Sharjah’s Natural Resources Tax 2025: A Quick Guide for Businesses 

Sharjah’s introduction of the Natural Resources Tax (NRT) in 2025 marks a significant change in the emirate’s taxation framework. The new law, effective from February 2025, imposes a 20% tax on extractive and non-extractive businesses operating within the natural resources sector. 

This shift aims to bring better transparency and predictability to the taxation of oil, gas, and other natural resource-related industries. Businesses operating in this sector must now ensure compliance with new tax requirements, reporting obligations, and potential penalties to avoid financial repercussions. 

This post offers a detailed overview of the new tax law, its implications for businesses, and the steps companies need to take to comply with these new regulations. 

- Introduction to Sharjah’s NRT 

The Sharjah Natural Resources Tax applies to all companies engaged in activities related to natural resources. This includes businesses involved in: 

1. Extractive activities like oil and gas exploration, drilling, and production. 

2. Non-extractive activities, including refining, processing, transportation, and marketing of natural resources. 

The flat 20% tax rate is a major change from the previous tax regime, under which oil and gas companies were subject to a progressive tax rate of up to 55% under the Sharjah Income Tax Decree of 1968. The introduction of the NRT provides a more standardized and predictable taxation system. 

- Key Provisions of the New Natural Resources Tax Law

1. Taxation of Extractive Businesses 

For companies engaged in extractive activities such as oil and gas drilling and production, the tax base is determined as follows: 

• The company’s tax liability is based on its share of the value of extracted resources (oil, gas, or minerals). 

• This share is calculated using a formula agreed upon with the Sharjah Petroleum Department. 

• The tax calculation considers royalties, bonuses, and participation shares in the extraction process. 

2. Taxation of Non-Extractive Businesses 

Companies involved in non-extractive activities, such as refining, transportation, and resource processing, are taxed based on their net taxable profits. 

• The tax base is determined according to internationally recognized accounting standards. 

• Businesses can claim depreciation deductions on non-current assets, typically at a 20% annual rate. 

• Tax losses can be carried forward indefinitely to offset future taxable income. 

3. Interaction with UAE Federal Corporate Tax 

Sharjah’s Natural Resources Tax operates alongside the UAE’s Federal Corporate Tax (CT), which was introduced in June 2023 at a standard rate of 9% on taxable profits above AED 375,000. 

To prevent double taxation, companies subject to both the Sharjah NRT and UAE Federal CT can claim a credit against their Sharjah tax liability for any federal corporate tax paid. This ensures that businesses are not taxed twice on the same income and aligns Sharjah’s tax regime with UAE’s broader corporate tax framework. 

- Tax Filing and Payment Requirements 

The filing and payment process differs for extractive and non-extractive businesses. 

1. Filing Requirements for Extractive Businesses 

• Tax payments follow the terms outlined in each company’s contract with the Sharjah Petroleum Department. 

• Payment schedules and tax calculations are customized for each business, based on its agreements with the department. 

2. Filing Requirements for Non-Extractive Businesses 

• Tax returns must be filed with the Sharjah Finance Department. 

• The tax payment is due within nine months of the company’s financial year-end. 

• The specific filing deadlines and forms will be announced by the Sharjah Finance Department in due course. 

- Tax Deductions and Loss Carryforwards 

To reduce their overall tax liability, businesses can claim certain deductions on their taxable income. 

1. Deductible Expenses 

• Depreciation on non-current assets is allowed at a standard rate of 20% per year. 

• If a company follows a different depreciation rate under international accounting standards, it may be used subject to approval by the Sharjah Finance Department. 

2. Carrying Forward Tax Losses 

• Businesses that incur tax losses in one period can carry them forward indefinitely. 

• These losses can be used to offset future taxable profits, helping companies manage periods of fluctuating income. 

- Penalties for Non-Compliance 

Sharjah’s new tax law imposes strict penalties for late payments and non-compliance. 

1. Late Payment Penalties 

• 1% penalty on the outstanding tax amount for every 30-day delay. 

• 2% penalty for tax discrepancies found during audits, applied for every 30 days of delay. 

• 5% penalty for cases of intentional tax evasion or fraud. 

These penalties highlight the importance of timely compliance with tax regulations to avoid unnecessary financial burdens. 

- Tax Audits and Record Retention 

The Sharjah Finance Department has the authority to conduct tax audits on companies subject to the NRT. 

• Businesses must retain financial records for at least seven years. 

• Records must be accessible for audit purposes and include supporting documents such as invoices, contracts, and financial statements. 

• If discrepancies are found, companies must pay the outstanding tax within 15 days of receiving an audit report. 

- Appeal and Dispute Resolution 

If a business disagrees with a tax assessment, it can file an objection within 20 days of receiving the tax decision. 

• Extractive companies must appeal to the Sharjah Petroleum Department. 

• Non-extractive businesses must appeal to the Sharjah Finance Department. 

• The department must respond within 15 days of receiving the appeal. 

If the company is still unsatisfied, it can escalate the case to a special tax committee under the Sharjah Finance Department, which will issue a final decision within 15 days. Any outstanding taxes must be settled within 20 days of receiving the final decision. 

- New Strategies for Businesses 

To comply with the new tax law, businesses operating in Sharjah’s natural resources sector should take the following steps: 

1. Review the law’s impact – Assess how the tax applies to your business, including tax base calculations and filing requirements. 

2. Consult with tax advisors – Seek expert guidance to maximize allowable deductions and federal tax credits. 

3. Implement compliance measures – Ensure your company maintains accurate financial records, reports, and documentation. 

The Sharjah Natural Resources Tax of 2025 introduces a standardized tax framework for company formation in Sharjah in the extractive and non-extractive natural resources sector. While the 20% flat tax rate is a significant shift. 

By taking proactive steps to ensure compliance, businesses can continue operating efficiently while minimizing tax risks. Engaging tax consultants and legal advisors can help navigate the complexities of the new tax landscape.