Greenland operates a tax system that applies to both individuals and companies. For employees, income tax is the primary form of taxation, levied on various types of income including salaries, wages, and benefits. Employers play a crucial role in this system by withholding income tax from employee salaries and remitting it to the relevant tax authorities.
Understanding these tax obligations and deductions is essential for businesses employing staff in Greenland, ensuring compliance and accurate payroll processing. The system is designed to be progressive, with tax rates increasing with income levels, and includes provisions for various deductions and allowances that can reduce an employee's overall tax burden.
Employer Tax Obligations
Employers in Greenland are primarily responsible for withholding income tax from their employees' gross salaries and remitting these amounts to the tax authorities. Unlike some countries, Greenland does not typically have separate, significant employer-only social security contributions levied as a percentage of payroll on top of income tax withholding. The main burden is the correct calculation and remittance of the employee's income tax.
There may be minor contributions or fees related to specific labor market schemes or insurance, but the substantial employer obligation revolves around the Pay As You Earn (PAYE) system for income tax. Employers must register with the tax authorities and report payroll information regularly.
Income Tax Withholding Requirements
Income tax in Greenland is levied at both the national and municipal levels. The system is progressive, meaning higher income is taxed at higher rates. Employers are required to calculate and withhold the correct amount of income tax from each employee's salary based on their income level and tax card information provided by the tax authorities.
The tax rates and brackets are subject to change annually. For 2025, the specific brackets and rates will determine the amount of tax withheld. The calculation typically involves applying the relevant tax rates to the employee's taxable income after considering any applicable allowances or deductions specified on their tax card.
While specific 2025 brackets are determined annually, the structure generally involves increasing marginal rates.
Employee Tax Deductions and Allowances
Employees in Greenland are entitled to various deductions and allowances that can reduce their taxable income. These are typically reflected in the employee's tax card issued by the tax authorities, which informs the employer how much tax to withhold. Common deductions and allowances may include:
- Personal Allowance: A basic allowance granted to all taxpayers before income becomes taxable.
- Specific Deductions: Deductions for certain expenses, which might include contributions to approved pension schemes, interest expenses on loans, or potentially deductions related to specific employment costs, although the latter are often limited or covered by standard allowances.
- Regional Allowances: In some cases, specific allowances might apply based on the employee's place of residence within Greenland, reflecting regional cost of living differences.
The exact nature and amount of these deductions and allowances are determined by tax legislation and the individual's circumstances, as assessed by the tax authorities when issuing the tax card.
Tax Compliance and Reporting Deadlines
Employers in Greenland have strict reporting obligations to ensure compliance with tax laws. The primary requirement is the regular reporting of payroll information and the remittance of withheld income tax.
- Monthly Reporting: Employers are typically required to report salary payments and withheld tax amounts on a monthly basis. This reporting is usually done electronically through the designated tax portal.
- Monthly Remittance: The withheld income tax must be remitted to the tax authorities by a specific deadline each month, usually shortly after the end of the payroll period.
- Annual Reporting: While monthly reporting is key, there are also annual summaries or reconciliation requirements to ensure all monthly reports align with the total amounts paid and withheld over the year.
- Annual Employee Tax Returns: Employees are required to file annual tax returns, typically by a deadline in the spring following the tax year, to report their total income and claim any additional deductions or allowances not fully accounted for via the tax card.
Meeting these deadlines is crucial to avoid penalties and interest charges.
Special Considerations for Foreign Workers and Companies
Foreign workers and companies operating in Greenland may be subject to specific tax rules.
- Tax Residency: An individual's tax obligations in Greenland depend on their tax residency status. Individuals who are considered resident for tax purposes are generally taxed on their worldwide income, subject to double taxation agreements. Non-residents are typically taxed only on income derived from Greenlandic sources, such as employment income for work performed in Greenland.
- Withholding for Non-Residents: Employers hiring non-resident workers for work performed in Greenland are still required to withhold income tax, often at a flat rate or based on specific non-resident tax rules, unless an exemption applies under a double taxation treaty.
- Foreign Companies: Foreign companies with a permanent establishment in Greenland are subject to Greenlandic corporate income tax on the profits attributable to that permanent establishment. Companies without a permanent establishment may still have tax obligations related to specific types of income sourced in Greenland.
- Double Taxation Agreements: Greenland has entered into double taxation agreements with several countries (often covered under Denmark's agreements extended to Greenland) to prevent individuals and companies from being taxed twice on the same income. These agreements can affect tax rates and reporting requirements for foreign workers and companies.
Navigating these special rules requires careful attention to residency status, the nature of the work performed, and the provisions of any relevant tax treaties.
