The UAE Federal Tax Authority (FTA) has issued Corporate Tax Public Clarification CTP010, clarifying the meaning of “director” and “officer” for the purpose of payments to Connected Persons under Article 36 of the UAE Corporate Tax Law.
The clarification has been much awaited and provides insights to UAE businesses that make payments or provide benefits to owners, board members, senior management, general managers, authorised signatories, or other individuals who may have strategic decision-making or binding authority.
The key message is that the analysis should not stop at job titles. Consistent with the broader transfer pricing principle that substance should prevail over form, businesses should assess who actually has the authority to make decisions, direct the business, or legally bind the company.
Background
Under Article 36 of the UAE Corporate Tax Law, payments or benefits made by a Taxable Person to a Connected Person are deductible only to the extent that they:
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correspond to the Market Value of the service, benefit, or otherwise provided by the Connected person; and
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are incurred wholly and exclusively for the purposes of the Taxable Person’s business.
The application of Article 36 should be considered in light of the exceptions provided under Article 36(6), including for certain listed and regulated Taxable Persons.
What has the FTA clarified?
Meaning of “director”
A director generally refers to an individual who holds a position on the board of directors or an equivalent governing body of the Taxable Person.
Where an entity does not have a board of directors, the term may extend to individuals holding positions in an equivalent governing body, depending on the applicable law and the entity’s constitutional documents.
Importantly, CTP010 clarifies that the mere use of the word “director” in a job title does not, by itself, make an individual a director for Article 36 purposes.
Meaning of “officer”
The meaning of officer is more substance-based. An individual may be considered an officer where they have:
- authority and responsibility for planning, directing, and controlling the activities of the Taxable Person; with CTP010 drawing reference from IAS 24 - Related Party Disclosures, which focuses on functional authority and decision-making power rather than job title alone;
- authority to make strategic financial, operational, or commercial decisions; or
- authority to enter into agreements or approve actions that legally or contractually bind the Taxable Person, including through a power of attorney (POA), being named as a manager in the trade licence, or being identified in board resolutions as having such authority.
Key points to consider
- All key management personnel reported under the related party disclosures in the financial statements will not automatically be treated as Connected Persons. An individual analysis would still be required, based on the person’s actual authority, decision-making power, and role within the business.
- The assessment should focus on actual authority and conduct, not merely formal titles. CTP010 reinforces that the analysis should be based on substance rather than title.
- CTP010 also clarifies that where a person is both a Related Party and a Connected Person of a Taxable Person, that person will be treated as a Related Party for UAE Corporate Tax purposes.
Why this matters for businesses
CTP010 is a timely reminder that identifying Connected Persons should not be treated as a simple title-based exercise. In practice, businesses should ask:
- Who has final decision-making authority?
- Who can approve budgets, contracts, bank facilities, or key commercial terms?
- Who can legally or contractually bind the company?
- Who directs or controls the business in practice?
- Are payments to such individuals commercially supportable?
This is particularly important for owner-managed businesses, family groups, private companies, free zone entities, tax groups, permanent establishments, and businesses with delegated authority structures.
Recommended actions
UAE businesses should consider reviewing their Connected Person population and related payment arrangements before Corporate Tax Return filing.
This should include identifying individuals with final decision-making or binding authority, assessing whether payments or benefits made to such individuals are supportable at Market Value, considering any applicable Article 36 exceptions, and maintaining sufficient documentation to support deductibility and disclosure positions.
How we assist you
Grant Thornton UAE can assist businesses in assessing the impact of CTP010 and strengthening their Corporate Tax and transfer pricing compliance framework, including:
- identifying Related Parties and Connected Persons;
- reviewing governance documents and delegated authority structures;
- assessing payments and benefits to owners, directors, officers and senior management;
- conducting benchmarking analysis to determine the market value of the remuneration/ payments made to connected persons based on their role and responsibilities;
- reviewing Corporate Tax Return disclosure positions; and
- assisting in updating transfer pricing documentation and internal governance processes.
Source: FTA Corporate Tax Public Clarification CTP010
Contact our Tax team
For more details regarding this Tax alert or other Tax issues, reach out to our team of experts on the latest Tax developments within the UAE and the Middle East region.
