labor during the construction phase of development projects when costs exceed DKK 5 billion (approximately $759 million) and workforce requirements exceed local capacity.
The act lays out the framework for Impact Benefit Agreements between the Government of Greenland and employers, ensuring that foreign workers enjoy the same legal protections as Greenlandic workers.
Investment in Natural Resources
Greenland is rich in mineral deposits, including:
- Rare earth elements
- Zinc
- Lead
- Molybdenum
- Uranium
- Gold
- Platinum
- Ruby
- Pink sapphires
The country also has large quantities of iron ore and copper, although exploration has been limited to date. As the ice cover continues to recede, mining industry experts anticipate that the island’s rich stores of raw materials will become more accessible.
Greenland’s Policy Framework
The country’s policy framework is relatively attractive for most mining activities. In October 2013, the Greenlandic Parliament abolished its “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.
Greenland General Business Information
OPIC programs are not applicable to U.S. investments in Greenland. The country’s government welcomes foreign investment, but remains aware of the potential adverse impacts that a rapid influx of wealth from these activities could have on Greenlandic society.
- Private property can only be expropriated for public purposes in areas where the Greenlandic Self-government has competencies, in a non-discriminatory manner, and with reasonable compensation.
Conclusion
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Greenland offers a unique combination of low taxes, attractive policy framework, and rich natural resources, making it an attractive destination for businesses looking to minimize their tax burden and invest in the country’s vast mineral deposits. With its strong democratic institutions and legal framework, Greenland is an excellent choice for companies looking to expand their operations in the Arctic region.