Sharjah Introduces 20% Corporate Tax on Natural Resources Companies

In a proclamation made to introduce the 20% corporate tax on companies engaging in extractive and non-extractive activities relating to natural resources, Sharjah has committed, as of Thursday, the announcement made to all businesses in extraction, processing, and distribution of other natural resources, besides oil, metals, and minerals-for example, aggregates.

It was signed into law by Sheikh Dr. Sultan bin Mohammed Al Qasimi, the Supreme Council Member and Ruler of Sharjah. The law provides different tax provisions for extractive companies and all other non-extractive companies. The extractive companies would focus strictly on the extraction and utilization of raw materials. Such companies will be subjected to a tax that is to be computed based on the taxable base derived from the different agreements made between the company and the Sharjah Oil Department. The taxable base for these companies will be calculated by the total share the company receives from the value of produced oil and gas, as well as all royalties and bonuses stipulated in the agreements with the department.

Meanwhile, this corporate tax of 20% is imposed on the annual taxable profits of the companies and will cover all other non-extractive companies involved in the separation, treatment, refinement, processing, storage, transportation, marketing, or distribution of natural resources. The taxable base for such companies will incorporate the depreciation of assets with an annual deduction rate of 20% applied to non-current properties. Furthermore, tax losses from the previous years will be carried forward for deduction from taxable bases in the future, the approval being given by the finance department.

One important stipulation in the new law is that tax compliance is and will be one of the preconditions for renewing concession rights or commercial licenses in Sharjah. Companies subject to this tax law have to maintain proper records and documentation for seven years to achieve transparency and accountability with respect to their financial reporting.

In addition to the above, companies found guilty of any financial violations, particularly those engaged in tax evasion, will be subject to a 5% penalty calculation on the total amount of tax due. It is evident now that Sharjah remains committed to improving tax compliance and ensuring that the corporate sector operates fairly.

The new tax law is expected to solidify Sharjah’s tax revenues while also ascertaining that all businesses in the natural resources sector contribute to the emirate’s economy. The law further goes according to the much wider regional initiatives to regulate the natural resources sector province and ensure sustainable economic development.