UAE Connected Persons: Payments, Benefits and TP Risks

Not every related individual is a Connected Person, and not every Connected Person payment is automatically deductible. Article 36 of the UAE Corporate Tax Law tests payments and benefits made to owners, directors, officers and their Related Parties against Market Value — and the Federal Tax Authority now applies a substance-based test to decide who actually falls within that category.

Owner salaries, director fees, shareholder rent, bonuses to senior management and other benefits paid by a UAE Taxable Person to individuals connected with its ownership or control are among the most heavily scrutinised categories under UAE Corporate Tax. The rules sit at the intersection of transfer pricing, tax deductibility and Corporate Tax Return disclosure. Getting the classification wrong can mean disallowed deductions or Connected Persons Schedule errors on the return.

This guide explains who counts as a Connected Person, how the Market Value test in Article 36 works, when a payment or benefit must be disclosed, and how businesses should document the arrangements. Related Party mapping is a separate exercise — see how to identify Related Parties under UAE Corporate Tax.

What is a Connected Person under UAE Corporate Tax?

Article 36 of Federal Decree-Law No. 47 of 2022 identifies a defined set of individuals as Connected Persons in relation to a Taxable Person. Broadly, a Connected Person includes:

An individual who directly or indirectly owns an ownership interest in, or controls, the Taxable Person.
A director or officer of the Taxable Person.
A Related Party of any of the individuals above, as defined under Article 35.

For a partner in an Unincorporated Partnership, or a founder, trustee or beneficiary of a Foundation or trust, the same principle applies to that person's connection with the entity. The common thread is proximity to ownership or control, rather than the label used in a contract, payroll system or organisational chart.

These categories are illustrative. Whether a specific individual is a Connected Person always depends on the facts — the entity's constitutional documents, its governance structure, and the actual authority the individual holds.

How is a Connected Person different from a Related Party?

Related Party status under Article 35 is a broader, structural concept built around ownership percentages, control and family or corporate relationships. Connected Person status under Article 36 is narrower and specifically targets individuals — owners, directors and officers — whose payments and benefits could otherwise be used to extract value from a Taxable Person outside the ordinary commercial process.

The two concepts can overlap. Where an individual meets the definition of both a Related Party and a Connected Person in relation to the same Taxable Person, current FTA guidance confirms that the person is treated only as a Related Party for UAE Corporate Tax purposes, so the Article 35 framework applies rather than a double overlay of both regimes. This does not remove the requirement for the underlying payment to reflect Market Value — it simply determines which set of provisions and disclosure schedules is technically engaged.

What does FTA Public Clarification CTP010 change?

In April 2026, the FTA issued Corporate Tax Public Clarification CTP010, clarifying the meaning of "director" and "officer" for the purposes of Article 36. The clarification is significant because many UAE businesses use titles such as Managing Director, Commercial Director, General Manager or Head of Division without a formal board appointment.

CTP010 sets out two separate, substance-based tests. A title-based review is not sufficient.

Who is a director?

A director is a natural person who holds a formal position on the board of directors, or an equivalent governing body, as recognised under the law governing the entity or its constitutional documents. This can include executive, non-executive, alternate, temporary and permanent directors, and members of board committees.

A job title containing the word "director" does not, on its own, make someone a director for Article 36 purposes if the person does not sit on the board or an equivalent governing body.

Who is an officer?

An individual who is not a director may still be an officer if their actual authority meets one of the following tests:

They have authority and responsibility for planning, directing and controlling the activities of the Taxable Person.
They have authority to make final or ultimate strategic decisions on financial, operational or commercial matters.
They have authority to enter into agreements or approve actions that legally or contractually bind the Taxable Person.

Only a natural person can be a director or officer. A secondee, outsourced manager or interim consultant performing a genuine C-suite role can be an officer even without a formal employment contract or title, while a power of attorney limited to predefined administrative actions may not be sufficient on its own.

Businesses should map actual decision rights — board minutes, delegation of authority matrices, signing limits and powers of attorney — rather than relying solely on organisational charts or payroll job titles.

How does Article 36 test payments and benefits?

Article 36 provides that a payment or benefit given by a Taxable Person to a Connected Person is deductible for Corporate Tax purposes only to the extent that it corresponds with the Market Value of the service, benefit or other consideration provided by the Connected Person, and is incurred wholly and exclusively for the purposes of the Taxable Person's Business, subject to the exceptions set out in the Law and any Cabinet Decision.

In practice, two separate tests must be satisfied before a Connected Person payment can be deducted in full:

Test	What it requires
Market Value	The payment or benefit must reflect what an independent party would have paid for the same service, role or benefit
Wholly and exclusively	The payment must relate genuinely to the Taxable Person's business, rather than to the individual's personal benefit or to their role as an owner

A payment that exceeds Market Value, or that is not incurred wholly and exclusively for business purposes, is not deductible to the extent of the excess or the non-business element, even where the payment was validly authorised as a matter of corporate governance. The arm's length framework in the FTA Transfer Pricing Guide (CTGTP1) is the practical reference for supporting that value.

Which payment and benefit categories are commonly reviewed?

The following transaction types are frequently reviewed under Article 36. The list is illustrative, not exhaustive:

Director remuneration, sitting fees and board committee fees.
Salary, bonus and benefits paid to owner-managers and senior executives.
Management fees paid to an owner or a company controlled by an owner.
Rent paid to a shareholder for premises used by the business.
Interest-free or below-market loans between the Taxable Person and a Connected Person.
Non-cash benefits such as housing, vehicles, school fees or club memberships provided to owners or senior management.
Reimbursements and expense claims that are not clearly wholly and exclusively business-related.

How do you support the Market Value of owner, director and officer remuneration?

A benchmarking exercise for Connected Person remuneration should start with the actual role performed, not the job title. Relevant factors typically include job scope and decision authority, business size, industry and geography, comparable third-party remuneration data, experience and qualifications, and the mix of fixed versus variable pay and benefits.

The objective is to demonstrate that the total payment or benefit is commercially supportable for the services genuinely performed by that individual.

Owner-managers present a specific risk because the same individual can influence both sides of a payment decision — as the person authorising the payment and as the person receiving it. Good practice is to separate the return on ownership (dividends, capital gains) from remuneration for services actually performed (salary, bonus, management fee, rent, and loan terms), and to test each category according to its own nature rather than bundling everything into a single "owner account" entry.

When must Connected Person payments be disclosed?

The UAE Corporate Tax Return includes a Connected Persons Schedule. Under current FTA guidance, a Taxable Person is required to complete this schedule where the aggregate value of payments or benefits provided to a single Connected Person, together with that Connected Person's own Related Parties, exceeds AED 500,000 in the relevant Tax Period.

This threshold operates independently of the AED 40 million aggregate Related Party disclosure threshold used for the separate Related Party Transaction Schedule. The two schedules should be assessed and completed separately. See the UAE transfer pricing compliance guide.

Where the AED 500,000 threshold is exceeded, the disclosure typically requires the nature of the payment or benefit, its value, and the basis on which it was determined to be at Market Value. A payment below the disclosure threshold is not automatically compliant — the Market Value and wholly-and-exclusively tests in Article 36 apply to every Connected Person payment, regardless of whether it triggers the disclosure schedule.

How should a UAE business document Connected Person arrangements?

Board and committee membership records confirming who is formally appointed as a director.
Constitutional documents and trade licence details relevant to governance.
Job descriptions, employment contracts and organisational charts.
A delegation-of-authority matrix and signing or approval limits.
Powers of attorney and evidence of bank and contract approval authority.
Board resolutions evidencing who makes final strategic decisions.
A short written conclusion, for each senior role, explaining why the individual is or is not treated as a director or officer.
Remuneration benchmarking data and reconciliation of payments actually made.
Loan agreements, tenancy contracts or service agreements supporting any non-salary Connected Person payment.

Because the analysis draws on governance, employment and tax together, the review is best carried out jointly by tax, HR, legal and finance. A review based only on payroll titles risks over-classifying some employees as Connected Persons while missing others who hold genuine binding authority without a C-suite label.

Key takeaways

Connected Person status turns on ownership, board membership or actual authority — not job titles.
CTP010 introduced a substance-based test for officer status, built around planning, directing and controlling authority, final strategic decision-making, or authority to bind the entity.
Article 36 restricts deductions to the Market Value of the service or benefit, incurred wholly and exclusively for the business.
The AED 500,000 Connected Persons disclosure threshold is separate from the AED 40 million Related Party disclosure threshold.
Owner-manager payments deserve particular scrutiny because the same person can sit on both sides of the transaction.
Where a person is both a Related Party and a Connected Person, current FTA guidance treats the person as a Related Party only.

Following CTP010, businesses can no longer rely on job titles or informal assumptions to decide who is a director or officer. A disciplined, evidence-based review — covering governance records, actual authority, remuneration benchmarking and disclosure thresholds — is now the standard businesses should expect to be held to on audit.

Frequently asked questions

Is every General Manager a Connected Person?

A General Manager can be an officer where the person has authority and responsibility for overall management of the business, but this depends on the specific facts and actual authority held, not the title alone.

Is a "Director" job title automatically a director for tax purposes?

No. The FTA has confirmed that a title containing the word "director" is not sufficient on its own. The person must formally hold a position on the board or an equivalent governing body.

Can someone without a C-suite title still be an officer?

Yes. Actual conduct and authority can make a person an officer even without a formal C-suite appointment, provided the relevant authority tests under CTP010 are met.

Do interest-free loans to owners raise Connected Person issues?

Potentially. An interest-free or below-market loan to a Connected Person may not reflect Market Value and should be reviewed alongside other Related Party financing arrangements.

Does the AED 500,000 threshold mean smaller payments are automatically fine?

No. The threshold only determines whether a disclosure schedule must be completed. The underlying Market Value and wholly-and-exclusively tests apply to Connected Person payments of any size.

What happens if a Connected Person payment exceeds Market Value?

The excess over Market Value is not deductible for Corporate Tax purposes, and incorrect treatment may also expose the business to disclosure errors and administrative penalties.

Primary sources and further reading

How SBC Tax Consulting can help

SBC's transfer pricing and corporate tax teams map directors, officers and owner-managers against CTP010, test Connected Person payments at Market Value, and complete the disclosure schedule so the return matches the governance file. Contact SBC before the next owner, director or officer payment is booked without support.

This publication is for general information only and does not constitute professional advice. Please consult your SBC advisor before acting on any matter covered here.