In a significant regulatory move, His Highness Sheikh Dr. Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah, has issued a new law imposing a 20% corporate tax on companies involved in extractive and non-extractive natural resource activities within the emirate. The law establishes tax guidelines, compliance requirements, and penalties for violations, reinforcing Sharjah’s fiscal policies in the energy and natural resources sector.
Key Provisions and Compliance
The newly issued law categorizes companies into two main groups:
- Extractive Companies – Those engaged in the extraction of raw materials, including oil, metals, minerals, and aggregates.
- Non-Extractive Companies – Entities involved in the separation, treatment, refinement, processing, storage, transport, marketing, or distribution of natural resources.
The tax structure for these companies is defined as follows:
- Extractive Companies: A 20% tax will be levied on the taxable base, calculated based on the company’s share of produced oil and gas as per agreements with the Sharjah Oil Department.
- Non-Extractive Companies: A 20% tax will be applied to net taxable profits after deductions, including a 20% annual depreciation rate on non-current assets and the option to carry forward tax losses for an indefinite period.
Companies subject to this tax must maintain accurate financial records for at least seven years and meet specified tax payment deadlines:
- Extractive Companies: Tax payments must be made according to agreements with the Sharjah Oil Department.
- Non-Extractive Companies: Payments must be made to the finance department no later than the ninth month following the end of the financial year.
Failure to meet tax obligations will result in financial penalties, including:
- A 1% penalty for every 30 days of delay in tax payments.
- A 2% penalty per month for outstanding tax differences uncovered in audits.
- A 5% penalty for deliberate tax evasion.
Impact on Businesses
This tax reform aligns Sharjah with global fiscal trends in resource taxation, ensuring a structured revenue system while encouraging transparency and accountability in the natural resources sector. Affected companies must now assess their financial strategies to comply with the new regulations while optimizing profitability.
For further details, visits the official website.
