On 29 April 2026, the FTA issued Corporate Tax Public Clarification, CTP010, which explicitly details exactly how the terms “director” and “officer” are interpreted under Article 36 of the UAE Corporate Tax rules regarding connected persons in the UAE.
If you run a UAE business and pay salaries or bonuses to senior leaders – whether that’s yourself, a co-founder or a hired executive – the FTA’s new CTP010 Clarification changes what you need to declare on your corporate tax return. And the job title? It simply doesn’t matter.
The main takeaway? The FTA is prioritising substance over form. They are looking at an individual’s actual decision-making authority and operational control inside your company, rather than the job title they hold.
This article is relevant if you:
- Own or co-own a UAE-registered business
- Manage payroll or compensation for senior executives
- Sit on a board or hold Power of Attorney
- File UAE corporate tax returns
Why did the FTA issue CTP010?
To understand why the FTA is focusing closely on these definitions, we need to examine the core principles of Article 36 concerning Connected Persons. The law aims to prevent business owners or high-ranking executives from artificially lowering their company’s taxable profits by paying themselves excessively high salaries or benefits.
Therefore, any transaction between a business and a connected person must adhere to the arm’s length principle. This means that payment should reflect the true market value to qualify as tax-deductible.
Additionally, there is a strict reporting threshold: transactions with Connected Persons that exceed AED 500,000 must be explicitly disclosed in your corporate tax return.
Who Qualifies as a Director under UAE Corporate Tax Rules?
Under UAE corporate tax, the definition of a director is strictly limited to legal governance. Unlike the functional “officer” definition, being a director required holding a formally documented position on a governing board as outlined in FTA CTP010.
The FTA defines a director as a natural person who holds an official position on the Board of Directors or an equivalent governing body, such as the Board of Trustees or Board of Governors. Critically, this position must be explicitly established by your company’s Memorandum of Association (MoA) or Articles of Association. If it isn’t in those documents, the individual does not qualify as a director for UAE Corporate Tax purposes, regardless of their role in practice.
The definition covers all formally appointed board roles, including:
- Executive directors
- Non-executive directors
- Temporary, permanent or alternative directors
- Permanent directors
A job title means nothing here. If an individual does not hold a formally documented seat on the governing board, they are not a Director under Article 36 regardless of what their business card says.
Who Qualifies as an Officer under UAE Corporate Tax Rules?
Under UAE corporate tax, an officer is defined by function, not title. The FTA “officer” definition is specifically aligned with international accounting standards, focusing on actual authority and strategic control within the business.
The FTA applies a three-pronged test to determine officer status:
- Strategic Management: They hold the authority and responsibility for planning, directing and controlling the company’s core activities.
- Decision-making Power: They actively make high-level financial, operational or commercial decisions rather than just executing orders.
- Binding Authority: This extends to individuals acting under a Power of Attorney (PoA) or anyone named as a Manager on the UAE trade licence – both automatically qualify as Connected Persons under UAE corporate tax rules.
What is the Actual Impact of FTA CTP010 on your UAE Business?
The updated FTA CTP010 carries operational and financial consequences. If your business regularly interacts with corporate leaders, this guidance has a direct, immediate impact on:
- Salary Management and Fee Deductions: Any executive compensation paid to “hidden” officers must now be strictly benchmarked to prevent tax disallowances.
- Other Payments to Owners and Executives: Remunerations, performance bonuses, and directors’ fees must now be rigorously defended as arm’s length.
- Connected Person Disclosures: Companies must meticulously track and declare all transactions exceeding AED 500000 in their corporate tax returns for all individuals who meet the functional criteria.
- Pricing and Related Compliances: Transfer pricing documentation and market value justifications must be maintained to withstand FTA scrutiny.
- Corporate governance structures: Internal structures, delegated authorities and Power of Attorney (PoA) must be reviewed to see who inadvertently triggers “officer” status.
For various businesses in the UAE, especially startups, SMEs, family-owned businesses and closely held companies, this update is crucial to avoiding tax disallowances.
How UAQ Free Trade Zone Can Be Your Partner in Tax Governance
As the UAE tax ecosystem evolves to align with global best practices, setting up a business without a clear governance strategy is a financial risk. UAQ addresses this by being an end-to-end business setup partner. Our compliance frameworks are designed to help SMEs easily map out their corporate hierarchies, properly register designated managers on licences and issue documents that match the exact definitions required by FTA.
Action Points for CTP010 Compliance
If you run a business in the UAE, whether it’s a standard corporation, a partnership or any other structure that pays corporate tax, here are three practical steps you should take right now to stay fully compliant:
- Audit internal frameworks and governance: Verify that “directors” and “officers” are accurately identified for corporate tax purposes. If your management structure is informal or documentation is ambiguous regarding executive roles, update and formalise these records promptly. If you are a UAQ FTZ member, you can leverage our corporate services desk to amend trade licenses or formalise management appointments.
- Reconcile Disclosures: Match your existing Related Parties Disclosures under IAS 24 against the FTA’s specific definition for Connected Person disclosures to check for irregularities. Look for gaps or mismatches between the two so you aren’t caught off guard at tax time.
- Review Compensation and Documentation: Review compensation, performance bonuses, allowances, and non-monetary benefits being provided to identified Connected Persons. Ensure that these financial arrangements are strictly evaluated against deductibility restrictions and supported by solid, arm’s-length, market value documentation.
Thinking of setting up a business in the UAE? The tax advantages are real if you structure it correctly. Talk to our specialists today to find out how to set up the right way and keep more of what you earn.
FAQs
What does FTA stand for in taxes?
FTA stands for Federal Tax Authority. It is the UAE government body responsible for administering, collecting, and enforcing federal taxes, including corporate tax, VAT and excise taxes across the UAE.
Is the UAE corporate tax-free?
The UAE is no longer corporate tax-free, as a 9% federal corporate tax applies to taxable profits above AED 375,000. However, profits up to AED 375,000 are taxed at 0%, meaning small businesses and early-stage startups effectively pay no corporate tax.
What is Article 36 of the UAE corporate tax law?
Article 36 of the UAE corporate tax law governs transactions between a business and its Connected Persons, such as owners, directors and senior officers. It requires that any salary, bonus, or payment to these individuals must reflect fair market value under the Arm’s Length Principle. Transactions exceeding AED 500,000 must be disclosed in the corporate tax return. This prevents companies from artificially reducing taxable profits by overpaying executives.
Who are connected taxable persons?
Connected persons under UAE corporate tax are individuals with significant influence or ownership over a business. They include:
- Anyone who indirectly or directly owns or controls the taxable entity
- A Director or Officer of the company, as defined functionally by FTA clarification CTP010
- Close relatives of the above, including spouses and family members.
Is UAE corporate tax applicable to free zone companies?
Yes, corporate tax applies to UAE free zone companies. However, they can qualify for a 0% preferential tax rate if they are registered as a Qualifying Free Zone Person (QFZP). To maintain these rules, a free zone company must:
- Maintain adequate physical substance in the UAE.
- Earn only Qualifying Income (typically from transactions with other free zone entities or international activities)
- Comply fully with UAE transfer pricing regulations.
Income that does not meet these conditions is taxed at the standard 9% rate.
Source: Umm Al Quwain Free Trade Zone