Are extraction businesses subject to Corporate Tax?

Article 7 – Extractive Business 1. A Person shall be exempt from Corporate tax and the provisions of this DecreeLaw shall not apply to its Extractive Business where all of the following conditions are met: a. The Person directly or indirectly holds or has an interest in a right, concession or Licence issued by a Local Government to undertake its Extractive Business. b. The Person is effectively subject to tax under the applicable legislation of an Emirate in accordance with the provisions of Clause 6 of this Article. c. The Person has made a notification to the Ministry in the form and manner agreed with the Local Government. 2. If a Person that meets the conditions of Clause 1 of this Article derives income from both an Extractive Business and any other Business that is within the scope of this Decree-Law, the following shall apply: a. The income derived from the Extractive Business shall be calculated and taxed according to the applicable legislation of the Emirate. b. The income derived from the other Business shall be subject to the provisions of this Decree-Law, unless that other Business meets the conditions to be exempt from Corporate Tax under Article 8 of this Decree-Law. 3. For the purposes of Clause 2 of this Article, a Person shall not be considered to derive income from any other Business where such other Business is ancillary or incidental to that Person’s Extractive Business and the Revenue of such other Business in a Tax Period does not exceed 5% (five percent) of the total Revenue of that Person in the same Tax Period. 4. For the purposes of calculating the Taxable Income of the Person’s other Business, the following shall apply: a. The other Business shall be treated as an independent Business, and financial statements shall be kept for this Business separately from the Extractive Business. b. Any common expenditure shared between the Extractive Business and the other Business of the Person shall be apportioned in proportion to their Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 12 Revenue in the Tax Period, unless such expenditure is taken into account in different proportions for the purposes of calculating the tax payable by the Person under the applicable legislation of the relevant Emirate in respect of its Extractive Business, in which case the expenditure will be apportioned in the latter proportion. c. The Person shall calculate the Taxable Income for its other Business independently for each Tax Period in accordance with the provisions of this Decree-Law. 5. Transactions between the Extractive Business and the other Business of the same Person shall be considered Related Party transactions subject to the provisions of Article 34 of this Decree-Law, unless such other Business is exempt from Corporate Tax under Article 8 of this Decree-Law. 6. A Person shall be considered effectively subject to tax under the applicable legislation of the Emirate for the purposes of this Article if the Local Government imposes a tax on income or profits, a royalty or revenue tax, or any other form of tax, charge or levy in respect of such Person’s Extractive Business. 7. The exemption under this Article shall 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 Business that does not in its own right meet the conditions to be exempt from Corporate Tax under this Article or Article 8 of this Decree-Law.

4. Taxation of Extractive Business and Non-Extractive Natural Resource Business 4.1. Introduction The Corporate Tax Law provides that in general a Person engaged in an Extractive Business/Non-Extractive Natural Resource Business is exempt from Corporate Tax and referred to as an Exempt Person.7 This exemption respects the sovereignty of the Emirates over their Natural Resources and prevents taxation being imposed at both the Emirate and Federal level on the same type of income. However, the relevant Person needs to meet the criteria in the Corporate Tax Law to qualify for the Extractive Business/Non-Extractive Natural Resource Business exemption, respectively, in order to be considered an Exempt Person. The Corporate Tax Law accepts that an Exempt Person engaged in an Extractive Business/Non-Extractive Natural Resource Business, may also be engaged in other Business. The existence of the other Business will not affect the exemption for the Extractive Business/Non-Extractive Natural Resource Business. However, the income from the other Business will generally be subject to Corporate Tax, unless that other Business itself specifically qualifies for a distinct Corporate Tax exemption. 4.2. Conditions to qualify as an Exempt Person A Person engaged in an Extractive Business/Non-Extractive Natural Resource Business, will be exempt from Corporate Tax on that Business if it meets the following conditions:8 1. The Person directly or indirectly holds an interest in a right, concession or Licence issued by a Local Government to undertake the Extractive Business/NonExtractive Natural Resource Business, in the UAE. 2. The Person is effectively subject to tax under the applicable legislation of the Local Government. 3. The Person has made a notification to the Ministry of Finance in the form and manner agreed with the Local Government. For a Non-Extractive Natural Resource Business, there is an additional condition to be met: 4. The Person’s income from its Non-Extractive Natural Resource Business is derived solely from Persons that undertake a Business or Business Activity. These conditions are discussed below. 7 Article 4(1)(c) and (d) of the Corporate Tax Law. 8 Articles 7(1) and 8(1) of the Corporate Tax Law. Corporate Tax Guide | Extractive and Non-Extractive Business | CTGEPX1 13

meet the relevant conditions will be exempt from Corporate Tax.15 Where an Extractive Business or Non-Extractive Natural Resource Business conducts an independent Business that is not ancillary to its ordinary business and this Business accounts for more than 5% of their total Revenue, it will be required to register with the FTA for Corporate Tax.16 Example 3: Extractive and Non-Extractive Natural Resource Businesses that meet the requirements to be exempt from Corporate Tax Company T is an Extractive Business and Company U is a Non-Extractive Natural Resource Business. Both entities meet the requirements to be exempt from Corporate Tax. Neither Company T or Company U will be required to register for Corporate Tax as they will be treated as Exempt Persons. Example 4: Extractive and Non-Extractive Natural Resource Business that do not meet the conditions set out in Article 7 or Article 8 of the Corporate Tax Law Company V is engaged in the extraction of oil but does not meet the conditions to be exempt from Corporate Tax. As Company V does not meet the conditions to be an Exempt Person, it is a Taxable Person and must register for Corporate Tax. Example 5: Extractive Business engaged in ancillary activities that regularly exceeds 5% of total Revenues Company W is an Extractive Business established, registered and effectively subject to tax in Ajman. On an annual basis, Company W engages in ancillary activities that represent 15% of the company’s total Revenue. As Company W engages in ancillary activities that make up more than 5% of its total Revenues, the Company will be required to register for Corporate Tax and report the ancillary business Revenue and expenses in its Corporate Tax Return. 15 Article 7(1) and Article 8(1) of the Corporate Tax Law. 16 Article 7(3) and Article 8(3) of the Corporate Tax Law. Corporate Tax Guide I Registration of Resident Juridical Persons I CTGRJP1 18