This initiative makes Sharjah the first emirate in the UAE to impose a local corporate tax on natural resource operations—both upstream and downstream—marking a bold shift in fiscal policy and regulatory oversight.
09 July, 2025
Sharjah Imposes 20% Corporate Tax on Oil and Gas Sector: A New Fiscal Era Begins
In a landmark move toward fiscal reform, the Emirate of Sharjah has introduced a 20% corporate income tax on oil and gas companies under Sharjah Law No. 3 of 2025, effective from 13 February 2025. This makes Sharjah the first emirate in the UAE to independently impose a statutory tax regime on natural resource operations—both upstream and downstream.
This development significantly shifts the tax governance model for oil and gas companies and reflects Sharjah’s broader efforts to diversify its revenue streams while aligning with international standards of transparency and sustainability.
Who Is Affected?
The new law applies to companies licensed in Sharjah involved in:
Extractive activities: Including exploration, drilling, production, and development of crude oil, natural gas, and minerals, typically governed under concession agreements with the Sharjah Petroleum Council (SPC).
Non-extractive activities: Covering refining, storage, processing, distribution, and marketing of extracted resources. Even companies based in free zones or offshore areas are liable if their work relates to Sharjah’s resources.
This comprehensive scope ensures that both direct and indirect contributors to the natural resource economy are brought under the purview of the new tax regime.
Understanding the 20% Tax Structure
The law imposes a flat 20% tax on taxable income:
For extractive companies, tax is assessed on net income earned from resource production, adjusted for royalties, bonuses, and other operational costs.
For non-extractive companies, tax is levied on net profits post-expense deductions. These entities may claim straight-line depreciation of assets at 20% annually. Importantly, financial losses may be carried forward indefinitely.
This method aligns with international oil and gas taxation principles, offering predictability for investors and businesses.
Reporting and Compliance Obligations
The new law introduces a detailed compliance structure:
Extractive companies must adhere to their existing concession agreements, with oversight from the SPC.
Non-extractive companies must file tax returns within 9 months of the financial year’s end.
All entities are required to maintain detailed accounting records for at least 7 years, in line with UAE accounting and audit standards.
Regulatory inspections may be carried out by the SPC, Sharjah Department of Finance, or any appointed authority.
Penalties for Non-Compliance
Strict enforcement measures are built into the law:
5% penalty for intentional tax evasion or misrepresentation.
1% monthly fine, increasing to 2%, for delayed tax payments.
15-day rectification period for discrepancies discovered during audits to avoid further penalties.
These provisions are designed to ensure transparency and prevent tax abuse.
Regulatory Oversight and Key Authorities
The Sharjah Petroleum Council (SPC) leads implementation and compliance, supported by:
The Sharjah Department of Finance
The Federal Tax Authority (when applicable)
The Ministry of Energy and Infrastructure, for ensuring sustainable practices and environmental standards
The coordinated governance model brings consistency and accountability to Sharjah’s resource management.
Strategic and Economic Impact
Sharjah’s decision to implement this tax regime reflects a forward-looking fiscal strategy, aimed at:
Reducing dependency on federal transfers and international funding
Enhancing regulatory transparency, aligned with frameworks like the Extractive Industries Transparency Initiative (EITI)
Boosting investor confidence through predictability and fair governance
Financing development goals, including infrastructure, education, healthcare, and environmental protection under the UAE’s SDG commitments
This policy is not just about revenue—it’s a long-term economic positioning move for Sharjah.
Key Considerations for Oil and Gas Businesses
Businesses operating in Sharjah’s energy sector should take note of:
Budgeting implications: Immediate financial impact of the 20% tax.
Contractual obligations: Reassess current concession agreements for compliance.
Compliance readiness: Ensure systems are in place to meet filing and reporting obligations.
Investment recalibration: Evaluate long-term capital deployment in light of the new tax environment.
Conclusion
Sharjah’s implementation of Law No. 3 of 2025 introduces a formal corporate tax regime in the oil and gas sector, marking a pivotal shift in how natural resource operations are managed. By embracing structured taxation, the Emirate enhances its fiscal autonomy while sending a positive signal to global investors about its commitment to transparency and economic sustainability. This bold legislative step not only modernizes Sharjah’s regulatory framework but also sets a precedent for other emirates and resource-rich regions in the Gulf.
Sharjah Imposes 20% Corporate Tax on Oil and Gas Sector: A New Fiscal Era Begins
In a landmark move toward fiscal reform, the Emirate of Sharjah has introduced a 20% corporate income tax on oil and gas companies under Sharjah Law No. 3 of 2025, effective from 13 February 2025. This makes Sharjah the first emirate in the UAE to independently impose a statutory tax regime on natural resource operations—both upstream and downstream.
This development significantly shifts the tax governance model for oil and gas companies and reflects Sharjah’s broader efforts to diversify its revenue streams while aligning with international standards of transparency and sustainability.
Who Is Affected?
The new law applies to companies licensed in Sharjah involved in:
Extractive activities: Including exploration, drilling, production, and development of crude oil, natural gas, and minerals, typically governed under concession agreements with the Sharjah Petroleum Council (SPC).
Non-extractive activities: Covering refining, storage, processing, distribution, and marketing of extracted resources. Even companies based in free zones or offshore areas are liable if their work relates to Sharjah’s resources.
This comprehensive scope ensures that both direct and indirect contributors to the natural resource economy are brought under the purview of the new tax regime.
Understanding the 20% Tax Structure
The law imposes a flat 20% tax on taxable income:
For extractive companies, tax is assessed on net income earned from resource production, adjusted for royalties, bonuses, and other operational costs.
For non-extractive companies, tax is levied on net profits post-expense deductions. These entities may claim straight-line depreciation of assets at 20% annually. Importantly, financial losses may be carried forward indefinitely.
This method aligns with international oil and gas taxation principles, offering predictability for investors and businesses.
Reporting and Compliance Obligations
The new law introduces a detailed compliance structure:
Extractive companies must adhere to their existing concession agreements, with oversight from the SPC.
Non-extractive companies must file tax returns within 9 months of the financial year’s end.
All entities are required to maintain detailed accounting records for at least 7 years, in line with UAE accounting and audit standards.
Regulatory inspections may be carried out by the SPC, Sharjah Department of Finance, or any appointed authority.
Penalties for Non-Compliance
Strict enforcement measures are built into the law:
5% penalty for intentional tax evasion or misrepresentation.
1% monthly fine, increasing to 2%, for delayed tax payments.
15-day rectification period for discrepancies discovered during audits to avoid further penalties.
These provisions are designed to ensure transparency and prevent tax abuse.
Regulatory Oversight and Key Authorities
The Sharjah Petroleum Council (SPC) leads implementation and compliance, supported by:
The Sharjah Department of Finance
The Federal Tax Authority (when applicable)
The Ministry of Energy and Infrastructure, for ensuring sustainable practices and environmental standards
The coordinated governance model brings consistency and accountability to Sharjah’s resource management.
Strategic and Economic Impact
Sharjah’s decision to implement this tax regime reflects a forward-looking fiscal strategy, aimed at:
Reducing dependency on federal transfers and international funding
Enhancing regulatory transparency, aligned with frameworks like the Extractive Industries Transparency Initiative (EITI)
Boosting investor confidence through predictability and fair governance
Financing development goals, including infrastructure, education, healthcare, and environmental protection under the UAE’s SDG commitments
This policy is not just about revenue—it’s a long-term economic positioning move for Sharjah.
Key Considerations for Oil and Gas Businesses
Businesses operating in Sharjah’s energy sector should take note of:
Budgeting implications: Immediate financial impact of the 20% tax.
Contractual obligations: Reassess current concession agreements for compliance.
Compliance readiness: Ensure systems are in place to meet filing and reporting obligations.
Investment recalibration: Evaluate long-term capital deployment in light of the new tax environment.
Conclusion
Sharjah’s implementation of Law No. 3 of 2025 introduces a formal corporate tax regime in the oil and gas sector, marking a pivotal shift in how natural resource operations are managed. By embracing structured taxation, the Emirate enhances its fiscal autonomy while sending a positive signal to global investors about its commitment to transparency and economic sustainability. This bold legislative step not only modernizes Sharjah’s regulatory framework but also sets a precedent for other emirates and resource-rich regions in the Gulf.
Sharjah Imposes 20% Corporate Tax on Oil and Gas Sector: A New Fiscal Era Begins
In a landmark move toward fiscal reform, the Emirate of Sharjah has introduced a 20% corporate income tax on oil and gas companies under Sharjah Law No. 3 of 2025, effective from 13 February 2025. This makes Sharjah the first emirate in the UAE to independently impose a statutory tax regime on natural resource operations—both upstream and downstream.
This development significantly shifts the tax governance model for oil and gas companies and reflects Sharjah’s broader efforts to diversify its revenue streams while aligning with international standards of transparency and sustainability.
Who Is Affected?
The new law applies to companies licensed in Sharjah involved in:
Extractive activities: Including exploration, drilling, production, and development of crude oil, natural gas, and minerals, typically governed under concession agreements with the Sharjah Petroleum Council (SPC).
Non-extractive activities: Covering refining, storage, processing, distribution, and marketing of extracted resources. Even companies based in free zones or offshore areas are liable if their work relates to Sharjah’s resources.
This comprehensive scope ensures that both direct and indirect contributors to the natural resource economy are brought under the purview of the new tax regime.
Understanding the 20% Tax Structure
The law imposes a flat 20% tax on taxable income:
For extractive companies, tax is assessed on net income earned from resource production, adjusted for royalties, bonuses, and other operational costs.
For non-extractive companies, tax is levied on net profits post-expense deductions. These entities may claim straight-line depreciation of assets at 20% annually. Importantly, financial losses may be carried forward indefinitely.
This method aligns with international oil and gas taxation principles, offering predictability for investors and businesses.
Reporting and Compliance Obligations
The new law introduces a detailed compliance structure:
Extractive companies must adhere to their existing concession agreements, with oversight from the SPC.
Non-extractive companies must file tax returns within 9 months of the financial year’s end.
All entities are required to maintain detailed accounting records for at least 7 years, in line with UAE accounting and audit standards.
Regulatory inspections may be carried out by the SPC, Sharjah Department of Finance, or any appointed authority.
Penalties for Non-Compliance
Strict enforcement measures are built into the law:
5% penalty for intentional tax evasion or misrepresentation.
1% monthly fine, increasing to 2%, for delayed tax payments.
15-day rectification period for discrepancies discovered during audits to avoid further penalties.
These provisions are designed to ensure transparency and prevent tax abuse.
Regulatory Oversight and Key Authorities
The Sharjah Petroleum Council (SPC) leads implementation and compliance, supported by:
The Sharjah Department of Finance
The Federal Tax Authority (when applicable)
The Ministry of Energy and Infrastructure, for ensuring sustainable practices and environmental standards
The coordinated governance model brings consistency and accountability to Sharjah’s resource management.
Strategic and Economic Impact
Sharjah’s decision to implement this tax regime reflects a forward-looking fiscal strategy, aimed at:
Reducing dependency on federal transfers and international funding
Enhancing regulatory transparency, aligned with frameworks like the Extractive Industries Transparency Initiative (EITI)
Boosting investor confidence through predictability and fair governance
Financing development goals, including infrastructure, education, healthcare, and environmental protection under the UAE’s SDG commitments
This policy is not just about revenue—it’s a long-term economic positioning move for Sharjah.
Key Considerations for Oil and Gas Businesses
Businesses operating in Sharjah’s energy sector should take note of:
Budgeting implications: Immediate financial impact of the 20% tax.
Contractual obligations: Reassess current concession agreements for compliance.
Compliance readiness: Ensure systems are in place to meet filing and reporting obligations.
Investment recalibration: Evaluate long-term capital deployment in light of the new tax environment.
Conclusion
Sharjah’s implementation of Law No. 3 of 2025 introduces a formal corporate tax regime in the oil and gas sector, marking a pivotal shift in how natural resource operations are managed. By embracing structured taxation, the Emirate enhances its fiscal autonomy while sending a positive signal to global investors about its commitment to transparency and economic sustainability. This bold legislative step not only modernizes Sharjah’s regulatory framework but also sets a precedent for other emirates and resource-rich regions in the Gulf.
Sharjah Imposes 20% Corporate Tax on Oil and Gas Sector: A New Fiscal Era Begins
In a landmark move toward fiscal reform, the Emirate of Sharjah has introduced a 20% corporate income tax on oil and gas companies under Sharjah Law No. 3 of 2025, effective from 13 February 2025. This makes Sharjah the first emirate in the UAE to independently impose a statutory tax regime on natural resource operations—both upstream and downstream.
This development significantly shifts the tax governance model for oil and gas companies and reflects Sharjah’s broader efforts to diversify its revenue streams while aligning with international standards of transparency and sustainability.
Who Is Affected?
The new law applies to companies licensed in Sharjah involved in:
Extractive activities: Including exploration, drilling, production, and development of crude oil, natural gas, and minerals, typically governed under concession agreements with the Sharjah Petroleum Council (SPC).
Non-extractive activities: Covering refining, storage, processing, distribution, and marketing of extracted resources. Even companies based in free zones or offshore areas are liable if their work relates to Sharjah’s resources.
This comprehensive scope ensures that both direct and indirect contributors to the natural resource economy are brought under the purview of the new tax regime.
Understanding the 20% Tax Structure
The law imposes a flat 20% tax on taxable income:
For extractive companies, tax is assessed on net income earned from resource production, adjusted for royalties, bonuses, and other operational costs.
For non-extractive companies, tax is levied on net profits post-expense deductions. These entities may claim straight-line depreciation of assets at 20% annually. Importantly, financial losses may be carried forward indefinitely.
This method aligns with international oil and gas taxation principles, offering predictability for investors and businesses.
Reporting and Compliance Obligations
The new law introduces a detailed compliance structure:
Extractive companies must adhere to their existing concession agreements, with oversight from the SPC.
Non-extractive companies must file tax returns within 9 months of the financial year’s end.
All entities are required to maintain detailed accounting records for at least 7 years, in line with UAE accounting and audit standards.
Regulatory inspections may be carried out by the SPC, Sharjah Department of Finance, or any appointed authority.
Penalties for Non-Compliance
Strict enforcement measures are built into the law:
5% penalty for intentional tax evasion or misrepresentation.
1% monthly fine, increasing to 2%, for delayed tax payments.
15-day rectification period for discrepancies discovered during audits to avoid further penalties.
These provisions are designed to ensure transparency and prevent tax abuse.
Regulatory Oversight and Key Authorities
The Sharjah Petroleum Council (SPC) leads implementation and compliance, supported by:
The Sharjah Department of Finance
The Federal Tax Authority (when applicable)
The Ministry of Energy and Infrastructure, for ensuring sustainable practices and environmental standards
The coordinated governance model brings consistency and accountability to Sharjah’s resource management.
Strategic and Economic Impact
Sharjah’s decision to implement this tax regime reflects a forward-looking fiscal strategy, aimed at:
Reducing dependency on federal transfers and international funding
Enhancing regulatory transparency, aligned with frameworks like the Extractive Industries Transparency Initiative (EITI)
Boosting investor confidence through predictability and fair governance
Financing development goals, including infrastructure, education, healthcare, and environmental protection under the UAE’s SDG commitments
This policy is not just about revenue—it’s a long-term economic positioning move for Sharjah.
Key Considerations for Oil and Gas Businesses
Businesses operating in Sharjah’s energy sector should take note of:
Budgeting implications: Immediate financial impact of the 20% tax.
Contractual obligations: Reassess current concession agreements for compliance.
Compliance readiness: Ensure systems are in place to meet filing and reporting obligations.
Investment recalibration: Evaluate long-term capital deployment in light of the new tax environment.
Conclusion
Sharjah’s implementation of Law No. 3 of 2025 introduces a formal corporate tax regime in the oil and gas sector, marking a pivotal shift in how natural resource operations are managed. By embracing structured taxation, the Emirate enhances its fiscal autonomy while sending a positive signal to global investors about its commitment to transparency and economic sustainability. This bold legislative step not only modernizes Sharjah’s regulatory framework but also sets a precedent for other emirates and resource-rich regions in the Gulf.
