Insights Corporate Tax
Related Party Transactions UAE: The Corporate Tax Disclosure Explained
How the UAE corporate tax related party disclosure works — the AED 40m and AED 500,000 thresholds, who counts, and the arm's-length rule.
Key takeaways
- Related Party Schedule threshold: AED 40 million aggregate across all related parties; then disclose each category above AED 4 million.
- Connected Persons Schedule threshold: AED 500,000 aggregate, disclosed per connected person together with its related parties.
- Dividends between related parties are excluded from both the AED 40 million and AED 4 million thresholds.
- Related parties are defined in Article 35 — fourth degree of kinship, 50% ownership, or Control.
- Connected persons are owners, directors and officers, and the related parties of either, under Article 36.
- Master file and local file start at AED 200,000,000 of own revenue or AED 3,150,000,000 of consolidated MNE group revenue.
Short answer. The UAE corporate tax return carries two related-party schedules with different triggers. The Related Party transactions Schedule applies where aggregate transactions with all related parties exceed AED 40 million, with per-category disclosure above AED 4 million. The Connected Persons Schedule applies where aggregate transactions with connected persons exceed AED 500,000. The arm’s-length rule underneath them has no threshold at all.
Most UAE guidance on this topic describes the concepts and skips the numbers, which is unhelpful, because the numbers decide whether you have work to do. This guide gives the thresholds as the Federal Tax Authority states them, the definitions as Federal Decree-Law No. 47 of 2022 words them, and the mapping exercise that turns both into a return you can defend.
The thresholds, in one table
Everything else on this page hangs off these figures.
| Schedule | Trigger | What you then disclose |
|---|---|---|
| Related Party transactions Schedule | Aggregate value of all transactions with all related parties, in the financial statements or at market value, exceeds AED 40 million | Each transaction category, across all related parties, where the aggregate exceeds AED 4 million |
| Connected Persons Schedule | Aggregate value of transactions with connected persons, including their related parties, exceeds AED 500,000 | Each connected person where the aggregate payment or benefit exceeds AED 500,000 for that person together with its related parties |
| Master file and local file | Own revenue AED 200,000,000 or more, or consolidated MNE group revenue AED 3,150,000,000 or more | Full transfer pricing documentation |
Schedule thresholds: Federal Tax Authority Corporate Tax Guide on Tax Returns (CTGTXR1), sections 9.3.2, 9.3.9, 16.1 and 16.2. Documentation thresholds: Article 2, Ministerial Decision No. 97 of 2023. Last verified 4 August 2026.
One exclusion changes the arithmetic and is worth pulling out immediately. Dividends declared between related parties do not need to be disclosed in the Related Party transactions Schedule, and are not taken into account in determining the AED 40 million or AED 4 million thresholds. A group that moves large dividends but little else may sit under the threshold entirely.
AED 500,000
The aggregate value of transactions with connected persons, including their related parties, above which the Connected Persons Schedule must be completed
Why the disclosure exists at all
The corporate tax system taxes profit, and the easiest way to move profit is to transact with someone you control at a price you choose. Charge your own company an inflated management fee, pay a family member for a role they do not really perform, or lend between sister companies at an artificial rate, and reported profit stops reflecting economic reality.
The schedules give the Federal Tax Authority visibility of exactly those flows. They do not assume wrongdoing. Most related-party dealings are entirely legitimate — groups share services, owners lease property to their own businesses, directors advance working capital. The disclosure makes them legible so the arm’s-length test can be applied where it matters.
Get it right and it is administrative. Get it wrong — miss a related party, overpay a connected person, hold no market-value evidence — and you have created an adjustment risk that surfaces on review rather than on your terms.
Who is a related party — Article 35 in full
Article 35(1) of Federal Decree-Law No. 47 of 2022 defines related parties as any of the following.
| Category | The test |
|---|---|
| Two or more natural persons | Related within the fourth degree of kinship or affiliation, including by way of adoption or guardianship |
| A natural person and a juridical person | The person, alone or with related parties, directly or indirectly owns a 50% or greater ownership interest, or Controls it |
| Two or more juridical persons | One owns 50% or more of the other, or Controls it; or any person owns 50% or more of, or Controls, both |
| A person and its permanent establishment | Including a foreign permanent establishment |
| Partners in an unincorporated partnership | Two or more persons partners in the same partnership |
| Trusts and foundations | A trustee, founder, settlor or beneficiary, and its related parties |
Source: Article 35(1), Federal Decree-Law No. 47 of 2022. Last verified 4 August 2026.
The fourth-degree kinship test is wider than most owner-managers assume, and it is measured in degrees of relationship rather than by household. It reaches well beyond a spouse and children.
Article 35(2) then defines Control as the ability of a person, whether in their own right or by agreement or otherwise, to influence another person, including:
- The ability to exercise 50% or more of the voting rights of another person.
- The ability to determine the composition of 50% or more of the board of directors of another person.
- The ability to receive 50% or more of the profits of another person.
- The ability to determine, or exercise significant influence over, the conduct of the business and affairs of another person.
That fourth limb carries no percentage. It is what catches shareholder agreements, veto rights and funding arrangements a share register would never reveal, and it is why the mapping exercise has to read agreements rather than only ownership tables.
Who is a connected person — Article 36
Article 36(2) is much shorter and much closer to home. A person is a connected person of a taxable person if that person is an owner of the taxable person, a director or officer of the taxable person, or a related party of either.
Article 36(3) defines an owner as any natural person who directly or indirectly owns an ownership interest in the taxable person or Controls it. Article 36(4) adds that where the taxable person is a partner in an unincorporated partnership, any other partner in that partnership, and any related party of that partner, is a connected person.
Put those together and a typical UAE owner-managed company has a connected-person population of the shareholder, the shareholder’s family within the fourth degree, every director and officer, their families, and any company those people own or control. That is a long list before you look at a single transaction.
The rule that bites: connected person deductibility
Article 36(1) is the provision that turns identification into money. A payment or benefit provided by a taxable person to its connected person is deductible only if and to the extent it corresponds with the market value of the service, benefit or otherwise provided, and is incurred wholly and exclusively for the purposes of the taxable person’s business.
Two conditions, both of which must hold. Market value alone is not enough if the expense is not for the business. Being for the business is not enough if the amount exceeds market value.
Article 36(5) directs that Article 34’s provisions apply, as the context requires, to determining whether the payment corresponds with market value, so the connected-person test borrows the transfer pricing machinery. Article 36(6) disapplies the rule for a taxable person whose shares are traded on a recognised stock exchange, one subject to the regulatory oversight of a competent authority in the State, and any other person the Cabinet determines.
| Payment to a connected person | Market value | Deductible | Disallowed |
|---|---|---|---|
| Owner’s salary AED 900,000 | AED 600,000 for the role performed | AED 600,000 | AED 300,000 |
| Rent to shareholder AED 480,000 | AED 420,000 for comparable premises | AED 420,000 | AED 60,000 |
| Director’s consultancy fee AED 250,000 | AED 250,000, benchmarked | AED 250,000 | Nil |
| Payment for a service not actually provided | Nil | Nil | The full amount |
Illustrative application of Article 36(1), Federal Decree-Law No. 47 of 2022. The figures are examples used to explain the mechanic, not benchmarks — market value depends entirely on what was provided in your own circumstances. Prepared 4 August 2026.
Payments to a director raise a second question that has nothing to do with corporate tax, and the two answers regularly diverge. Since 1 January 2023 a fee paid to an individual for the board-director function is outside the scope of VAT altogether, while a consultancy fee paid to the same person is a taxable supply — the split, and what it means for registration, is worked through in our guide to VAT on directors’ fees in the UAE.
The connected person rule is where UAE corporate tax stops being an abstraction for owner-managed businesses. It reaches directly into the owner’s salary, the rent paid to the family holding company, and the interest on the director’s loan.
The arm’s-length standard, and the five methods
Article 34(1) requires that in determining taxable income, transactions and arrangements between related parties meet the arm’s length standard. Article 34(2) defines it: results consistent with what would have been realised had persons who were not related parties engaged in a similar transaction under similar circumstances.
Article 34(3) lists the accepted methods.
| Method | Broadly suits |
|---|---|
| Comparable uncontrolled price | Transactions where a directly comparable third-party price exists |
| Resale price | Distribution arrangements resold without significant transformation |
| Cost plus | Manufacturing or service provision priced off a cost base |
| Transactional net margin | Where net margin is the most reliable comparable indicator |
| Transactional profit split | Highly integrated operations where both parties contribute unique value |
Source: Article 34(3), Federal Decree-Law No. 47 of 2022. Article 34(4) permits another method where the taxable person can demonstrate that none of the five can reasonably be applied. Last verified 4 August 2026.
Article 34(5) says the choice must be made having regard to the most reliable method, taking into account the contractual terms, the characteristics of the transaction, the economic circumstances, the functions performed, assets employed and risks assumed by the related parties, and the business strategies they employ.
Article 34(7) recognises that applying a method may produce an arm’s length range rather than a single figure. Article 34(8) then provides that where the result falls outside that range, the Authority shall adjust taxable income to the arm’s length result that best reflects the facts. Article 34(10) requires a corresponding adjustment to the related party’s taxable income, so one adjustment does not create double taxation inside a group, and Article 34(11) lets a taxable person apply for a corresponding adjustment where a foreign competent authority has made one.
What the schedules actually ask for
Once a threshold is crossed, the return wants specifics rather than a summary. The Related Party transactions Schedule requires, for each reportable transaction, the legal name of the related party and the transaction type selected from a fixed list. Gross income and expenditure are reported separately, and figures are required for each related party in aggregate by type of income and expenditure.
| Transaction type available in the schedule |
|---|
| Goods |
| Services |
| Intellectual property |
| Interest |
| Assets |
| Liabilities |
| Other |
Source: field 16.1.2, Federal Tax Authority Corporate Tax Guide on Tax Returns. Last verified 4 August 2026.
The Connected Persons Schedule requires the name of each connected person where the aggregate payment or benefit exceeds AED 500,000 for that person together with its related parties.
| Data point | Related Party Schedule | Connected Persons Schedule |
|---|---|---|
| Counterparty name | Legal name of the related party | Name of the connected person |
| Categorisation | Transaction type from the fixed list | Payments and benefits |
| Income and expenditure | Reported separately | Aggregate payment or benefit |
| Aggregation basis | Per related party, by type | Per connected person, including their related parties |
| Dividends | Excluded from the schedule and both thresholds | Complete the schedule’s own fields as presented |
Source: sections 16.1 and 16.2, Federal Tax Authority Corporate Tax Guide on Tax Returns. Complete the current version of the return, since fields evolve. Last verified 4 August 2026.
The main return body also asks the threshold questions directly, and asks separately for the aggregate value of transfer pricing adjustments that increase taxable income. Those upward adjustments are not netted against downward adjustments, which have their own field and, per the guide, require FTA approval before an amount can be entered.
Transfer pricing documentation: who has to hold what
Ministerial Decision No. 97 of 2023 sets a two-limb test, and either limb triggers both files.
| Requirement | Applies when |
|---|---|
| Master file and local file | The person is, at any time in the tax period, a constituent company of an MNE group with total consolidated group revenue of AED 3,150,000,000 or more |
| Master file and local file | Or the person’s own revenue in the tax period is AED 200,000,000 or more |
Source: Article 2(1), Ministerial Decision No. 97 of 2023, issued 27 April 2023. Last verified 4 August 2026.
Articles 2(2) and 2(3) then decide which counterparties belong in the local file.
| Include in the local file | Exclude from the local file |
|---|---|
| A non-resident person | Other resident persons |
| An exempt person | A natural person acting as if independent |
| A resident person that elected Small Business Relief and meets the conditions | A juridical person related only through an unincorporated partnership and acting as if independent |
| A resident person whose income is subject to a different corporate tax rate | A permanent establishment of a non-resident taxed at the same rate as the taxable person |
Source: Articles 2(2) and 2(3), Ministerial Decision No. 97 of 2023. Last verified 4 August 2026.
The Small Business Relief line is the one people miss. Transactions with a resident related party are generally excluded from the local file — unless that party elected Small Business Relief. The logic is clear once seen: a resident treated as having no taxable income under the relief sits at a different effective rate from one taxed at 9%, and pricing between them can shift profit into the relieved entity.
What “acting as if they were independent” means
Two of those exclusions depend on the parties acting as if independent, and Article 2(4) sets the test. Both conditions must be met: the transaction is undertaken in the ordinary course of business, and the parties are not exclusively or almost exclusively transacting with each other.
Article 2(5) adds a disqualifier. Where the activities of one person in the transaction are subject to detailed instruction, or to comprehensive control, of the other person in the same transaction, they are not regarded as acting independently. Article 2(6) directs the Authority to take all relevant facts and circumstances into account.
The practical consequence is that a sister-company relationship where one entity supplies almost nothing to anyone else fails the second condition and cannot be excluded on that basis. So does an arrangement where one party is told how to run the work in detail. Neither is a technicality, and both are judgements worth documenting when they are made rather than reconstructing under a query.
A worked example: a family-owned Dubai group
Take a mainland Dubai LLC with AED 22 million of revenue, owned entirely by one individual. It rents its warehouse from a property company owned by the same individual, pays the owner a salary, pays a management fee to a sister company under the same ownership, and employs the owner’s brother.
| Transaction | Counterparty status | Annual value | Consequence |
|---|---|---|---|
| Warehouse rent to the owner’s property company | Related party and connected person | AED 720,000 | Counts toward the AED 500,000 connected persons threshold |
| Owner’s salary | Connected person as an owner | AED 840,000 | Article 36(1) market value test applies |
| Management fee to the sister company | Related party under Article 35(1)(c) | AED 360,000 | Article 34 arm’s length applies |
| Brother’s salary | Connected person as a related party of the owner | AED 240,000 | Article 36(1) market value test applies |
Illustrative scenario prepared 4 August 2026. The values are examples used to show how the thresholds aggregate, not benchmarks.
Three conclusions follow. The AED 40 million related party threshold is nowhere in sight, so the Related Party transactions Schedule is not triggered. The connected persons aggregate is far above AED 500,000, so the Connected Persons Schedule is triggered. And the real exposure is not the schedule at all — it is whether AED 840,000 and AED 240,000 stand up as market value for what those two people actually do, and whether AED 720,000 matches what an unconnected landlord would have charged for the same warehouse.
Revenue of AED 22 million also sits below the AED 200 million documentation threshold, so no master file or local file is required. That is a common and comfortable position, and it is routinely misread as “transfer pricing does not apply to us”. Article 34 applies. Only the documentation obligation is absent.
Where UAE SMEs actually trip up
The failures we see are consistent, and none of them involve sophisticated planning.
- Assuming the AED 40 million threshold means “we are out”. That is the related party threshold. The connected persons threshold is AED 500,000, and it applies to a different population.
- Counting only companies. Connected persons are people. An owner, a director, and their relatives within the fourth degree are all in scope.
- Treating the owner’s salary as ordinary payroll. It is a payment to a connected person, and Article 36(1) tests it against market value for the role actually performed.
- Forgetting the shareholder’s premises. Rent paid to a shareholder or a family holding company is a classic Article 36 item and is rarely benchmarked.
- Netting adjustments. Upward transfer pricing adjustments have their own field and are not netted against downward ones.
- Ignoring the Small Business Relief counterparty rule. A resident related party that elected the relief belongs in the local file if you are in documentation scope.
- Leaving it to the last fortnight. The return is due nine months after the period end, and the evidence has to describe conditions as they were during the year.
The mapping exercise, done properly
Nobody can complete these schedules from a trial balance. The work is a register, built once and maintained.
| Step | What it produces | When |
|---|---|---|
| Build the ownership map | Every direct and indirect holding of 50% or more, plus any Control arrangement | At the start of the tax period |
| Read the agreements, not just the register | Veto rights, board composition rights, profit entitlements, significant influence | Alongside the ownership map |
| List the people | Owners, directors, officers, and relatives within the fourth degree | Same exercise |
| Tag the ledger | Flag every account and counterparty that touches the register | Monthly, as transactions post |
| Total by counterparty and category | The figures the thresholds are tested against | Quarterly |
| Hold market-value evidence | A benchmark, comparable or valuation per material item | Before year end, not after |
| Decide the transfer pricing method | Documented, addressing the Article 34(5) factors | Before year end |
A working sequence built around Articles 34 to 36 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023. Prepared 4 August 2026.
The quarterly totalling step is what changes outcomes. A company that only totals at year end discovers in month ten that it crossed AED 500,000 in month four, with no contemporaneous evidence for anything in between.
Three profiles, three different obligations
| Owner-managed SME | Mid-market group | MNE constituent company | |
|---|---|---|---|
| Related Party Schedule | Unlikely — needs AED 40m aggregate | Possible | Likely |
| Connected Persons Schedule | Likely — AED 500,000 is easy to cross | Likely | Likely |
| Arm’s-length rule, Article 34 | Applies in full | Applies in full | Applies in full |
| Article 36 deductibility test | The main exposure | Applies | Applies |
| Master file and local file | No, unless revenue reaches AED 200m | Only at AED 200m own revenue | Yes at AED 3.15bn group revenue |
| Typical failure mode | Owner salary and shareholder rent unbenchmarked | Intra-group service fees with no documented method | Local file counterparty scoping |
Positions per Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023. Last verified 4 August 2026.
The first column is where most UAE companies sit, and the pattern is consistent: no schedule-level reporting problem, and a real Article 36 deductibility problem sitting inside the owner’s remuneration and the related-party rent.
Building market-value evidence that survives a query
“Hold market-value evidence” is easy to write and vague to act on. In practice, the evidence that works is specific to the transaction type, and the effort should be proportionate to the amount at stake.
| Transaction | What evidence usually works | What does not |
|---|---|---|
| Owner or director remuneration | A salary survey for the role, sector and seniority, plus a written description of the duties actually performed | ”The owner decides what the owner is worth” |
| Rent from a shareholder-owned property | Comparable listings or lease terms for similar premises in the same area, dated | The figure carried forward from before the company had a landlord relationship |
| Intra-group management fee | A cost base with an allocation key, or a benchmarked margin on comparable services | A round monthly number with no build-up |
| Loan from a director or sister company | Comparable third-party lending terms for a similar borrower, tenor and security | A rate chosen because it is convenient |
| Goods sold to a related distributor | Third-party price lists for the same goods, or a resale price analysis | The internal transfer price used before corporate tax existed |
| Use of a group brand or software | A licensing benchmark, or a documented reason the charge is nil | A licence fee introduced in the year profits rose |
Practical guidance built around Articles 34 and 36 of Federal Decree-Law No. 47 of 2022. It is not an FTA-published evidence list, and the appropriate method depends on the Article 34(5) factors in your case. Prepared 4 August 2026.
Two habits separate evidence that holds from evidence that does not. The first is contemporaneity — the document should be dated before or around the transaction, not after the year end when the number needed defending. The second is that the evidence describes what was actually provided, not what the contract says was provided. Article 36(1) tests the payment against the market value of the service or benefit provided by the connected person, which means the description of duties matters as much as the salary survey.
What changes when a related party is in a free zone
A frequent UAE structure is an onshore operating company alongside a free zone entity claiming 0% on qualifying income. That combination puts a related party at a different effective rate from its counterparty, and the rules react to it.
| Feature | Consequence |
|---|---|
| Different corporate tax rate between related residents | The transaction goes into the local file under Article 2(2)(d) of Ministerial Decision No. 97 of 2023, if you are in documentation scope |
| Pricing pressure toward the 0% entity | Article 34 arm’s-length applies with no threshold, and Article 34(8) allows the Authority to adjust |
| Corresponding adjustment | Article 34(10) requires the counterparty’s taxable income to be adjusted too |
| Audited financial statements | Every Qualifying Free Zone Person needs them under Ministerial Decision No. 84 of 2025, regardless of revenue |
| Auditor’s own duty | Article 248 of Federal Decree-Law No. 32 of 2021 requires the auditor to review related-party transactions |
Positions verified 4 August 2026. Whether an entity is a Qualifying Free Zone Person, and whether specific income qualifies, is a separate analysis under the free zone provisions of Federal Decree-Law No. 47 of 2022.
The structural point is that a rate differential between two related UAE entities is precisely the fact pattern transfer pricing rules exist to police. Nothing about the structure is improper. What is not sustainable is a set of intra-group prices chosen after someone worked out which side of the group the profit was worth more on.
How this fits the rest of the return
The related party schedules do not sit alone. The corporate tax return also asks whether audited financial statements were prepared and what the audit opinion was — and audited accounts carry their own related-party dimension, because Article 248 of Federal Decree-Law No. 32 of 2021 puts reviewing the company’s transactions with related parties on the auditor’s mandatory list.
That gives you a free cross-check. If your auditor reviewed related-party transactions and your return reports none worth disclosing, one of the two is wrong, and it is cheaper to reconcile that before filing than to explain it afterwards. The audit side is covered in our guide to the Financial Audit Authority Dubai, which also sets out when audited statements become mandatory under Ministerial Decision No. 84 of 2025.
Article 53(1) sets the filing deadline at nine months from the end of the relevant tax period. Late filing carries AED 500 per month for the first twelve months and AED 1,000 per month from the thirteenth, under Cabinet Decision No. 75 of 2023 as amended — which makes a return delayed by a related-party mapping problem an expensive way to buy time.
A twelve-month calendar for a 31 December year end
Working backwards from the filing date makes the sequencing obvious, and removes the filing-week scramble that produces most of the errors on this page.
| When | What happens |
|---|---|
| January | Build or refresh the ownership map and the people list; read the agreements, not just the register |
| Ongoing, monthly | Tag related-party and connected-person counterparties in the ledger as transactions post |
| March, June, September | Total by counterparty and by category; check both thresholds against the running figures |
| By September | Obtain or refresh market-value evidence for every material connected-person item |
| By November | Fix the transfer pricing method and document the Article 34(5) factors behind the choice |
| December, year end | Freeze the register; reconcile it to the related-party notes in the financial statements |
| Q1 the following year | Audit fieldwork, including the auditor’s Article 248 review of related-party transactions |
| By 30 September | File the return under Article 53(1), nine months after the period end |
A working calendar for a 31 December tax period, built around Federal Decree-Law No. 47 of 2022. Prepared 4 August 2026. Adjust the months to your own period end.
The single most valuable line is the third. Quarterly totalling is what turns the AED 500,000 threshold from a surprise into a decision — because a company that knows in June it will cross the line can obtain the evidence while the transactions are still current, rather than reconstructing it in the following September.
Where this leaves you
The related party disclosure is not difficult once you know two numbers and read three articles. AED 40 million triggers the related party schedule; AED 500,000 triggers the connected persons schedule. Article 35 says who is related, Article 36 says who is connected and tests what you paid them, and Article 34 says how the pricing has to be justified.
What makes it painful is doing it late. The register is a one-off build and a monthly habit. Assembled at filing time, it is guesswork with a deadline attached.
Our corporate tax services team builds and maintains that register alongside the monthly close, benchmarks the material connected-person items before year end rather than after, and prepares the return so the schedules populate from a ledger that already knows which counterparties are in scope.
The monthly work sits under accounting and bookkeeping, the pricing side under transfer pricing, the documentation thresholds in transfer pricing documentation thresholds UAE, and the wider regional picture in our GCC tax comparison. If you are unsure whether your owner’s salary or your shareholder rent would survive an Article 36 test, get a quote and we will scope a review against your actual ledger.
Disclaimer: Velmont Crest is a DED-licensed UAE accounting firm providing advisory, preparation and compliance support. We are not a law firm, an FTA-registered tax agent representing clients before the Federal Tax Authority, or a licensed auditor. The provisions and thresholds cited were verified on 4 August 2026 against the sources below. Confirm the current position before acting on any of them.
References
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
- Ministerial Decision No. 97 of 2023 on Transfer Pricing Documentation
- Federal Tax Authority — Corporate Tax Guide, Tax Returns (CTGTXR1)
- Federal Tax Authority — Transfer Pricing Guide (CTGTP1)
- Cabinet Decision No. 75 of 2023 on administrative penalties for corporate tax
Frequently asked questions
- What exactly is the related party disclosure in the UAE corporate tax return?
- It is two schedules rather than one. The Related Party transactions Schedule discloses high-value transactions with related parties as defined in Article 35 of the Corporate Tax Law, and is completed where the aggregate value of all transactions with all related parties recorded in the financial statements or at market value exceeds AED 40 million. The Connected Persons Schedule discloses high-value transactions with connected persons as defined in Article 36, and is completed where the aggregate value of those transactions exceeds AED 500,000. The FTA sets both thresholds in its Corporate Tax Guide on Tax Returns.
- What is the AED 40 million related party threshold?
- It is the trigger for the Related Party transactions Schedule. The FTA guide asks whether the aggregate value of all transactions with all related parties, recorded in the financial statements or at market value, exceeds AED 40 million. Answer yes and you are directed to complete the schedule. Once over the threshold, you disclose transactions where the aggregate transaction value per category, across all related parties, exceeds AED 4 million. Dividends declared between related parties are excluded from the schedule and from both threshold calculations.
- What is the AED 500,000 connected persons threshold?
- It is the trigger for the Connected Persons Schedule. The FTA guide states the schedule is to be completed only if the aggregate value of transactions with connected persons, including their related parties, exceeds AED 500,000. Once triggered, you complete a schedule for each connected person where the aggregate payment or benefit exceeds AED 500,000 for that person together with its related parties. It is a much lower bar than the related party threshold, and it catches owner-managed companies that would never come near AED 40 million.
- Who counts as a related party under UAE corporate tax?
- Article 35 of Federal Decree-Law No. 47 of 2022 defines it. Two or more natural persons related within the fourth degree of kinship or affiliation, including by adoption or guardianship. A natural person and a juridical person where the person alone or with related parties owns 50% or more, or Controls it. Two or more juridical persons where one owns 50% or more of the other, or Controls it, or where any person owns 50% or more of, or Controls, both. A person and its permanent establishment. Partners in the same unincorporated partnership. And a trustee, founder, settlor or beneficiary of a trust or foundation, and its related parties.
- What does Control mean for related party purposes?
- Article 35(2) defines Control as the ability of a person, whether in their own right or by agreement or otherwise, to influence another person. It gives four examples: the ability to exercise 50% or more of the voting rights of another person, the ability to determine the composition of 50% or more of the board of directors, the ability to receive 50% or more of the profits, and the ability to determine or exercise significant influence over the conduct of the business and affairs of another person. The last limb is the widest, and it catches arrangements no shareholding register would reveal.
- How are connected persons different from related parties?
- Connected persons are people close to the business rather than entities linked by ownership. Article 36(2) defines a connected person as an owner of the taxable person, a director or officer of the taxable person, or a related party of either. Article 36(3) defines an owner as any natural person who directly or indirectly owns an ownership interest in the taxable person or Controls it. Where the taxable person is a partner in an unincorporated partnership, any other partner and any related party of that partner is also a connected person. The distinction matters because Article 36 carries its own deductibility rule.
- What is the connected person deductibility rule?
- Article 36(1) provides that a payment or benefit provided by a taxable person to its connected person is deductible only if and to the extent the payment or benefit corresponds with the market value of the service, benefit or otherwise provided by the connected person, and is incurred wholly and exclusively for the purposes of the business. Pay a connected person above market value and the excess is not deductible. Article 36(6) disapplies that rule for a taxable person whose shares are traded on a recognised stock exchange, and for one subject to the regulatory oversight of a competent authority in the State.
- Does the arm's-length rule have a threshold?
- No. Article 34(1) requires that in determining taxable income, transactions and arrangements between related parties must meet the arm's length standard. Article 34(2) defines that standard as results consistent with what would have been realised if persons who were not related parties had engaged in a similar transaction under similar circumstances. This obligation applies to every taxable person with a related party transaction, regardless of size. The disclosure thresholds decide what you report on the return; they do not decide whether the pricing rule applies to you.
- Which transfer pricing methods does UAE corporate tax accept?
- Article 34(3) lists five: the comparable uncontrolled price method, the resale price method, the cost-plus method, the transactional net margin method, and the transactional profit split method. Article 34(4) permits another method where the taxable person can demonstrate that none of the five can reasonably be applied and the alternative still satisfies the arm's length standard. Article 34(5) requires the choice to be made having regard to the most reliable method, taking into account contractual terms, the characteristics of the transaction, the economic circumstances, the functions performed and risks assumed, and the business strategies employed.
- What transfer pricing documentation does a UAE business have to keep?
- Ministerial Decision No. 97 of 2023 sets the master file and local file thresholds. Both are required where the taxable person is, at any time in the tax period, a constituent company of a multinational enterprise group with total consolidated group revenue of AED 3,150,000,000 or more, or where the taxable person's own revenue in the tax period is AED 200,000,000 or more. Below those figures no master file or local file is required — but the underlying evidence behind your pricing still has to exist, because the arm's-length obligation itself has no threshold.
- Which transactions go into the local file?
- Article 2(2) of Ministerial Decision No. 97 of 2023 requires the local file to include transactions with non-resident persons, exempt persons, resident persons that have elected Small Business Relief and meet the conditions, and resident persons whose income is subject to a different corporate tax rate. Article 2(3) then excludes other resident persons, natural persons acting as if independent, juridical persons related only by being partners in an unincorporated partnership and acting as if independent, and a permanent establishment of a non-resident taxed at the same rate as the taxable person.
- What does acting as if they were independent mean?
- Article 2(4) of Ministerial Decision No. 97 of 2023 sets two conditions that must both be met: the transaction is undertaken in the ordinary course of business, and the parties are not exclusively or almost exclusively transacting with each other. Article 2(5) adds that where the activities of one party are subject to detailed instruction or comprehensive control by the other, they are not regarded as acting independently. The Authority takes all relevant facts and circumstances into account, which makes this a judgement to document rather than a box to tick.
- When is the corporate tax return due in the UAE?
- Article 53(1) of Federal Decree-Law No. 47 of 2022 requires a taxable person to file the tax return no later than nine months from the end of the relevant tax period, or by such other date as the Authority directs. A company with a 31 December year end therefore files by the following 30 September. The related party schedules go in as part of that return, which is exactly why the mapping work belongs months earlier — neither the ownership map nor the market-value evidence can be assembled in the final fortnight.
- What happens if the FTA disagrees with a related party price?
- Article 34(8) provides that where the result of a transaction between related parties does not fall within the arm's length range, the Authority shall adjust the taxable income to achieve the arm's length result that best reflects the facts and circumstances. Article 34(9) requires the Authority to rely on information that can or will be made available to the taxable person. Article 34(10) then requires a corresponding adjustment to the taxable income of the related party that was party to the transaction, so the adjustment does not simply create double taxation within the same group.
- Does a small UAE company have to complete these schedules?
- Only if it crosses a threshold — but the connected persons threshold is low. An owner-managed company paying rent to its shareholder, a salary to the owner's relative, and interest on a director's loan can pass AED 500,000 of aggregate connected-person transactions without anything unusual happening. That triggers the Connected Persons Schedule. Separately, the Article 36 deductibility rule and the Article 34 arm's-length rule apply regardless of whether any schedule is triggered, so a company below every threshold still has to price these dealings properly.
Filed under: related party transactions uae, corporate tax, connected persons, transfer pricing, arm's length, CT disclosure, FTA, UAE corporate tax return
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