Director And Officer Under UAE Corporate Tax Law: Understanding The FTA's Public Clarification CTP010 On Connected Persons

Key Takeaways

• On 29^th of April 2026, the UAE Federal Tax Authority (FTA), issued Corporate Tax Public Clarification CTP010, which clarifies the meaning of the terms “director”, and “officer” under the Article 36 of the UAE Corporate Tax Law.
• The clarification adopts a substance-over-form approach, meaning that an individual’s actual authority and responsibilities are that is more important than their job title.
• Payments and benefits made to Connected Persons are only deductible if they are at market value and are incurred wholly and exclusively for business purposes.
• The definition of “officer” may now include senior employees, general managers, authorized signatories and persons with significant delegated authority.
• Businesses should review their Connected Person identification process, remuneration arrangements, transfer pricing documentation and Corporate Tax disclosures.
• The clarification also clarifies that only natural persons can be directors or officers for the purposes of Article 36.

Navigate UAE law with confidence. Become a part of  r/legaladviceUAE —your Reddit group for sharp analysis, strategic advice, and real solutions to complex legal matters.

Introduction

The UAE’s Corporate Tax regime has a strong focus on the transactions involving related, and the connected persons are conducted on an arm's length basis. With the issuance of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the taxpayers are required to carefully assess, whether the payments made to individuals, related to their business meet the legal requirements, for deductibility.

For more clarity, the Federal Tax Authority (FTA) issued Corporate Tax Public Clarification CTP010 on 29 April 2026, which clarifies the interpretation of the terms “director”, and “officer” in relation to the Article 36 of the UAE Corporate Tax Law. The clarification is particularly important, because these terms determine, whether an individual is a Connected Person, and therefore have a direct impact on the deductibility of remuneration, disclosure obligations, and the transfer pricing compliance.

The FTA emphasizes, that businesses should look at the actual authority of an individual, rather than official job titles. This clarification is consistent, with the broader objective of preventing excessive deductions, and permitting the deduction of the commercially justified payments.

Understanding Article 36 of the UAE Corporate Tax Law

The Article 36 addresses the deductibility of the payments, or benefits provided by a Taxable Person to Connected Persons. The provision seeks to prevent, the artificial reduction of taxable profits through excessive remuneration, or benefits granted to individuals, who have closely connected with the business.

Payments to Connected Persons are deductible under Article 36 only if they are at market value and are incurred wholly and exclusively for the purposes of the business. Where these conditions are not satisfied, the deduction may be limited, thereby increasing the taxable income of the business.

Thus, the applicability of the Article 36 depends largely, on whether an individual qualifies, as a Connected Person. Directors & officers fall within the Connected Person framework, and as such, it is important to ensure that, these individuals are correctly identified for Corporate Tax purposes.

The FTA's Substance-Based Interpretation

One of the key features of Public Clarification CTP010 is the adoption of a substance-over-form approach. The FTA states that the designation of an individual does not determine whether the individual is a director or officer.

Instead, companies need to look at the real authority, duties and influence an individual has within the organization. This is consistent with internationally accepted governance principles and generally corresponds to the concepts contained in International Accounting Standard (IAS) 24 on Related Party Disclosures which focuses on individuals having authority and responsibility for planning, directing and controlling the activities of an entity.

So, companies shouldn’t be concerned with employment contracts or organizational charts, but rather with the reality of what each individual does.

Who Qualifies as an "Officer"?

The clarification significantly broadens, the practical understanding of the term "officer."

According to the FTA, an individual may qualify as an officer, where the person has authority, and responsibility for planning, directing, and controlling the activities of the Taxable Person, possesses authority to make strategic financial, operational, or commercial decisions, or has the legal, or contractual authority to bind the business.

Importantly, the clarification recognizes that such authority may arise through board resolutions, powers of attorney, constitutional documents, or delegated management authority.

The FTA provides several examples illustrating individuals who may be regarded as officers. These include general managers of limited liability companies, managers of permanent establishments, interim chief executive officers, heads of divisions possessing final decision-making authority, heads of human resources responsible for strategic workforce decisions, and employees named as managers in trade licenses, or board resolutions, where such appointments confer genuine authority. Likewise, individuals acting under broad powers of attorney that permit them to make discretionary business decisions may also fall within the definition.

This broader interpretation means that many businesses may discover that certain senior executives or authorized representatives should be treated as Connected Persons Despite they have never previously been classified as officers for tax purposes.

Who Is Considered a "Director"?

The clarification further explains, what is meant by "director" under Article 36.

Director means a natural person who is serving on the board of directors or an equivalent governing body of the Taxable Person. This includes executive directors, non-executive directors, alternate directors, temporary directors and members of board committees.

Where an organization does not operate, through a conventional board structure, equivalent governing bodies, such as boards of trustees, or boards of governors may meet this requirement, subject to the governing legislation, and constitutional documents of the entity.

However, the FTA explicitly states that simply holding the title “Director” in the organizational structure of the company does not automatically qualify the employee as a director for Corporate Tax purposes. A departmental director or functional director who is not a member of the board would not necessarily qualify unless the person otherwise falls within the definition of an officer.

Practical Implications for Businesses

The clarification has immediate compliance implications for businesses within the UAE.

Historically many organizations have identified Connected Persons based on legal ownership arrangements or membership of the board of directors. Following CTP010 businesses will need to undertake a more detailed review of senior management roles, delegated authorities, powers of attorney and governance arrangements.

A company should consider whether the individual has real decision-making power over financial, business or operational matters. This review should include an assessment of signatory authority, contractual authority, budget approval authority, strategic planning authority, and organizational authority.

Where an individual qualifies as a Connected Person, businesses should ensure that remuneration packages, bonuses, allowances, management fees and other benefits are at market value. Supporting documentation must show, the compensation is in correspondence, with the services actually performed, and it has a genuine business purpose.

These assessments are also connected to the UAE transfer pricing framework, as outlined in the Article 55 of the Corporate Tax Law. Consequently, businesses should ensure that, the transfer pricing documentation, including the Local Files, where relevant, adequately supports payments to Connected Persons, and demonstrates the compliance, with the arm's length principle.

Compliance and Documentation Considerations

The clarification highlights the need for strong governance and documentation processes.

Taxable Persons should have internal procedures to identify officers and directors by actual authority rather than simply by titles. Connected Person rules should be applied to delegation matrices, board resolutions, powers of attorney, employment contracts, governance policies and the way an organisation makes decisions and should be reviewed on a periodic basis.

The FTA has introduced a requirement for disclosure of payments or benefits made to Connected Persons in excess of AED 500,000 in the relevant tax period. Therefore, misidentification of officers or directors could lead to incomplete disclosures and increased compliance risk.

The clarification also confirms that only natural persons can be directors or officers. Where a person is at the same time a Related Party and a Connected Person the person shall be treated as a Related Party for the purposes of the Corporate Tax Law.

For businesses, this means taking a comprehensive view of governance, including tax, finance, legal and human resources functions, to ensure consistent identification and reporting of Connected Persons.

Conclusion

Corporate Tax Public Clarification CTP010 provides, much-needed certainty regarding the interpretation of the terms "director", and "officer" under the Article 36 of the UAE Corporate Tax Law. The FTA has taken, a substance over form approach, changing the emphasis from formal job titles, to the actual authority, exercised by the individuals, within an organization. 

The Clarification requires companies, to review their governance structures, delegated authorities, and remuneration arrangements to assess, whether additional persons should be treated as Connected Persons. This exercise extends beyond tax compliance, and promotes stronger corporate governance, by ensuring that decision-making authority is properly documented, and transparently reflected in the tax reporting.

As the UAE Corporate Tax regime continues to evolve, businesses that take a proactive strategy for reviewing governance arrangements, maintaining robust documentation, and ensuring arm’s length remuneration practices will be better placed to meet, the FTA’s compliance expectations, while mitigating the potential tax risks. 

Frequently Asked Questions

1. Why did the FTA issue Public Clarification CTP010?

The clarification was issued, to enhance certainty around the interpretation of the terms, ‘director’, and ‘officer’ under Article 36 of the UAE Corporate Tax Law. It helps taxpayers, to assess, whether people should be regarded as Connected Persons, and whether payments made to them satisfy the requirements, for deductibility. In addition, the guidance encourages uniform application of the law across business structures.

2. Does a person's job title determine whether they are an officer?

No. The FTA makes clear that job titles are not determinative. Instead, businesses must determine whether the person qualifies as an officer by evaluating the individual’s actual authority, decision-making responsibilities and ability to direct or control business activities.

3. Can a general manager be treated as an officer?

Yes. If the general manager has authority to plan, direct and control the business or has strategic choice-making powers, he may be an officer. The decision is based on the extent of the power actually exercised and not merely on the title.

4. Why is identifying Connected Persons important for Corporate Tax purposes?

The identification of Connected Persons is important, because the Article 36 limits, the deductibility of payments, and benefits made to them. Businesses must ensure, that the remuneration is at market value, and there is a bona fide business purpose. Accurate corporate tax disclosures, and the transfer pricing compliance also require, proper identification.

5. What documents should businesses review following the clarification?

Companies should review board resolutions, delegation of authority matrices, powers of attorney, employment contracts, governance policies, constitutional documents and signatory arrangements. These documents help in establishing whether an individual has sufficient authority to be considered a director or officer. Keeping contemporaneous documentation also strengthens the taxpayer’s position in an FTA review.

6. What practical steps should businesses take after the clarification?

Businesses should take a comprehensive look at their governance structures, to see who really makes decisions. Review the remuneration arrangements, update Connected Person disclosures, where appropriate and ensure that, the transfer pricing documentation adequately supports payments made to such persons. Taking these steps, can help reduce compliance risks, and improve readiness, for future tax audits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.