Sharjah has recently announced a new corporate tax business involved in natural resources. This law allows companies engaged in extractive and non-extractive activities to be subjected to a 20% corporate tax.

Corporate Tax for Extractive Businesses

Extractive companies involved in oil and gas production will be taxed at 20% based on their share of produced oil and gas. This taxable base will be measured as per agreements between the company and the Oil Department of Sharjah. Additional payments such as royalties, bonuses, and annual rents will also be included in these agreements.

Corporate Tax for Non-Extractive Businesses

Non-extractive natural resource companies will also be subjected to a 20% corporate tax on their net taxable profits. Consequently, these companies can deduct asset depreciation at an annual rate of 20%, subject to approval from the Finance Department of Sharjah. Hence, tax losses should be carried forward for future periods.

Payment and Compliance

Tax payments for extractive companies are made to the Oil Department, while non-extractive companies should pay the Finance Department. However, failure to pay on time may lead companies to penalties of 1% per month for late payments and 2% per month for any tax differences found during audits. Thus, companies proven to have evaded taxes may incur additional penalties of 5%.

Audit and Appeal Procedures

The Finance Department of Sharjah has the authority to audit company records. Companies may file objections or appeals within 20 days of receiving a tax assessment. Therefore, a designated committee will review this appeal and issue a decision within 15 days. As a result, all companies should settle tax liabilities before they can renew licenses or register in Sharjah’s commercial register.

Confidentiality Measure

The Finance and Oil Departments must maintain strict confidentiality for all tax-related company records, excluding when required for audit or review purposes.

Impact on Businesses

This new tax law in Sharjah will have a significant impact on businesses operating in Sharjah, particularly in the natural resource sector. However, companies like RGEstate, a leading real estate agency in Dubai can closely monitor the tax environment in Sharjah and the UAE to access regulatory changes that may influence business investment opportunities.

Bottomline

As Sharjah continues its impressive economic growth, businesses should ensure full compliance with new tax laws to deny financial penalties while safeguarding their operational licenses. These changes highlight the essentiality of staying informed about evolving tax policies across the UAE.