Sharjah Implements 20% Corporate Tax on Natural Resource Companies

12 January 2025

Shuchi Goel

On February 13, 2025, His Highness Sheikh Dr. Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah, issued a new law imposing a 20% corporate tax on companies involved in both extractive and non-extractive natural resource activities, covering both extractive and non-extractive activities.

Sharjah: The tax applies to companies engaged in extractive activities (e.g., oil and gas production) and non-extractive natural resource activities (e.g., mining, quarrying). The New Tax Law targets Both Extractive and Non-Extractive Sectors as per below:

1 - Taxation of Extractive Companies

Companies engaged in extracting raw materials such as oil, metals, minerals, and aggregates will be subject to:

• A 20% tax applied to the taxable base, as determined by agreements with the Sharjah Oil Department.
• Taxable base calculations that consider total production value, royalties, and financial agreements.
• Royalties, concession fees, and bonuses established through contractual arrangements with the Oil Department.

2 - Taxation of Non-Extractive Natural Resource Businesses

Companies involved in refining, processing, marketing, and distribution of natural resources will also be subject to the 20% tax, with key provisions including:

• Annual assessment of taxable profits, with adjustments based on legal guidelines.
• Depreciation deductions at 20% per year on non-current assets, with any variations requiring finance department approval.
• Unlimited loss carryforward, allowing companies to offset losses in future tax periods.

3 - Compliance, Record-Keeping, and Penalties

• Tax payments must be made for the renewal of concession rights or business licenses.
• Companies are required to maintain financial records for a minimum of seven years to ensure tax compliance.
• A 5% penalty will be imposed on companies found to have deliberately violated tax regulations for evasion purposes.

4 – Deductions

Companies subject to this tax and liable for any direct federal taxes are granted a deduction from the tax due under this law equal to any direct federal tax paid

5 - Calculation of Taxable Base

·        Extractive companies: Based on the total share of the company from the value of produced oil and gas, including royalties and other agreed-upon participations.

·        Non-extractive companies: Based on net taxable profits, with deductions for asset depreciation and tax losses

6 - Compliance and Reporting

Companies must comply with the reporting requirements and timelines set by the Sharjah authorities to ensure accurate tax calculations and payments.

In Conclusion

This new taxation framework aligns with Sharjah’s economic objectives by promoting financial transparency, increasing government revenue, and strengthening regulatory control over the natural resource sector.

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