Sharjah Emirate Law No. 3 of 2025: Expert Walkthrough

Navigating new legislation can be daunting—especially when it comes to taxes and regulations. That’s where Virtuzone steps in. We’re here to simplify tax and accounting, ensuring businesses stay compliant and avoid penalties. Below, we explore Sharjah Emirate Law No. 3 of 2025 in detail, from its purpose and key provisions to its implications for businesses and individuals.

Why This Law Matters

On 13 February 2025, Sharjah introduced Law No. 3 of 2025, a major piece of legislation that imposes a 20% corporate tax on businesses involved in natural resource extraction and related activities. This aligns with the UAE’s wider shift to a more robust corporate tax environment following the introduction of federal corporate tax in 2023.

Whether you’re a long-established enterprise or new to the market, understanding this law is vital. It directly affects companies engaged in oil, gas, mining, and other extractive/non-extractive resource operations—and it has broader implications for Sharjah’s economy and governance. Below is a comprehensive look at what Law No. 3 of 2025 entails, why it was introduced, and how it may impact your business.

Background and Purpose

Historical Context

• Old Decrees: Sharjah had long-standing but outdated income tax decrees dating back to 1968, with tax rates theoretically reaching 55%. These decrees were seldom applied to their full extent, creating uncertainty for investors.
• Federal Corporate Tax: From 2023, the UAE has enforced a 9% federal corporate tax. However, natural resource taxation remains an emirate-level matter. Sharjah Law No. 3 of 2025 fills this gap by modernising and clarifying local tax obligations for companies in the extractive and non-extractive resource sectors.

Why Now?

• Economic Diversification: Sharjah, like other Emirates, is seeking more diverse revenue streams. Taxing profitable resource companies at 20% ensures the Emirate benefits from its natural resources while keeping rates internationally competitive.
• Investor Confidence: This law provides legal certainty—clear tax rates, transparent calculation methods, and structured compliance requirements. In turn, it reassures investors that Sharjah’s business landscape is well-regulated and fair.
• Alignment with the UAE’s New Tax Framework: With the UAE’s recent move towards corporate taxation, Sharjah is harmonising local regulations to ensure businesses in oil, gas, mining, and related fields are taxed appropriately without double taxation.

Scope of the Law

Law No. 3 of 2025 covers:

1. Extractive Companies
   
   • Oil and gas producers
   • Companies engaged in mining or quarrying
   • Entities directly involved in exploration, drilling, or production of natural resources
2. Non-Extractive Resource Companies
   
   • Refineries and processors
   • Transporters or distributors of natural resources
   • Any midstream or downstream firms handling materials sourced from Sharjah’s natural resources

If your business touches any stage of natural resource extraction, refining, transport, or sales, this law likely applies to you.

Key Provisions at a Glance

Tax Rate

• Flat 20% Tax: All eligible companies pay a 20% corporate tax on profits or, for extractive operations, on the assessed value of their production share. This replaces the previously high nominal rates under older decrees.

Calculating the Taxable Base

• Extractive Companies (Upstream)
  The taxable base ties back to concession agreements. Typically, you will be taxed on the value of your production share (oil, gas, or other minerals), minus royalties and any allowable deductions.
• Non-Extractive Companies (Midstream and Downstream)
  These businesses calculate taxable profits in line with standard accounting rules—revenue minus expenses—subject to:
  • Depreciation Deductions: Standard 20% annual depreciation rate on assets (unless otherwise approved by the Sharjah Finance Department).
  • Loss Carry-Forward: Unlimited carry-forward of tax losses from previous years, used to offset future profits.

Coordination with the Federal Tax

• Credit for Federal Tax Paid: If a company also pays UAE federal corporate tax, that amount can be credited against Sharjah’s 20% resource tax. This mechanism prevents double taxation, capping your overall liability.

Filing and Payment Deadlines

• Extractive Companies: Payment schedules often tie to your specific agreement with the Sharjah Oil Department—e.g., quarterly advances or annual settlements.
• Non-Extractive Companies: Must generally submit an annual tax return and pay their dues within nine months of the financial year-end. If you close your books on 31 December, your payment date would typically fall on or before 30 September of the following year.

Registration and Licensing

• Licence Renewal Condition: To renew your commercial licence or concession rights in Sharjah, you must demonstrate that your tax obligations are met. Non-compliance could lead to denial of licence renewal and, effectively, an operational shutdown.

Enforcement, Penalties, and Audits

Enforcement Bodies

• Sharjah Oil Department: Oversees tax compliance for extractive (upstream) companies.
• Sharjah Finance Department: Manages non-extractive taxpayers, audits, penalty enforcement, and appeals.

Penalties

• Late Payment: A 1% penalty on the taxable base for every 30 days of delay in payment.
• Under-Reported Tax: If an audit reveals additional tax owed, a 2% monthly penalty applies to that shortfall until paid.
• Evasion and Fraud: A one-off 5% fine on the total tax due, on top of any outstanding tax or other penalties.

Appeals

• Initial Objection: File an objection within 20 days if you disagree with an assessment.
• Independent Appeals Committee: If the departmental ruling is unsatisfactory, you have 20 days to escalate to a dedicated committee of tax experts.
• Judicial Review: Court proceedings are typically a last resort after the administrative appeals process is exhausted.

Implications for Your Business

For Natural Resource Companies

• Budgeting and Profitability: A new 20% tax means you need to factor in higher costs. However, it replaces outdated—and sometimes higher—rates, creating more certainty and potentially lowering your long-term tax burden compared to the older 55% maximum.
• Compliance Overhaul: Ensuring accurate financial reporting is now non-negotiable. Proper bookkeeping and professional tax advice are essential to avoid penalties and facilitate smooth licence renewals.

For Other Businesses

• No Direct Impact: Most ordinary Sharjah businesses—retailers, service providers, manufacturers unaffiliated with natural resources—are unaffected by this new local tax.
• Indirect Effects: Sharjah’s expanded revenue base could bolster public infrastructure and services, theoretically benefiting the wider economy.

Sharjah Government and the Wider UAE

• Revenue Generation: Additional income from resource industries helps fund Sharjah’s development, reinforcing infrastructure and public projects.
• Standardisation: Demonstrates the UAE’s broader commitment to international tax standards, particularly in resource-rich sectors.

Expert Commentary and Market Reaction

Most legal and business analysts regard Sharjah’s Law No. 3 of 2025 as a “modern, transparent, and investor-friendly” regulatory step. The 20% rate is seen as competitive in a global context, balancing government revenue needs with a favourable climate for foreign investment.

For industry players, the greatest challenge lies in adjusting internal practices—adopting robust accounting systems, scheduling tax payments, and ensuring compliance. Yet the clarity provided by this new law can, in the long run, inspire investor confidence by setting out unambiguous rules.

How Virtuzone Can Help

At Virtuzone, our mission is to simplify tax and accounting for businesses, large or small. With the advent of Sharjah Emirate Law No. 3 of 2025, many resource-based companies find themselves grappling with new obligations. Here’s where we come in:

1. Expert Guidance: Our seasoned tax professionals help you interpret the law’s provisions, determining if and how your business is affected.
2. Accurate Bookkeeping: We set up or refine your accounting systems, ensuring your profit calculations and records meet Sharjah’s standards.
3. Timely Filings: Never miss a deadline. Our structured approach to compliance helps you submit returns and payments on time to avoid penalties.
4. Audit Support: In the event of a Sharjah Finance Department review, we can assist with documentation and representation, mitigating compliance risks.
5. Holistic Strategy: We consider federal corporate tax rules alongside Sharjah’s local regulations, making certain you do not overpay or encounter double taxation.

In short, we’ll equip you with the tools, expertise, and peace of mind to navigate Sharjah’s evolving tax landscape.

Final Thoughts

Sharjah Emirate Law No. 3 of 2025 is a landmark measure that reshapes how natural resource activities are taxed in the emirate. With a transparent 20% rate and clear compliance paths, the law aims to strengthen Sharjah’s economy, modernise revenue streams, and align with the UAE’s broader corporate tax framework.

If you operate in the extractive or non-extractive natural resource sector, this legislation signals a new era of formalised taxation and licensing requirements—but also provides the certainty businesses crave. For others, it could serve as a glimpse into how local-level tax regulations may evolve across the Emirates.

At Virtuzone, we’re ready to help you adapt. From assessing your tax exposure to ensuring seamless compliance, our goal is to reduce complexities, protect your bottom line, and position your business for ongoing success.