Insights Corporate Tax
Related Party Transactions UAE: The Corporate Tax Disclosure Explained
How the UAE corporate tax related party disclosure works — who counts as a related party or connected person, what the form captures, and the arm's-length rule.
Key takeaways
- The CT return includes a disclosure form for transactions with Related Parties and Connected Persons
- Related parties are broadly linked by 50%+ ownership or control, or by being in the same group
- Connected persons are owners, directors and their relatives, plus the related parties of those people
- The form captures the nature and value of transactions and any payments or benefits
- Payments to connected persons are deductible only up to arm's-length market value
- Accurate identification and market-value support is the whole game — map the parties before you file
Related party transactions in the UAE are the quiet part of corporate tax that most owner-managed businesses only think about once, badly, in the final week before the return is due. The mechanics of taxable income get the attention — the 9% rate, the AED 375,000 threshold, the deductibility of this or that expense. But sitting inside every corporate tax return is a disclosure form that asks a different and more revealing question: who are you actually doing business with, and are you and those parties genuinely independent of each other? Rent paid to a shareholder, a management fee charged by a sister company, a director’s loan, a salary to the owner’s brother — these are all related party or connected-person dealings, and the return wants to see them named, valued, and priced at what the open market would have charged. This guide walks through what the disclosure captures, who counts as a related party versus a connected person, why the arm’s-length standard is the whole point, and how to get the mapping done long before filing.
Why the disclosure exists at all
The corporate tax system taxes profit. Profit is revenue minus deductible costs, and the easiest way to move profit around — to shrink it in one entity and grow it in another, or to strip it out to an individual — is to transact with someone you control at a price you choose. Charge your own company a 40% management fee, pay a family member a salary for a role they do not really perform, lend money between sister companies at an artificial interest rate, and the reported profit no longer reflects genuine economic reality.
The related party disclosure is how the Federal Tax Authority gets visibility of exactly those flows. It does not assume wrongdoing. Most related-party dealings are completely legitimate — groups share services, owners lease property to their own businesses, directors advance working capital. The disclosure simply makes those dealings transparent, so the arm’s-length test can be applied where it matters. Report the nature and value of the transaction, confirm the parties, and the system can see whether the numbers look like something independent parties would have agreed.
Get this right and it is administrative. Get it wrong — miss a related party, over-pay a connected person, hold no market-value evidence — and you have created an adjustment risk that surfaces on review rather than on your terms.
50%+
The broad ownership or control threshold at which parties are treated as related for UAE corporate tax — a parent and subsidiary, or two companies under a common majority owner, are related parties
Who is a related party
A related party is, broadly, someone you are linked to by ownership or control. The test is not about who you happen to trade with a lot — it is about the economic and voting links between the parties.
The common threshold is fifty percent. Where one party owns 50% or more of another, they are related. Where the same person or group owns 50% or more of two separate entities, those two entities are related to each other. And where one party controls another in practice — the ability to direct its affairs — that is a related-party link even if the ownership percentage sits below the headline number. Companies within the same group are related parties by definition.
Worked through real structures, that means:
- A parent company and its subsidiary are related parties.
- Two sister companies owned by the same shareholder are related parties.
- An individual who owns a majority of a company is a related party of that company.
- A company and an entity it controls in substance are related, even without a clean 50% shareholding.
The trap here is reading the trade licence instead of the actual structure. Ownership can sit behind holding companies, nominee arrangements, or family blocks; control can exist through board seats and shareholder agreements rather than raw percentages. Map the real economic links — who ultimately owns what, and who can actually direct decisions — before you decide who is in scope.
Who is a connected person
Connected persons are a related but distinct category, and mixing the two up is the most common conceptual error we see. Where related parties are mostly about entities linked by ownership, connected persons are about the people close to the business.
A connected person is, broadly:
- An owner of the taxable person.
- A director or officer of the taxable person.
- A relative of any owner, director or officer.
- A related party of any of those people.
So the shareholder, the managing director, that director’s spouse or child, and a company owned by that shareholder can all be connected persons of your business. The category deliberately reaches past the entity to the humans who stand behind it and the people and companies close to them — because that is exactly where profit tends to be extracted when it is extracted.
The reason the distinction earns its own paragraph is that connected persons carry a specific, sharp rule that related parties in general do not, and it bites on deductibility. We come to it next.
What the form actually captures
The disclosure is not an essay. It is a structured schedule inside the corporate tax return that captures, for the parties in scope, the nature and value of transactions — and, for connected persons, the payments or benefits provided.
In practice you are reporting things like the type of each transaction (a sale, a purchase, a loan, rent, a service or management fee, interest), the counterparty and its relationship to you, and the value involved over the period. For connected persons the form is particularly interested in what was paid or provided to them, because that is where the market-value deductibility test applies. The precise fields and the level of detail depend on the return format and the requirements the Federal Tax Authority sets, and the scope can scale with the size and nature of the transactions — but the underlying ask is consistent: name the party, state the relationship, describe the dealing, put a value on it.
The work, then, is not really the typing. It is the two things that must be true before you type: you have correctly identified every related party and connected person, and you hold defensible market-value support for the material amounts. Everything else is transcription.
The arm’s-length standard, in plain terms
Arm’s length is the yardstick for everything above. It means the price two independent parties, each acting in their own commercial interest, would have agreed for the same transaction under the same conditions. It is the neutral benchmark the corporate tax system uses to test dealings between parties who are not independent — because those parties, left alone, could price to suit their tax position rather than the market.
For related-party dealings generally, the arm’s length principle in the UAE is the standard the pricing is expected to reflect, which is the world of transfer pricing — documenting that intra-group charges, loans and service fees sit within a defensible market range. For connected-person payments specifically, the standard turns into a hard deductibility limit: you can deduct up to market value and no further.
The practical implication is the same in both cases. Against each material related-party or connected-person item, you want a piece of evidence that answers “how do we know this is market value?” — a benchmark of comparable fees, a rent valuation for the area and property type, a market salary reference for the role, an arm’s-length interest rate for the loan. That evidence is not bureaucracy for its own sake. It is the difference between a disclosure you can stand behind and a set of numbers that invite an adjustment.
Nobody gets caught by the related party disclosure because they filed it. They get caught because they never mapped who their related parties were, and then discovered at filing that the rent, the management fee and the family salary were all connected-person payments with no market-value support behind them.
Where SMEs actually trip up
The businesses that struggle with this are rarely running aggressive structures. They are ordinary owner-managed companies where the ownership and the operations overlap, and where nobody drew the line between “the business” and “the people who own it” until the return forced the question.
A few recurring patterns:
Rent to a shareholder. The owner leases premises to their own company. That is a connected-person payment. If the rent is above the market rate for comparable space, the excess is not deductible — and the market rate needs evidence, not an assertion.
The family salary. A relative of the owner is on payroll. Entirely legitimate if the role is real and the pay is a market rate for that role. A deductibility problem if the pay exceeds what an unrelated person would have earned for the same work, or if the role is thin.
Inter-company management fees. A sister company charges a management or service fee. Related-party dealing; the fee should reflect what an independent provider would have charged for the same service, and it should be documented.
The director’s loan. Money moves between the business and a director, or between sister companies. The relationship must be disclosed, and where interest is charged it should sit at an arm’s-length rate.
None of these are exotic. They are the everyday reality of running a business you also own, which is exactly why the disclosure reaches them — and exactly why the mapping has to happen before the deadline, not during it.
Getting the mapping done before you file
The whole exercise becomes calm if you do the identification work upstream. A short, deliberate process:
Build the party map. List every entity and individual you are linked to by ownership, control or family — parent, subsidiaries, sister companies, shareholders, directors and their relatives, and any companies those people own. This is the register of who is a related party and who is a connected person. Keep it live; ownership and boards change.
Tag the transactions. Run your ledger against that map and flag every transaction with a party on it. Rent, salaries, fees, loans, interest, purchases, sales — anything flowing to or from a related party or connected person gets tagged.
Hold market-value evidence for the material items. For each significant tagged item, attach a piece of support that shows the amount is arm’s length — a comparable-fee benchmark, a rent valuation, a market-salary reference, an arm’s-length interest rate. For connected-person payments this is what protects the deduction.
Then complete the form. With the map built, the transactions tagged and the evidence held, the disclosure is transcription. The nature and value fields are already answered, and you can defend each figure if asked.
A capable corporate tax adviser does this as part of the annual cycle rather than a filing-week scramble, and reconciles the disclosure back to the financial statements so the reported related-party values tie out to the accounts.
How the disclosure fits the wider return
The related party disclosure does not sit alone. It connects to the deductibility analysis, because connected-person payments above market value get added back. It connects to the transfer pricing position, because related-party pricing is where the arm’s-length standard lives. And it connects to the financial statements, because the related-party transactions and balances you report should reconcile to the related-party notes in the accounts.
That is the useful mental model: the disclosure is not a separate compliance chore bolted onto the return, but the point where your ownership structure, your intra-group and owner-facing transactions, your deductions, and your market-value evidence all have to agree with each other. When they do, the form is a formality. When they do not, the form is where the disagreement shows up — which is a far better place for it to surface than a later review.
Where this leaves you
Related party transactions in the UAE are not a large-group problem or an anti-avoidance trap for the aggressive. They are a routine feature of owner-managed business — you rent from your shareholder, you employ a relative, your sister company charges a fee — and the corporate tax return simply asks you to name those dealings and confirm they were priced at market value. The two things that make the disclosure straightforward are the two things people skip: identify every related party and connected person accurately, and hold market-value support for the amounts that matter. Do both upstream, months before the deadline, and the form is transcription. Skip both and you meet the arm’s-length standard the hard way, on someone else’s timetable.
Pair the disclosure with a properly documented transfer pricing position so intra-group pricing is defensible, and fold it into your broader corporate tax filing so the related-party numbers reconcile to the financial statements and the deductibility analysis. Read more on our insights hub or get in touch via our contact page.
Velmont Crest is a DED-licensed UAE accounting firm providing advisory, preparation and compliance support across the corporate tax cycle — related-party identification, disclosure preparation, market-value support and return filing — for mainland and free zone SMEs.
Disclaimer: Velmont Crest is a DED-licensed accounting firm providing advisory, preparation and compliance support services. We are not a law firm, an FTA-registered tax agent representing clients before the Federal Tax Authority, or a licensed financial-services provider. UAE corporate tax rules — including the definitions of related parties and connected persons, the arm’s-length standard and disclosure requirements — are detailed and subject to change. Verify all positions against the current Federal Decree-Law on Corporate Tax, the relevant Cabinet and Ministerial Decisions and current FTA guidance, and consult a qualified professional for advice specific to your circumstances before acting.
References
Frequently asked questions
- What exactly is the related party disclosure in the UAE corporate tax return?
- It is a schedule inside the corporate tax return where a taxable person reports transactions and balances with its related parties and connected persons. It captures the nature of each dealing — a sale, a loan, a service fee, rent, a management charge — and the value involved, along with any payments or benefits given to connected persons. The point is transparency: it lets the Federal Tax Authority see the flows between parties that are not fully independent of each other, and check whether those flows were priced at genuine market value rather than a number picked to move profit around. It is part of every taxable person's return, not an optional extra for large groups.
- Who counts as a related party under UAE corporate tax?
- Broadly, parties linked by ownership or control. That typically means one party owns 50% or more of another, or the same person or group owns 50% or more of both, or one party controls another in practice. Companies in the same group are related to each other. So a parent and its subsidiary are related parties, two sister companies under a common owner are related parties, and an individual who owns a majority of a company is a related party of that company. The test looks at ownership percentages and at real control, not just the names on the trade licence, so map the actual economic and voting links before you decide who is in and who is out.
- How are connected persons different from related parties?
- Connected persons are about people close to the business rather than entities linked by ownership. A connected person is broadly an owner of the taxable person, a director or officer, and the relatives of those people — plus the related parties of any of them. So a shareholder, a company director, that director's spouse or child, and a company owned by that shareholder can all be connected persons. The distinction matters because there is a specific rule for connected persons: any payment or benefit you give them is deductible for corporate tax only up to its arm's-length market value. Pay a connected person above market rate and the excess is not deductible.
- What is the arm's-length rule and why does it matter here?
- Arm's length means the price two independent parties, each acting in their own interest, would have agreed for the same transaction. It is the yardstick the corporate tax system uses to test dealings between related parties and connected persons, because those parties could otherwise set prices to suit their tax position rather than commercial reality. For connected-person payments the rule bites directly on deductibility: a salary, rent, interest or fee paid to a connected person is only deductible up to the market value of what was actually provided. That is why holding market-value support — a benchmark, a comparable, a valuation — against each material related-party item is the practical core of getting the disclosure right.
- Does a small company really have to complete the related party disclosure?
- The disclosure is part of the corporate tax return, so in principle it applies to taxable persons generally rather than only to large groups — a small owner-managed company can easily have related-party dealings, because paying rent to a shareholder or a salary to the owner's relative are exactly the kinds of connected-person transactions the form is designed to capture. The scope and level of detail required can depend on the size and nature of the transactions and on the specific return requirements set by the Federal Tax Authority, so thresholds and materiality do come into it. The safe approach for any SME is to identify its related parties and connected persons first, then confirm the exact reporting obligation for its situation rather than assume it is exempt.
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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