Extractive and non-extractive businesses are different types of industries based on their operations and resource utilization. Extractive businesses involve the extraction of natural resources from the earth or sea, such as minerals, oil, gas, timber, metals, and raw materials. Non-extractive businesses, on the other hand, engage in sectors like manufacturing, services, technology, finance, retail, tourism, or other industries that don't involve direct resource extraction.
In the UAE, extractive businesses may be eligible for corporate tax exemptions under specific conditions. Entities must consult with tax advisors in the UAE to ensure they adhere to the Corporate Tax Law and understand their tax obligations.
Key Conditions for Exemption
To determine whether non-extractive businesses are exempt from corporate tax, several conditions must be met. These include holding or having an interest in a right, concession, or license issued by a local government for engaging in non-extractive natural resource business, the income being derived solely from persons undertaking a business or business activity (excluding income from natural persons or non-business entities), being subject to tax in the emirate where they operate, and notifying the Ministry in the agreed-upon form and manner to validate eligibility for exempt status.
Further, these conditions include holding or having an interest in a right, concession, or license issued by a local government for their extractive operations. The person must be subject to taxation in the emirate where they operate, meaning they need to pay some form of tax, such as income tax or royalties, to the relevant local government. However, if a person who engages in extractive activities earns income from both extractive and other business activities subject to corporate tax, the income from the non-extractive business will be subject to corporate tax.
Read more: Exempt businesses under corporate tax in UAE
Regulation of Non-Extractive Businesses
For non-extractive businesses, corporate tax regulations and conditions apply. Under Article 8 of the Corporate Tax Explanatory Guide, non-extractive businesses are responsible for regulating activities related to natural resources beyond exploration and production. Each emirate has the authority to regulate access to infrastructure and facilities for processing, transportation, and storage of natural resources. Non-extractive businesses may be granted access to such infrastructure and facilities through concessions or commercial agreements. The income from non-extractive natural resource businesses may be subject to taxation at the emirate level, depending on certain conditions.
It's important to note that if a non-extractive business engages in other business activities subject to corporate tax, the person will have dual status for corporate tax purposes. The income from the non-extractive natural resource business remains outside the scope of corporate tax and is taxed according to the applicable legislation of the relevant emirate. However, income from other business activities will be subject to corporate tax unless the other business is an exempted extractive business.
Read More: Do extractive and Non-Extractive businesses have to pay Corporate Tax in UAE
Seek the expert services of Tax Consultants in UAE
To ensure compliance with the UAE's Corporate Tax Law, taxable entities are encouraged to seek the expertise of professional tax consultants. These experts can offer valuable guidance and support in adhering to corporate tax regulations. Contacting a tax consultant in dubai is a proactive step towards ensuring tax compliance and understanding the tax implications for your business.
FAQs
Q. Do extractive and non-extractive businesses have to pay corporate tax in UAE?
Answer: Yes, both extractive and non-extractive businesses in the UAE are subject to corporate tax. However, there are specific exemptions and conditions under the UAE Corporate Tax Law. Extractive businesses involved in the extraction of natural resources may qualify for certain exemptions, while non-extractive businesses can benefit from other tax relief measures. It is crucial to consult with Tax Consultant Dubai to determine your eligibility for exemptions and ensure compliance with the latest tax regulations.
Q. What exemptions apply to extractive and non-extractive businesses under UAE corporate tax law?
Answer: Are there any special exceptions for companies that are extracting natural resources in the UAE, under the country’s corporate tax rules? These exemptions are meant to help the energy sector and its positive effect on the economy. On the other hand, non-extractive businesses can take advantage of some tax relief measures such as exemption for qualifying investment funds, income from overseas shareholdings, public benefit entities among others. For more details on this matter or for expert advice on your specific situation, contact Tax Consultant Dubai.