His Highness Sheikh Dr. Sultan bin Mohammed Al Qasimi, the Supreme Council Member and Ruler of Sharjah, has enacted a new law regarding corporate tax for both extractive and non-extractive natural resource companies operating in the Emirate of Sharjah. This law aims to establish clear tax obligations for companies involved in these sectors.

Under this law, companies engaged in extractive activities will face a corporate tax rate of 20%. The taxable base for these companies will be determined by their share of the total value of produced oil and gas. This calculation will follow the mechanisms detailed in agreements between the Oil Department and the respective company, which also dictate the amounts for royalties, bonuses, and annual rent for any concession areas operated by these companies.

For non-extractive natural resource companies, a similar corporate tax rate of 20% will apply. Their taxable base will be calculated based on net taxable profits, allowing for certain deductions. Companies can deduct depreciation of non-current assets at a rate of 20% annually, and if they follow international accounting standards, they may deduct depreciation according to those standards with finance department approval. Additionally, companies may carry forward tax losses to future periods, which can also be deducted from their taxable base.

The law outlines specific procedures for tax payments. Extractive companies must pay their tax dues to the Oil Department as per their agreements, while non-extractive companies are required to make payments to the finance department within nine months after the financial year ends. Failure to meet these deadlines will incur penalties of 1% of the outstanding taxable base for every 30 days of delay.

Moreover, the finance department holds the authority to audit any records related to the companies’ revenues. Upon completing an audit, they will prepare a report detailing any tax amounts owed, which becomes binding after 15 days. Companies must address any outstanding tax differences identified during audits within 15 days or face additional penalties. Notably, if financial violations are found, a penalty of 5% of the total due tax may be imposed.

The law also provides a framework for appeals. Extractive companies can appeal decisions to the Oil Department, while non-extractive companies can approach the finance department. They have 20 days to submit their objections, with a decision expected within 15 days. Payment of outstanding taxes must occur within 20 days of the final decision, or additional penalties will apply.

Companies must comply with these tax regulations to renew their concession rights or commercial licenses in Sharjah. They are required to keep records for seven years and allow access to authorized representatives from the Oil Department or the finance department. In cases of liquidation, companies must submit a tax declaration for the year they ceased operations within 90 days.

Confidentiality is emphasized in the law, ensuring that declarations and correspondence submitted by companies will be kept confidential, except for audit and review purposes. This new tax law represents a significant regulatory move in Sharjah’s approach to managing its natural resources sector.