Sharjah, UAE – Companies involved in extractive and non-extractive natural resource activities in Sharjah will now be subject to a 20% corporate tax, following a new law passed by Sheikh Dr. Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah.
Scope of the New Tax Regulation
The tax applies to two types of companies:
- Extractive Companies: Businesses engaged in the extraction, processing, and utilization of natural resources, including oil, metals, minerals, and aggregates.
- Non-Extractive Companies: Those involved in the separation, treatment, refining, processing, storage, transport, marketing, or distribution of natural resources.
Taxation Structure for Extractive Companies
- Extractive companies will be taxed at 20% of the taxable base, in accordance with agreements between the Sharjah Oil Department and the company.
- The taxable base is determined based on the company’s share of produced oil and gas and the division of royalties and participation agreements with the Oil Department.
- Additional costs, such as royalties, bonuses, and annual rent, will be calculated based on individual concession agreements.
Taxation Structure for Non-Extractive Companies
- A 20% corporate tax will also apply to companies involved in non-extractive natural resource activities, with taxation calculated annually.
- The taxable base for these companies is derived from net taxable profits, adjusted as follows:
- Depreciation Deductions: Companies may deduct asset depreciation at a rate of 20% per year. If financial reports adhere to international accounting standards, depreciation may be adjusted accordingly—pending approval from the finance department.
- Tax Loss Carry Forward: Companies can carry forward tax losses indefinitely, allowing deductions from future taxable earnings.
Compliance, Renewals, and Penalties
- Tax compliance is mandatory for companies renewing their concession rights or commercial licenses in Sharjah.
- Companies must maintain tax-related records for at least seven years to ensure accurate financial reporting.
- Failure to comply with tax regulations or deliberate tax evasion will result in a 5% penalty on the total due tax.
This new corporate tax law aligns with Sharjah’s efforts to strengthen financial regulations and ensure fair contributions from the natural resource sector, reinforcing its commitment to sustainable economic growth.
