How Does Corporate Tax UAE Apply to Non-Extractive Natural Resources

The UAE government introduced corporate tax through Federal Decree-Law No. 47, which governs the taxation of businesses and enterprises across the country. Corporate tax is levied on a company’s annual net profit at a rate of 9%, applied primarily to a corporation’s taxable income. Leading tax consultants in the UAE can provide expert guidance to help businesses complete tax registration, remain fully compliant, and navigate the regulations set by the Federal Tax Authority (FTA) efficiently and seamlessly.

The set Corporate tax rates in the UAE

The UAE corporate tax rate varies between 0% and 9%, the rate is imposed on taxable income upon specified conditions highlighted below: 

• If the generated revenue or taxable income does not surpass the set threshold or if it has (income up to AED 375,000), the taxable person will be exempt (0%)  
• A rate of 9% is imposed if the net profit surpasses the specified threshold (income above AED 375,000)

What is a Non-extractive natural resource business?

The resources that can be obtained without the process of mining or extraction from the earth and are later refined are known as non-extractive natural resources. Isolating, purifying, distilling, preparing, preserving, moving, marketing, or distributing these natural resources of the state is considered a non-extractive natural resource business.

Corporate tax in the UAE on Non-extractive natural resource business

The Following are exempted from the purview of the UAE corporate tax: 

• If the person is authorized by the Local Government to undertake a non-extractive natural resource business.
• Persons who have interests in a right or a concession directly or indirectly.
• If the taxable person’s sole source of income is a non-extractive natural resource business.
• In the aforementioned case, the specified person(s) remains subject to the Emirate-level tax, as conferred by the UAE Federal-Decree-Law.
• If it is a government entity or a government-controlled entity. 

The scope of persons holding more than one business

If the specified person is an owner of a non-extractive natural business and at once an owner of another business, and is exempt from the corporate tax according to the above set conditions, in such a case, the below is applicable:

• The income made from non-extractive natural resource business is taxed according to the Legislation of the Emirates under Federal-Decree-Law.
• The net profit obtained from other businesses is taxed according to the present corporate tax law. Income may be exempt from corporate tax if the conditions are met as specified in Article 7 of the UAE Corporate Federal Decree-Law.
• A Person is not allowed to derive income from any other Business if such other Business is supplementary or incidental to that Person’s Non-Extractive Natural Resource Business and the Profits of such other Company in a Taxable Period does not outpace 5% (five percent) of that Person’s overall Sales in that Tax Period.

Calculation of taxable income of the other business

To calculate the taxable income of other businesses, the following essentials are affected:

• The other business is to be considered a distinct business.
• Financial statements of both businesses are to be stored separately and independently of each other.
• The corporate tax rate in the UAE is determined independently for each period of taxation.

Expenditures between both businesses

The disbursements shared between non-extractive businesses and the other businesses are taxed in proportion to the revenue generated according to the UAE Corporate Tax Federal Decree Law unless the specified disbursement is taken into consideration for the calculation of income corporate tax.

Keynote 

In these conditions, the exemption is not implemented:

• Contractors, subcontractors, suppliers, or any other Person employed or planned to be used in any element of the execution of the Non-Extractive Natural Resource Business are not excluded under this Article.
• A person who does not meet the conditions specified in this article.

Seek expert consultation for corporate tax from top tax agents in the UAE! 

It is highly advisable and essential for taxable corporations in the UAE to avail the services of reputable licensed corporate tax advisory Agents in the UAE to seamlessly combat any business tax intricacies and to effectively enforce compliance with the regulations and laws set by the UAE Federal Tax Authority. Thus, contact us today and we shall be happy to assist you!