Under Federal Decree-Law No. 47 of 2022, payments or benefits provided by a Taxable Person to a Connected Person are deductible only to the extent they reflect Market Value and are incurred wholly and exclusively for business purposes.

The law explicitly treats directors and officers as Connected Persons. However, in practice, questions have arisen around:

• Whether a job title alone triggers Connected Person status
• How far “officer” extends beyond the traditional C-suite
• Whether senior managers, authorised signatories, or consultants fall within scope

CTP010 addresses these grey areas with detailed guiding principles and examples.

Key Clarifications Issued by the FTA

i) Meaning of “Director”

A director refers strictly to a natural person who:

• Holds a formal position on the board of directors, or
• Sits on an equivalent governing body (e.g. trustees, governors), as defined in the entity’s constitutional documents.

Importantly:

• A job title containing the word “director” does not automatically qualify
• If an individual does not sit on the board or equivalent body, they are not treated as a director for Corporate Tax purposes

However, this does not preclude such a person from being assessed as an officer based on their actual authority.

ii) Meaning of “Officer” – Substance Over Title

The FTA adopts a substance-based approach when defining an officer. An individual is considered an officer if they have final or ultimate authority to:

• Plan, direct, and control the activities of the business
• Make strategic financial, operational, or commercial decisions
• Enter into or approve actions that legally or contractually bind the entity

Indicative roles may include (but are not limited to):

• CEO, CFO, COO, GM, CCO
• Authorised representatives with discretionary powers

Crucially:

• A formal title or appointment is only an indicator
• Even without a C-suite title, a person may still be an officer based on actual conduct and decision-making authority

iii) Who Is Explicitly Excluded?

A person will not be treated as an officer if they:

• Lack final strategic decision-making authority
• Act only within frameworks approved by the board or executive management
• Perform routine or administrative functions without discretion

The clarification also confirms that outsourced or seconded personnel are not treated as officers unless they have final authority to make decisions that are binding on the company.

Practical Corporate Tax Implications

This clarification has immediate implications for UAE businesses:

• Deductibility of payments: Remuneration, benefits, or other payments made to directors or officers must meet the Market Value test to remain deductible.
• Disclosure requirements: Where thresholds are met, such payments must be disclosed in the Corporate Tax return under Article 55.
• Risk of misclassification: Incorrectly concluding that a person is not a Connected Person may expose taxpayers to disallowed deductions and penalties for incomplete or inaccurate disclosures.

What Should Businesses Do Now?

As a next step, taxpayers should consider:

• Performing a role-based assessment of senior personnel
• Mapping decision-making authority against the FTA’s criteria
• Reviewing remuneration structures and inter-company arrangements
• Ensuring Connected Person disclosures are robust and defensible

Early alignment with the FTA’s interpretation can significantly reduce future audit and compliance risks.

Final Thought – GCC Tax Monday Insight

Corporate Tax Public Clarification CTP010 reinforces a key principle of UAE Corporate Tax regime: it is the substance of a role that matters, not the label. Businesses that take a proactive look at governance structures, decision-making authority and payment arrangements will be better placed to manage Connected Person risks under the evolving tax framework.