What is a Connected Person Under the UAE Corporate Tax Law: Key Clarifications

What is a connected person under the UAE Corporate Tax Law? In practical terms, the Connected Person rules matter where a payment or benefit is made to someone whose relationship with the taxable person may influence the amount paid. Under Article 36 of the UAE Corporate Tax Law, a payment or benefit to a Connected Person is generally deductible only to the extent that it corresponds to market value and is incurred wholly and exclusively for business purposes.

In this article, we look at the key clarifications introduced by the Federal Tax Authority’s Public Clarification CTP010 and what they mean for UAE businesses in practice. The focus is on helping businesses identify roles that may require closer review before payments, benefits, deductions, or disclosures are assessed for Corporate Tax purposes.

The practical answer to what is a connected person is therefore not limited to a simple title check. Businesses should review who receives the payment, what service or benefit is provided, and whether the amount can be supported by arm’s length evidence.

How the FTA clarifies what is a connected person for directors and officers

The Federal Tax Authority’s Public Clarification CTP010 focuses on the meaning of “director” and “officer” for the purposes of Articles 36 and 55 of the UAE Corporate Tax Law. This matters because both categories may fall within the connected person analysis, depending on the facts. The clarification also shows that formal governance documents and actual authority should be reviewed together.

Director

A director is a person who formally holds a position on the board of directors or on an equivalent governing body, such as a board of trustees or board of governors. This can include executive, non-executive, temporary, alternate, and committee roles where the person formally sits within the governance structure.

Officer

An officer is assessed more broadly. The focus is whether the person has authority and responsibility for planning, directing, and controlling the business, or whether they can make strategic financial, operational, or commercial decisions that bind the taxable person.

Role type	FTA CTP010 treatment	Practical check
Board director	Usually within scope where formally appointed	Review constitutional documents and board records
Senior manager	May be within scope if strategic authority exists	Review delegated authority and decision rights
Routine administrator	Generally outside scope where instructions are predefined	Review whether decisions are independent or merely procedural

Examples that may require closer review include:

• Chief executive officer
• General manager
• Chief financial officer
• Chief operating officer
• Chief commercial officer
• Authorised representative with discretionary authority

For further context, businesses may read WellTax’s related article on UAE Corporate Tax deductible expenses, which explains how director remuneration and connected person payments can affect deductible expense analysis.

Why substance matters more than job titles

The FTA Corporate Tax Public Clarification CTP010 is clear that job titles are not enough. A person with “Director” in their employment title will not automatically be treated as a director if they do not formally sit on the governing body. Equally, someone without a C-suite title may still be an officer if they exercise actual authority, take strategic decisions, or hold binding authority in practice.

This substance-based approach means businesses should look at how decisions are made, not only what the organisational chart says. The clarification also refers to IAS 24 concepts, supporting a fact-based review of control and influence. A Head of Division, Head of HR, secondee, outsourced manager, or interim consultant may fall inside or outside the analysis depending on their real powers.

A practical review should therefore test whether the individual can:

• Approve actions that legally or contractually bind the business
• Make final strategic decisions rather than follow fixed instructions
• Control or direct material business activities

What is a connected person for director and officer roles?

A practical answer to what is a connected person must cover both legal appointment and operational authority. For director and officer roles, the key question is whether the individual falls within the connected person rules because of their formal office, their decision-making power, or the way they can bind the business.

This classification can affect remuneration deductibility, benefits treatment, and Corporate Tax return disclosure where thresholds and filing requirements apply. It is also relevant to transfer pricing analysis because the amount paid should be supportable by market evidence. WellTax’s article on the Transfer Pricing Disclosure Form UAE explains how connected person payments fit into the wider reporting process.

The same issue can arise in cross-border groups, especially where a UAE company pays management fees, salaries, bonuses, or consultancy fees to individuals connected to another group entity.

Practical action points for UAE businesses

Businesses should not wait until return filing to assess connected person status. A better approach is to build a practical evidence file during the tax period. The file should show who has authority, what has been paid, and how the business reached a reasonable view on market value. The core review should cover governance records, delegated authority, and supporting remuneration evidence.

Useful checks include:

• Review board resolutions, constitutional documents, and committee appointments
• Map signing powers, powers of attorney, and approval limits
• Identify who can bind the business in contracts or commercial decisions
• Compare salaries, bonuses, management fees, and benefits with market evidence
• Keep contemporaneous support for any connected person payment or benefit

As FTA registered tax agents in the UAE, WellTax can support businesses with UAE Corporate Tax compliance, connected persons remuneration analysis, transfer pricing support, and practical review of filings and documentation where relevant.

Source credit: This article is based on the Federal Tax Authority’s CTP010 Public Clarification.

Written by Lorenzo Tosonotti, CIMA Dip Ma, Partner & FTA Tax Agent, WellTax.