Key Takeaways
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On 29th of April 2026, the
UAE Federal Tax Authority (FTA), issued
Corporate Tax Public Clarification CTP010, which clarifies
the meaning of the terms “director”, and “officer” under the Article 36 of
the UAE Corporate Tax Law.
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The clarification adopts a substance-over-form approach,
meaning that an individual’s
actual authority and responsibilities are that is more
important than their job title.
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Payments and benefits made to
Connected Persons are only deductible if they are at market
value and are incurred wholly and exclusively for business purposes.
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The definition of “officer” may now include senior employees, general
managers, authorized signatories and persons with
significant delegated authority.
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Businesses should review their
Connected Person identification process, remuneration
arrangements, transfer pricing documentation and Corporate Tax disclosures.
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The clarification also clarifies that only natural persons can be directors
or officers for the purposes of Article 36.
Introduction
The UAE’s Corporate Tax regime has a strong focus on the
transactions involving related, and the connected persons are conducted
on an arm's length basis. With the issuance of the
Federal Decree-Law No. 47 of 2022 on the
Taxation of Corporations and Businesses, the taxpayers are
required to carefully assess, whether the payments made to individuals,
related to their
business
meet the legal requirements, for deductibility.
For more clarity, the Federal Tax Authority (FTA) issued
Corporate Tax Public Clarification CTP010 on 29 April 2026,
which clarifies the interpretation of the terms “director”, and “officer” in
relation to the Article 36 of the
UAE Corporate Tax Law. The clarification is particularly
important, because these terms determine, whether an individual is a Connected
Person, and therefore have a direct impact on the deductibility of
remuneration, disclosure obligations, and the transfer
pricing compliance.
The FTA emphasizes, that businesses should look at the
actual authority of an individual, rather than
official job titles. This clarification is consistent, with
the broader objective of preventing excessive deductions, and
permitting the deduction of the
commercially justified payments.
Understanding Article 36 of the UAE Corporate Tax Law
The Article 36 addresses the deductibility of the payments,
or benefits provided by a Taxable Person to Connected
Persons. The provision seeks to prevent, the
artificial reduction of taxable profits through
excessive remuneration, or benefits granted to individuals,
who have closely connected with the business.
Payments to Connected Persons are deductible under
Article 36 only if they are at
market
value and are incurred wholly and exclusively for the purposes of the
business. Where these conditions are not satisfied, the deduction may be
limited, thereby increasing the taxable income of the
business.
Thus, the applicability of the Article 36 depends largely, on
whether an individual qualifies, as a Connected Person. Directors &
officers fall within the Connected Person framework, and as
such, it is important to ensure that, these individuals are correctly
identified for Corporate Tax purposes.
The FTA's Substance-Based Interpretation
One of the key features of Public Clarification CTP010 is the
adoption of a substance-over-form approach. The FTA states
that the designation of an individual does not determine whether the
individual is a director or officer.
Instead, companies need to look at the real authority, duties
and influence an individual has within the organization. This is consistent
with internationally accepted
governance principles and generally corresponds to the
concepts contained in
International Accounting Standard (IAS) 24
on Related Party Disclosures which focuses on
individuals having authority and responsibility for planning,
directing and controlling the activities of an entity.
So, companies shouldn’t be concerned with
employment contracts or
organizational charts, but rather with the reality of what
each individual does.
Who Qualifies as an "Officer"?
The clarification significantly broadens, the practical understanding of the
term "officer."
According to the FTA, an individual may qualify as an
officer, where the person has authority, and responsibility
for planning, directing, and controlling the activities of the Taxable Person,
possesses authority to make strategic financial, operational, or
commercial decisions, or has the legal, or
contractual authority
to bind the business.
Importantly, the clarification recognizes that such authority may arise
through board resolutions,
powers of attorney, constitutional documents, or
delegated management authority.
The FTA provides several examples illustrating individuals who may be regarded
as officers. These include
general managers of limited liability companies, managers of
permanent establishments,
interim chief executive officers,
heads of divisions possessing final
decision-making authority,
heads of human resources responsible for strategic
workforce decisions, and
employees named as managers in trade licenses, or board
resolutions, where such appointments confer genuine authority. Likewise,
individuals acting under broad powers of attorney that permit
them to make discretionary business decisions may also fall within the
definition.
This broader interpretation means that many businesses may discover that
certain senior executives or
authorized representatives
should be treated as Connected Persons Despite they have never previously been
classified as officers for tax purposes.
Who Is Considered a "Director"?
The clarification further explains, what is meant by "director" under
Article 36.
Director means a natural person who is serving on the board
of directors or an equivalent governing body of the Taxable Person. This
includes executive directors,
non-executive directors, alternate directors, temporary
directors and members of board committees.
Where an organization does not operate, through a conventional board
structure, equivalent governing bodies, such as boards of
trustees, or boards of governors may meet this requirement,
subject to the governing legislation, and constitutional documents of the
entity.
However, the FTA explicitly states that simply holding the title “Director” in
the organizational structure of the company does not
automatically qualify the employee as a director for Corporate Tax purposes. A
departmental director or functional director who is not a
member of the board would not necessarily qualify unless the person otherwise
falls within the definition of an officer.
Practical Implications for Businesses
The clarification has immediate
compliance
implications for businesses within the UAE.
Historically many organizations have identified Connected Persons based on
legal ownership arrangements or membership of the
board of directors. Following CTP010 businesses will need to
undertake a more detailed review of senior management roles, delegated
authorities, powers of attorney and governance arrangements.
A company should consider whether the individual has real decision-making
power over financial, business or operational matters. This review should
include an assessment of signatory authority, contractual
authority, budget approval authority,
strategic planning authority, and
organizational authority.
Where an individual qualifies as a Connected Person, businesses should ensure
that remuneration packages, bonuses, allowances, management
fees and other benefits are at market value. Supporting documentation must
show, the compensation is in correspondence, with the services actually
performed, and it has a genuine business purpose.
These assessments are also connected to the UAE
transfer pricing
framework, as outlined in the Article 55 of the Corporate Tax Law.
Consequently, businesses should ensure that, the
transfer pricing documentation, including the
Local Files, where relevant, adequately supports
payments to Connected Persons, and demonstrates the
compliance, with the arm's length principle.
Compliance and Documentation Considerations
The clarification highlights the need for strong
governance and documentation processes.
Taxable Persons should have
internal procedures to identify officers and directors by
actual authority rather than simply by titles.
Connected Person rules should be applied to
delegation matrices, board resolutions,
powers of attorney, employment contracts,
governance policies and the way an organisation makes
decisions and should be reviewed on a periodic basis.
The FTA has introduced a requirement for
disclosure of payments or benefits made to Connected Persons
in excess of AED 500,000 in the relevant tax period. Therefore,
misidentification of officers or directors could lead to incomplete
disclosures and increased compliance risk.
The clarification also confirms that only natural persons can
be directors or officers. Where a person is at the same time a Related Party
and a Connected Person the person shall be treated as a Related Party for the
purposes of the Corporate Tax Law.
For businesses, this means taking a comprehensive view of governance,
including tax, finance,
legal
and human resources functions, to ensure consistent identification and
reporting of Connected Persons.
Conclusion
Corporate Tax Public Clarification CTP010 provides,
much-needed certainty regarding the interpretation of the terms "director",
and "officer" under the Article 36 of the
UAE Corporate Tax Law. The FTA has taken, a substance over
form approach, changing the emphasis from formal job titles, to the actual
authority, exercised by the individuals, within an organization.
The Clarification requires companies, to review their
governance structures, delegated authorities, and
remuneration arrangements to assess, whether additional persons should be
treated as Connected Persons. This exercise extends beyond
tax compliance, and promotes stronger
corporate governance, by ensuring that decision-making
authority is properly documented, and transparently reflected in the tax
reporting.
As the UAE Corporate Tax regime continues to evolve,
businesses that take a proactive strategy for reviewing governance
arrangements, maintaining robust documentation, and ensuring
arm’s length remuneration practices will be better placed to
meet, the FTA’s compliance expectations, while mitigating the potential tax
risks.
Frequently Asked Questions
1. Why did the FTA issue Public Clarification CTP010?
The clarification was issued, to enhance certainty around the interpretation
of the terms, ‘director’, and ‘officer’ under Article 36 of the
UAE Corporate Tax Law. It helps taxpayers, to assess, whether
people should be regarded as Connected Persons, and whether payments made to
them satisfy the requirements, for deductibility. In addition, the guidance
encourages uniform application of the law across
business structures.
2. Does a person's job title determine whether they are an officer?
No. The FTA makes clear that job titles are not determinative. Instead,
businesses must determine whether the person qualifies as an officer by
evaluating the individual’s actual authority, decision-making responsibilities
and ability to direct or control business activities.
3. Can a general manager be treated as an officer?
Yes. If the general manager has authority to plan, direct and control the
business or has strategic choice-making powers, he may be an officer. The
decision is based on the extent of the power actually exercised and not merely
on the title.
4. Why is identifying Connected Persons important for Corporate Tax purposes?
The identification of Connected Persons is important, because the Article 36
limits, the deductibility of payments, and benefits made to
them. Businesses must ensure, that the remuneration is at
market value, and there is a
bona fide business purpose. Accurate corporate tax disclosures, and the transfer
pricing compliance also require, proper identification.
5. What documents should businesses review following the clarification?
Companies should review board resolutions, delegation of authority matrices,
powers of attorney, employment contracts, governance
policies, constitutional documents and signatory
arrangements. These documents help in establishing whether an individual has
sufficient authority to be considered a director or officer. Keeping
contemporaneous documentation also strengthens the taxpayer’s position in an
FTA review.
6. What practical steps should businesses take after the clarification?
Businesses should take a comprehensive look at their governance structures, to
see who really makes decisions. Review the
remuneration arrangements, update
Connected Person disclosures, where appropriate and ensure
that, the transfer pricing documentation adequately supports payments made to
such persons. Taking these steps, can help reduce compliance risks, and
improve readiness, for future tax audits.
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About the Author
Dr. Hassan Elhais publishes analysis of UAE business law matters, including commercial relationships, company matters and business disputes. For readers comparing the best lawyers in Dubai, his writing offers insight into the legal questions surrounding these topics. Explore his published work and practice-area information for further context.
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