On 29 April 2026, the Federal Tax Authority (UAE) issued Public Clarification CTP010 to explain the meaning of the terms “Director” and “Officer” for the purposes of payments to Connected Persons under Article 36 of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022). While these terms were always included within the definition of Connected Persons, their practical interpretation across businesses has historically been much narrower than intended.
What Article 36 Requires Under the Law
Article 36 of the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) states that payments or benefits to Connected Persons are deductible only if they reflect Market Value and are incurred wholly and exclusively for business purposes.
Legal Scope of Connected Persons
Article 36(2) specifically includes within the definition of Connected Person: an owner, a director, or an officer of the Taxable Person. In addition, Article 55 empowers the Federal Tax Authority (UAE) to require disclosure of such transactions advisory in the Corporate Tax Return where the prescribed threshold is exceeded.
Impact on Financial Reporting
This means such payments cannot be treated as routine employee costs and must be assessed as Connected Person transactions, including Market Value evaluation and disclosure where applicable.
Why a Clarification Was Required
In practice, most businesses interpreted this provision narrowly. The term “Director” was understood to mean only a Board Director, and the term “Officer” was largely overlooked. As a result, compensation paid to senior personnel (e.g., General Managers, CFOs, Heads of Departments, and persons with signing authority) was treated as standard employee costs without assessing Article 36 implications.
Addressing Regulatory Uncertainty
This created uncertainty around who qualifies as an “officer,” necessitating formal guidance.
Key Principle Introduced: Substance Over Form
The guidance explains that while a “Director” is limited to a person sitting on the Board of Directors or an equivalent governing body, the term “officer” is much broader and aligned with the concept of key management personnel under IAS 24. The clarification establishes a clear substance over form principle.
Defining an “Officer”
A person is considered as an “Officer” if they:
- Plan, direct, and control the activities of the business, or
- Take strategic decisions in financial, operational, or commercial matters, or
- Have the authority to legally or contractually bind the business
The Decisive Factor
Job title, employment contract, or organisational chart is not decisive. Actual authority is decisive.
What This Changes in Practice
This significantly changes how businesses must assess management remuneration. Many individuals previously treated as employees may now qualify as Connected Persons.
Affected Personnel
This may include General Managers, CEOs, CFOs, Heads of HR responsible for organisational decisions, persons named as managers in trade licenses, individuals holding discretionary powers of attorney, interim consultants performing executive roles, managers of Permanent Establishments, and trustees of taxable trusts.
Regulatory Treatment
Their remuneration is no longer a routine employee cost and must be evaluated under Article 36.
Practical Examples Illustrating the Principle
Instances Classified as “Officer”
- A General Manager with overall authority
- A division head with strategic decision power
- A POA holder with binding authority
- A consultant acting as CEO
Instances Excluded
- Individuals executing pre-approved decisions
- Managers operating within defined limits
Action for Businesses
Before filing the Corporate Tax Return, businesses must:
- Identify individuals with decision-making or binding authority.
- Review the remuneration and benefits paid to such persons.
- Assess whether such payments meet the Market Value requirement.
- Undertake benchmarking or justification where required.
- Ensure appropriate disclosure as Connected Person transactions, if thresholds are met.
Implementation Note
This assessment must be based on substance, not designation.
How Comply Bridge Can Assist
Comply Bridge can support businesses by:
- Review of organizational structures to identify potential Connected Persons
- Assessing management remuneration from an Article 36 perspective
- Conducting Market Value benchmarking for such payments
- Preparation of defensible documentation to support deductibility
- Assisting with Connected Person disclosures in the Tax Return
- Supporting during tax reviews or it audits where these matters are examined
Concluding Note
This clarification does not introduce a new rule – it explains how Article 36 was always intended to apply. Businesses treating senior management remuneration as routine employee costs, without evaluating Connected Person implications, may face challenges on deductibility and disclosure during tax assessments.
