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<\/figure>\n<\/figure>\n\n\n\nSalary benchmarking helps UAE taxable businesses support remuneration paid to directors, owners, officers and other Connected Persons. For UAE Corporate Tax, remuneration is not automatically deductible because it is processed through payroll or approved internally. The amount should reflect market value and be incurred wholly and exclusively for the purposes of the business. The company should be able to show that an independent business would have paid a comparable amount for comparable work and responsibilities.<\/p>\n\n\n\n
What is a Connected Person?<\/h2>\n\n\n\n
A Connected Person is broadly someone with a close relationship to the taxable business, its ownership, control or management. This can include a shareholder, director, officer, owner, partner, trustee, or related individual, depending on the facts. For a more detailed explanation of the definition and its application, see WellTax\u2019s article on what is a Connected Person under the UAE Corporate Tax Law<\/strong><\/a>. The position should be checked against UAE Corporate Tax law and Federal Tax Authority guidance.<\/p>\n\n\n\n The risk usually arises because the person receiving remuneration may also influence the decision to pay it. A shareholder-director may approve their own salary, a founder may receive a year-end bonus, or a relative may be added to payroll. These arrangements can be commercially valid, but the business should retain evidence of the role performed, time spent and reason for the amount paid.<\/p>\n\n\n\n At the identification stage, WellTax can help businesses map directors, owners, officers and relevant related persons, then compare that list with payroll, board minutes and accounting records. This helps identify Connected Person payments early, before the Corporate Tax return or disclosure form is prepared.<\/p>\n\n\n\n Salary benchmarking matters because Connected Person remuneration can directly affect taxable profit. A business may pay salary, bonuses, allowances, benefits, directors\u2019 fees or other rewards. For the deduction to be supportable, the amount should be at market value and the cost should be wholly and exclusively incurred for business purposes.<\/p>\n\n\n\n Both tests should be considered together. The business should confirm that the person genuinely performs services for the company, and that the amount paid is consistent with what an independent employer might pay for those services<\/strong>. If the role is unclear, or the amount is materially above market evidence, the deduction may be harder to support.<\/p>\n\n\n\n For example, a full-time founder managing director may have a strong commercial basis for a senior executive package. A family member receiving a high salary without a written role, deliverables or decision-making responsibilities creates a weaker file. The relationship does not prevent a deduction, but it increases the need for clear evidence.<\/p>\n\n\n\n Salary benchmarking should compare the Connected Person\u2019s total reward with market evidence for comparable roles. The review should include base salary, bonuses, directors\u2019 fees, allowances and benefits where relevant. Focusing only on monthly salary may understate the real value of the package.<\/p>\n\n\n\n A credible benchmark considers the role performed, seniority, skills, experience, time commitment, business size, sector, location and performance conditions. The market rate for a full-time chief financial officer may differ from the rate for a part-time finance director in a small trading company. The FTA\u2019s Transfer Pricing Guide<\/strong><\/a> provides further guidance on applying the arm\u2019s length principle to transactions and arrangements involving Related Parties and Connected Persons.<\/p>\n\n\n\n WellTax can support the benchmarking stage by helping select appropriate comparables, reviewing internal pay data and assessing whether external market data is suitable. Where exact comparables are not available, the assumptions should be recorded clearly so the conclusion can be explained if supporting information is requested.<\/p>\n\n\n\n The objective is a reasonable commercial range. The business should show that remuneration is consistent with the role, available evidence and value delivered.<\/strong><\/p>\n\n\n\n A structured process makes salary benchmarking easier to defend and repeat each year. The detail should be proportionate to the business size, amount paid and tax risk.<\/p>\n\n\n\n For example, if a shareholder-director is paid AED 900,000 per year, the business should document duties, authority, time commitment, comparable senior roles and the approval basis.<\/p>\n\n\n\n At the documentation stage, WellTax can convert the analysis into a clear working paper or remuneration benchmarking memo. This salary benchmarking evidence can be kept with the tax file and updated when roles, profits or remuneration packages change.<\/p>\n\n\n\t\tWhy salary benchmarking matters for UAE Corporate Tax<\/h2>\n\n\n\n
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<\/figure>\n<\/figure>\n\n\n\nSalary benchmarking and market value in practice<\/h2>\n\n\n\n
A practical salary benchmarking methodology<\/h2>\n\n\n\n
Step<\/strong><\/td> Practical action<\/strong><\/td> Evidence to keep<\/strong><\/td><\/tr> 1. Identify the person<\/td> Confirm whether the recipient is a Connected Person<\/td> Ownership chart, director register, employment records<\/td><\/tr> 2. Define the role<\/td> Record duties, authority, seniority and time commitment<\/td> Job description, service agreement, board minutes<\/td><\/tr> 3. Capture total reward<\/td> Include salary, bonus, fees, allowances and benefits<\/td> Payroll reports, contracts, benefit schedules<\/td><\/tr> 4. Select comparables<\/td> Compare with similar UAE or sector roles<\/td> Salary surveys, recruiter data, internal third-party pay data<\/td><\/tr> 5. Adjust for facts<\/td> Consider company size, profitability, experience and responsibilities<\/td> Management notes, assumptions and calculations<\/td><\/tr> 6. Reach a conclusion<\/td> Decide whether pay is within a supportable range<\/td> Benchmarking memo and approval record<\/td><\/tr> 7. Link to tax reporting<\/td> Reflect the position in the Corporate Tax return and disclosure review<\/td> Tax computation, disclosure analysis, supporting schedules<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n ![\"\"](\"https:\/\/well-tax.com\/wp-content\/uploads\/2023\/06\/welltax-logo-white.svg\"){kind=logo}
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