The general deduction scheme is fairly standard, although the Greenlandic Tax Agency seems to have a restrictive view of the kinds of expenses that are deductible. One very unusual feature is that dividends paid are deductible for the distributing company.
Depreciation and amortisation
Tax depreciation is not required to be in coherence with book depreciation.
Operating assets can be depreciated by 30% a year on a declining-balance basis, ships and aeroplanes can be depreciated by 10% on a straight-line basis, and buildings and installations can be depreciated by 5% on a straight-line basis. Oil and mineral licences can be depreciated over ten years (oil) and four years (minerals) on a straight-line basis. If the lifetime of the licence is shorter than ten or four years, the licences are depreciated over the lifetime of the licence on a straight-line basis.
Depreciation allowances that are recaptured as part of a capital gain on the sale of an asset are generally fully taxable.
A new rule, with effect from 1 January 2024, will make it possible to postpone a taxable gain related to sale of buildings, vessels, and airplanes, to be taxed the following income year, under the condition that new assets are acquired in that subsequent year. The taxable gain should then reduce the acquisition value of the buildings/vessels/airplanes acquired in the subsequent year. A surcharge of 1% per month will be added to the taxable gain in the tax calculation for the subsequent income year if no new assets were acquired.
Goodwill can be depreciated as an operating asset (i.e. by 30% on a declining-balance basis).
No specific rules in Greenlandic tax law govern the treatment of start-up expenses. Instead, these expenses are treated according to general tax law.
Interest expenses are generally deductible under Greenlandic tax law. However, there are some limitations (see Thin capitalisation in the Group taxation section).
Companies can deduct losses on bad debt for Greenlandic tax purposes only to the extent the losses are realised. Note that there is a high threshold for when a loss is deemed to be realised.
An exception to this rule is that financial institutions shall deduct provisions for bad debt and guarantee liabilities in accordance with the accounting rules applicable to them. The same applies to mortgage institutions, but only if they are domiciled in Greenland.
Contributions to charity are not deductible for Greenlandic tax purposes.
Pension expenses are deductible as operating expenses.
Payments to directors
Payments to directors are deductible as operating expenses.
Research and development (R&D) expenses
R&D expenses may be deductible or not, depending on whether they are deemed operating expenses or capital expenses.
Bribes, kickbacks, and illegal payments
There is no published practice on the deductibility of bribes, kickbacks, return commissions, and the like. In Danish and Greenlandic practice, illegal payments are generally not deductible. Since 2008, any bribery payments, whether in or outside Greenland and whether towards a national or international authority, have been a criminal offence. Consequently, it may reasonably be inferred that no such payments are deductible.
Fines and penalties
Fines and penalties are not deductible for Greenlandic tax purposes.
Income taxes are, in general, not deductible for corporate tax purposes. Excise duties are deductible.
Other significant items
A highly unusual item is that dividends distributed are deductible in the hands of the distributing company. If a decision to distribute is made before the deadline for filing the income tax return (1 May) on the basis of the preceding year’s profits, the deduction may be carried back into the preceding year.
Net operating losses
With effect from 1 January 2024, tax losses can be carried forward for ten years (previously five years), under the condition that the taxpayer, each year before the tax return deadline, submits a specification of the tax losses and a declaration that the taxpayer will keep all accounting material relevant for the tax losses until at least two years after the utilisation of the tax loss. The filing of the declaration and specification must be performed digitally, and the accounting material should be shared with the Greenland tax authorities no later than 60 days after a potential request hereof.
Oil and mineral licence holders can carry losses forward indefinitely.
Tax losses may not be carried back and utilised in previous income years.
Tax losses are forfeited at ‘significant’ change of ownership or, unusually, activity of the company. Dispensation is available. ‘Significant’ is interpreted as 30% of ownership rights.
Payments to foreign affiliates
A Greenlandic corporation can claim a deduction for royalties, management fees, and similar payments made to foreign affiliates, provided that such amounts are made on an arm’s-length basis and reflect services received. Interest at normal commercial rates paid to foreign affiliates generally will be allowed as a deduction but is subject to thin capitalisation (see Thin capitalisation in the Group taxation section).