Sharjah has announced a new 20% corporate tax on companies engaged in both extractive and non-extractive natural resource activities, marking a significant fiscal move in the emirate. The decision, issued by His Highness Sheikh Dr. Sultan bin Mohammed Al Qasimi, aims to enhance tax fairness and compliance within Sharjah's business landscape.
Why Is Sharjah Implementing a 20% Corporate Tax?
The introduction of this tax aligns with Sharjah’s broader economic vision to generate sustainable revenue while ensuring businesses involved in natural resources contribute fairly. This move is separate from the UAE’s federal corporate tax, which was implemented in June 2023, imposing a 9% corporate tax on businesses earning profits over AED 375,000.
Key points of Sharjah’s new tax law include:
- Applies to companies operating in extractive and non-extractive natural resource sectors.
- Set at a rate of 20%, higher than the UAE’s 9% standard corporate tax.
- Intended to improve tax compliance and ensure a fair economic contribution.
How This Tax Differs from UAE’s Federal Corporate Tax
The United Arab Emirates (UAE) federal tax, introduced last year, applies across all emirates and levies a 9% tax on corporate profits above AED 375,000. However, Sharjah’s 20% tax specifically targets companies within the natural resource sector, a move that sets it apart from other emirates.
Additionally, starting January 1, 2025, the UAE will implement a 15% Domestic Minimum Top-up Tax (DMTT) on large multinational enterprises with global revenues exceeding €750 million. This measure follows the UAE’s commitment to the OECD’s global minimum corporate tax agreement.
What This Means for Businesses in Sharjah
Businesses operating in the natural resource sector in Sharjah will need to reassess their tax strategies to ensure compliance with the new 20% corporate tax. This policy is expected to:
- Enhance tax revenue generation for public projects and economic development.
- Encourage greater transparency and accountability in corporate taxation.
- Ensure that resource-based companies contribute fairly to the local economy.
While businesses outside the natural resource sector will continue following the UAE’s 9% corporate tax law, companies in oil, gas, and mineral extraction will now have to factor in this higher tax rate