A new law to impose a 20% tax on natural resources companies in Sharjah

Companies engaged in the extraction, processing, and consumer use of natural resources, such as aggregates, metals, minerals, and oil, are known as extractive industries. Natural resources are separated, treated, refined, processed, stored, transported, marketed, and distributed by non-extractive businesses.

Decree of the Ruler of Sharjah

The ordinance, which was passed by Sharjah's ruler and Supreme Council member Sheikh Dr. Sultan bin Mohammed Al Qasimi, states that corporations that deal with extractive industries and those that deal with non-extractive natural resources must pay corporate taxes.

The following is the corporate tax rate for extractive industries:

According to the procedures and schedules outlined in agreements reached between the company and the (Sharjah) Oil Department, extractive companies will be subject to a 20% tax depending on their taxable basis.

2. In accordance with the formula that divides the total royalty and any other agreed-upon participation in the division between the Oil Department and the company, the taxable base for companies involved in extractive activities will be determined by taking the total share of the company from the value of produced oil and gas.
 

3. Any annual rent, royalties, and bonuses owed for any concession area run by extractive firms will be decided in accordance with the contract that the Oil Department and those companies have signed.
 

Non-extractive natural resource enterprises are subject to the following corporate tax:
 

Depending on the taxable basis for each fiscal year, non-extractive natural resource corporations are subject to a 20% tax.
 

2. Under the terms of this law, non-extractive natural resource firms' taxable base is determined by taking their net taxable income and making the following adjustments:

2.a. The taxable base may be reduced by the amount of asset depreciation; non-current asset depreciation is computed at a rate of 20% per year. As long as the finance department gives its approval during the audit and confirms that the goal is not to lower profits, the company may deduct the depreciation amount in accordance with the rates listed in the financial statements if it adheres to an international standard for financial statement preparation that modifies the accounting methods for depreciation.

2.b. When determining the taxable base for a subsequent tax period, tax losses may be subtracted from that base. Tax losses can also be carried forward to an arbitrary future period.

Penalties and tax compliance

In the Sharjah, tax payment is required before concession privileges or a business license may be renewed. For seven years from the date of the financial statements' release, companies who are subject to this law's taxation must keep records and supporting documentation attesting to the veracity of the information contained in financial statements and other tax-related statements.

If the finance department of the emirate finds that the company purposefully committed financial irregularities for the purpose of tax evasion, it will be subject to a financial penalty of 5% of the entire amount of taxes owed.