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UAE Corporate Tax 2026: The AED 500K Connected Persons

UAE connected persons corporate tax rules 2026

15 min read

What Are Connected Persons Under UAE Corporate Tax?

Quick Answer: Connected persons under UAE corporate tax include company owners, directors, officers and their relatives. Any payment or benefit to a connected person is only tax-deductible if it reflects market value and serves a genuine business purpose. Aggregate payments exceeding AED 500,000 per connected person must be disclosed in the corporate tax return under Article 55 of Federal Decree-Law No. 47 of 2022.

Most UAE businesses know about the 9% corporate tax rate. Far fewer understand the connected persons rules under Article 36 of Federal Decree-Law No. 47 of 2022. These rules restrict what you can deduct when paying people closely tied to your business, and the FTA’s recent Public Clarification CTP010 has made the definition wider than most business owners expected.

In this guide, Qaspro Global breaks down exactly who qualifies as a connected person, what the AED 500,000 disclosure threshold means for your CT return, and how the FTA now defines “director” and “officer” based on substance over form.

Who Qualifies as a Connected Person Under Article 36?

A connected person is an individual with a close personal or professional relationship to the taxable business. Under Article 36 of FDL 47/2022, the following individuals are connected persons:

Owners: any individual who directly or indirectly holds an ownership interest in the business
Directors: members of the board of directors or equivalent governing body
Officers: individuals with authority to plan, direct and control business activities
Relatives: family members (up to the fourth degree of kinship) of any owner, director or officer
Partners: partners in an unincorporated partnership and their family members

The critical point is that this list covers individuals, not just companies. If you pay your brother a consulting fee, give your spouse a company car, or provide housing to a shareholder’s family member, Article 36 applies.

How Does the FTA Define “Director” and “Officer”? (CTP010 Clarification)

The FTA issued Public Clarification CTP010 to resolve confusion about who counts as a director or officer for connected persons purposes. The clarification applies to Articles 36 and 55 of the Corporate Tax Law and reinforces a substance-over-form approach.

Director Definition Under CTP010

A director is a person holding a position on the board of directors or an equivalent governing body (board of trustees, board of governors) as defined in the entity’s Memorandum of Association or constitutional documents. This includes:

Executive and non-executive directors
Temporary and permanent directors
Alternate directors
Board committee members

A job title containing the word “director” does not automatically make someone a connected person. A “Sales Director” or “Marketing Director” who does not sit on the formal board is not a director under Article 36, unless they also meet the officer definition.

Officer Definition Under CTP010

An officer is any individual who has authority and responsibility for planning, directing and controlling the activities of the business. This aligns with the IAS 24 definition of key management personnel. Officers typically include:

Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
Chief Operating Officer (COO)
General Manager (GM)
Chief Commercial Officer (CCO)
Any authorized representative with discretionary authority to bind the business

The FTA explicitly states that the classification depends on actual decision-making power, not the person’s formal job title. A General Manager who approves contracts and sets business strategy is an officer even if their contract says “Manager.”

What Is the Deductibility Rule for Connected Persons Payments?

Under Article 36 of FDL 47/2022, a payment or benefit provided to a connected person is only deductible for corporate tax purposes if it meets both of these conditions:

The payment corresponds to the market value of the service or benefit provided
The payment is incurred wholly and exclusively for the purposes of the business

Market value is determined by applying the arm’s length standard. This means you must ask: “What would an independent third party charge or receive for the same service under the same conditions?”

If you pay your CEO a salary of AED 80,000 per month, but a comparable CEO in the same industry and company size earns AED 45,000, the FTA can disallow the excess AED 35,000 as a deduction. That disallowed amount increases your taxable income and your corporate tax bill.

What Happens If You Pay Above Market Value?

When payments to connected persons exceed market value, the FTA can make the following adjustments:

Disallowance of the excess deduction: the amount above market value is added back to taxable income
Transfer pricing adjustment: the FTA treats the transaction as if it occurred at arm’s length
Penalties: under Cabinet Decision No. 129 of 2025, incorrect returns attract a penalty of AED 500 for the first offence and AED 1,000 for repeated violations, plus 14% annual interest on any underpaid tax
Double taxation risk: the connected person may still be taxed on the full amount received, while the business loses the deduction

What Is the AED 500,000 Connected Persons Disclosure Threshold?

Article 55 of the Corporate Tax Law requires businesses to disclose connected person transactions in their corporate tax return. The threshold is AED 500,000 per connected person in aggregate during the tax period.

If total payments or benefits to any single connected person exceed AED 500,000, you must complete a Connected Persons Schedule in the CT return. This schedule requires:

The connected person’s name and relationship to the business
The nature of each transaction (salary, fees, rent, loan, benefit in kind)
The total value of transactions during the tax period
The arm’s length pricing methodology used

This is separate from the Related Party disclosure, which has a much higher threshold of AED 40 million. Many businesses focus only on the AED 40M threshold and completely miss the AED 500K connected persons requirement.

How Do Related Parties Differ from Connected Persons?

The UAE Corporate Tax Law treats Related Parties (Article 35) and Connected Persons (Article 36) as two distinct categories with different rules and thresholds.

Factor	Related Parties (Article 35)	Connected Persons (Article 36)
Definition	Entities linked by 50%+ ownership or control	Individuals with personal/professional ties to the business
Scope	Parent-subsidiary, sister companies, PE relationships	Owners, directors, officers, their relatives
Disclosure threshold	AED 40 million aggregate	AED 500,000 per connected person
Pricing rule	Arm’s length (5 TP methods)	Market value + wholly for business purposes
TP documentation	Master File + Local File if revenue exceeds AED 200M or group revenue exceeds AED 3.15B	Benchmarking and commercial justification required
Government exemption	Yes, two government-owned entities are NOT related parties (FTA CTP002)	No specific government exemption

A common mistake is treating these as interchangeable. A payment to your subsidiary is a related party transaction under Article 35. A salary to your company’s General Manager is a connected persons transaction under Article 36. Both require arm’s length pricing, but the disclosure thresholds and documentation requirements differ significantly.

What Are All the Disclosure Thresholds for UAE Corporate Tax?

Qaspro Global advises businesses to track all four disclosure thresholds when preparing their CT return:

Disclosure Requirement	Threshold	Filing Obligation
Connected Persons Schedule	AED 500,000 per person	Disclose in CT return
Related Party Schedule (TP Disclosure Form)	AED 40 million aggregate	Disclose in CT return
Individual transaction category	AED 4 million per category	Separate category disclosure
Master File + Local File	AED 200M revenue (entity) or AED 3.15B (group)	Maintain and submit on request

Balance sheet items such as intercompany loans count toward the AED 40M threshold alongside profit-and-loss transactions. This catches many businesses that only track revenue transactions.

Which Payments to Connected Persons Are Common in UAE Businesses?

These are the most frequent connected persons transactions the FTA reviews during audits:

Owner salary: shareholders drawing a monthly salary from the company
Director fees: board member remuneration and sitting fees
Management fees: payments to a related individual for managing the business
Rent: the company renting property owned by a shareholder or relative
Consulting fees: payments to family members for advisory or consulting services
Benefits in kind: company car, housing, school fees, air tickets provided to connected persons
Loans: interest-free or below-market loans between the company and its owners
Profit distribution disguised as expenses: payments labeled as salaries or fees that are actually profit withdrawals

Every single one of these must pass the market value test. If you provide your CFO with a housing allowance of AED 15,000 per month when the market rate for a comparable position is AED 8,000, the FTA can disallow AED 7,000 per month (AED 84,000 per year) as a deduction.

How Should Businesses Prepare for Connected Persons Compliance?

Qaspro Global recommends these six steps before filing your corporate tax return:

Step 1: Identify All Connected Persons

List every individual who qualifies: owners, board members, officers with decision-making authority (apply the CTP010 substance test), and relatives of all of the above up to the fourth degree.

Step 2: Map All Transactions

For each connected person, total every payment, benefit and transaction during the tax period. Include salary, bonuses, fees, rent, loans, benefits in kind and any non-cash benefits.

Step 3: Check the AED 500,000 Threshold

If aggregate transactions with any single connected person exceed AED 500,000, you must complete the Connected Persons Schedule in the CT return.

Step 4: Benchmark Market Value

For each material transaction, document the arm’s length price. Use comparable salary surveys, rental market data, or independent valuations. The FTA expects contemporaneous documentation, not a retrospective exercise at filing time.

Step 5: Document Business Purpose

Every payment must be wholly and exclusively for business purposes. Board resolutions, employment contracts, service agreements and commercial justifications should be on file before the payment is made.

Step 6: Review Annually

Transfer pricing policies for connected persons should be reviewed at least every three years, but Qaspro Global recommends an annual review given the FTA’s increasing audit activity.

What Is the Substance-Over-Form Principle in CTP010?

FTA Clarification CTP010 confirms that the FTA will look at what a person actually does, not what their job title says. This means:

A “Sales Director” who only manages a sales team and has no board seat is not a connected person under the director definition
A “General Manager” who approves all contracts, sets strategy and can bind the company legally is an officer and therefore a connected person
A “Consultant” who is actually the owner’s spouse providing occasional advice is a connected person through the relative relationship
A part-time bookkeeper who happens to be the owner’s cousin is a connected person if payments exceed AED 500,000 in aggregate

The FTA can look through formal structures to identify the true nature of a relationship. Businesses that rely on title-based exclusions risk having deductions disallowed during an audit.

Worked Example: Connected Persons Disclosure

ABC Trading LLC is a mainland Dubai company. During the 2025 tax period, the company made these payments:

Connected Person	Relationship	Payment Type	Annual Amount (AED)
Ahmed (owner, 60% shares)	Owner	Salary + bonus	720,000
Fatima (Ahmed’s wife)	Owner’s relative	Consulting fees	180,000
Khalid (GM, no shares)	Officer (CTP010)	Salary + housing + car	650,000
Sara (board member)	Director	Director fees	120,000

Disclosure analysis:

Ahmed: AED 720,000 exceeds AED 500,000. Must disclose in Connected Persons Schedule. Must benchmark salary against market rate for similar-sized trading company owners.
Fatima: AED 180,000 is below AED 500,000. No schedule required, but the payment still must be at market value and for a genuine business purpose. If Fatima provides no real service, the full AED 180,000 is non-deductible.
Khalid: AED 650,000 exceeds AED 500,000. Must disclose. The GM qualifies as an officer under CTP010 because he approves contracts and directs operations.
Sara: AED 120,000 is below AED 500,000. No schedule required, but fees must reflect market rate for board service.

Total connected persons requiring disclosure: 2 out of 4. Total disclosed amount: AED 1,370,000.

Frequently Asked Questions

Is my General Manager a connected person under UAE corporate tax?

Yes, if the General Manager has authority to plan, direct and control business activities or can bind the company contractually. FTA Clarification CTP010 confirms that actual decision-making power, not job title, determines officer status under Article 36 of FDL 47/2022.

What is the AED 500,000 connected persons disclosure threshold?

Under Article 55 of Federal Decree-Law No. 47 of 2022, if aggregate payments or benefits to any single connected person exceed AED 500,000 during the tax period, the business must complete a Connected Persons Schedule in its corporate tax return disclosing the relationship, transaction types and amounts.

Can I deduct my own salary as a company owner?

Yes, but only if the salary reflects market value for the role you actually perform and is wholly for business purposes. If you draw AED 60,000 per month but a comparable manager earns AED 35,000, the FTA can disallow AED 25,000 per month (AED 300,000 per year) as a deduction, increasing your taxable income.

What is the difference between related parties and connected persons?

Related parties under Article 35 are entities linked by 50% or more ownership or control (parent-subsidiary, sister companies). Connected persons under Article 36 are individuals with personal or professional ties to the business (owners, directors, officers, relatives). The disclosure threshold is AED 40 million for related parties and AED 500,000 for connected persons.

Does a “Sales Director” job title make someone a connected person?

Not automatically. FTA Clarification CTP010 states that the word “director” in a job title does not make someone a director under Article 36. The individual must hold an actual position on the board of directors or equivalent governing body. However, if the Sales Director also has authority to bind the company or make strategic decisions, they may qualify as an officer.

What happens if I do not disclose connected persons transactions?

Failure to disclose triggers penalties under Cabinet Decision No. 129 of 2025: AED 500 for a first offence and AED 1,000 for subsequent violations, plus 14% annual interest on any underpaid tax resulting from disallowed deductions. The FTA can also make transfer pricing adjustments and reassess your taxable income.

Are benefits in kind to connected persons taxable?

Benefits in kind such as company cars, housing, school fees and air tickets provided to connected persons must be valued at market rate. The total value counts toward the AED 500,000 disclosure threshold. If the benefit exceeds market value for the role, the excess is non-deductible.

Do family members of my business partner count as connected persons?

Yes. Relatives up to the fourth degree of kinship of any owner, director or officer are connected persons under Article 36. If your business partner’s brother receives consulting fees from the company, that payment must pass the market value test and counts toward the AED 500,000 disclosure threshold.

How often should I review connected persons compliance?

The FTA expects contemporaneous transfer pricing documentation, meaning benchmarking should be in place before payments are made, not after. Formal transfer pricing policies should be reviewed every three years at minimum. Given the FTA’s expanding audit powers under Federal Decree-Law No. 17 of 2025, annual reviews are strongly recommended.

Can the FTA disallow my entire salary payment to a connected person?

The FTA disallows only the portion that exceeds market value, not the entire payment. If market value for a CFO role is AED 40,000 per month and you pay your connected-person CFO AED 55,000, only AED 15,000 per month (AED 180,000 per year) is disallowed. The AED 40,000 base remains deductible.

Need Expert Help?

Qaspro Global’s tax consultants help UAE businesses identify connected persons, benchmark market values, prepare Connected Persons Schedules and ensure full compliance with Articles 36 and 55 of the Corporate Tax Law before the September 30 filing deadline. Contact us today for a free consultation, or message us directly on WhatsApp.