UAE: Corporate tax provisions relating to oil and gas sector
Provisions on taxation of corporations and businesses and updated related FAQs section relating to oil and gas sector
Provisions on taxation of corporations and businesses and updated related FAQs section
The UAE Ministry of Finance released on 9 December 2022, the Federal Decree-Law No. 47 of 2022 [PDF 441 KB] on the taxation of corporations and businesses and updated related “frequently asked questions” (FAQs) section, which include provisions relating to the oil and gas and other natural resources sector as described below.
The corporate tax law will be effective for financial years starting on or after 1 June 2023.
Exemption for extractive and non-extractive natural resource businesses
The corporate tax law stipulates that any income derived by a person from extractive and non-extractive natural resource businesses will be exempt from corporate tax provided all of the following conditions are met:
- The person directly or indirectly holds or has an interest in a right, concession or license issued by a local government to undertake its extractive business.
- The person is effectively subject to tax under the applicable legislation of an Emirate.
- The person has made a notification to the federal government in the form and manner agreed with the local government.
However, any income derived from other business activities shall be subject to the normal corporate tax regime. Other business activities include:
- A business that is not ancillary or incidental to a person’s extractive or non-extractive natural resource business
- A business that is ancillary or incidental to a person’s extractive or non-extractive natural resource business and the revenue of such other business in a tax period exceeds 5% of the total revenue of the person in the same tax period
The corporate tax exemption also will not apply to contractors, subcontractors, suppliers or any other person used or contemplated to be used in any part of the performance of the extractive or non-extractive natural resources business.
Definitions of extractive and non-extractive natural resource businesses
Water, oil, gas, coal, naturally formed minerals, and other non-renewable, non-living natural resources that may be extracted from the UAE’s territory.
The business or business activity of exploring, extracting, removing, or otherwise producing and exploiting the natural resources of the UAE or any interest therein as determined by the government.
Non-extractive natural resource business
The business or business activity of separating, treating, refining, processing, storing, transporting, marketing or distributing the natural resources of the UAE.
Co-existence with corporate tax regime under Emirates tax decrees
The law co-exists alongside the corporate tax regime applicable under the Emirates tax decrees. Thus, income derived from the extractive business or non-extractive natural resource business will continue to be calculated and taxed by the respective Emirate tax decree:
- Abu Dhabi Income Tax Decree of 1965 (as amended by Decree 4 of 1972)
- Dubai Income Tax Decree of 1969
- Sharjah Income Tax Decree of 1968
- Ras Al Khaimah Income Tax Decree of 1969
- Fujairah Income Tax Decree of 1966
- Ajman Income Tax Decree of 1968
- Umm Al Quwain Income Tax Decree of 1968
In most of Emirates, taxable income is subject to progressive rates of up to 55%. However, foreign concession holders who are engaged in the extraction of oil and gas are typically taxed at different tax rates and provisions agreed with the relevant authority under specific government agreements/fiscal letters in practice.
Read a December 2022 report prepared by the KPMG member firm in the United Arab Emirates
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