Sharjah Imposes 20% Corporate Tax on Natural Resource Companies

Companies engaged in both extractive and non-extractive natural resource activities in Sharjah will now be subject to a 20% corporate tax, according to a new law passed by Sheikh Dr. Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah. The law, announced on Thursday, outlines taxation rules for businesses involved in resource extraction, processing, and distribution.

Taxation on Extractive Companies

Extractive companies—those involved in oil, metal, mineral, and aggregate extraction—will be taxed based on agreements between the company and Sharjah’s Oil Department.

The key provisions include:

1. A 20% corporate tax on the taxable base of extractive companies.
2. The taxable base is calculated based on the company’s share of oil and gas production value, considering royalty and other participation agreements.
3. Royalties, bonuses, and annual rent for concession areas will be determined as per agreements with the Oil Department.

Taxation on Non-Extractive Natural Resource Companies

Non-extractive companies—those engaged in processing, refining, storing, transporting, marketing, and distributing natural resources—will also face a 20% corporate tax on their annual taxable base.

The taxable base for these companies is determined by net taxable profits, with adjustments for:

• Depreciation of non-current assets, calculated at 20% annually. If international accounting standards result in different depreciation methods, the finance department must approve the adjustments.
• Tax losses, which can be deducted in future tax periods and carried forward indefinitely.

Tax Compliance and Penalties

The law mandates strict compliance measures:

• Companies must pay corporate tax to renew their concession rights or commercial licenses in Sharjah.
• Businesses must maintain financial records for seven years to ensure accuracy in tax filings.
• A 5% financial penalty on the total due tax will be imposed for intentional tax evasion, as determined by the Sharjah Finance Department.

This new taxation framework is expected to strengthen Sharjah’s fiscal policies while ensuring transparency and accountability in the natural resources sector.