FTA Clarifies Director & Officer Roles Under UAE Corporate Tax
Who qualifies as a “director” or “officer” for UAE Corporate Tax purposes?
The above clarification has a significant impact on:
- Salary and management fee deductions
- Other payments to owners and executives
- Connected Person disclosures
- ·Pricing and related compliances
- Corporate governance structures
For many of the UAE businesses, especially for family-owned entities and closely associated companies, this update is very critical to avoid tax disallowances and penalties.
Why This Clarification Matters
S per Article 36 of the UAE Corporate Tax Law, payments or other benefits given by a business to its Connected Persons are deductible only if:
· They are in par with Market Value
· It must be incurred wholly and exclusively for business purposes
· Required proper disclosure for these transactions
Since directors and officers are treated as Connected Persons under UAE CT Law, a proper understanding of who falls within this definition directly impacts corporate tax deductions.
Who Is a “Director” Under UAE Corporate Tax?
As per the clarification:
A director is a person who holds a position in:
- Board of directors
- Committee
- Board of Trustees
- Governors or equivalent governing body
Important: Just having the word “Director” in the job title does not automatically make someone as a director for CT purposes. Instead they should have Formal governance authority.
Examples:
Included:
- Board member
- Trustee
- Official council member
Not automatically included:
- Director of Sales
- Marketing Director
- Operational Director
Who Is an “Officer” Under UAE Corporate Tax?
The FTA adopts a broader definition for the term “ Officer”.
An officer includes a person who is having :
✔ Authority for Strategic decision making
✔ Authority to plan, monitor or control activities
✔ Power to bind the company legally or contractually
In short senior executives without formal board seats may still fall under the definition of officers.
Potential Officers May Include:
- CEO
- General Manager
- CFO
- COO
- Managing Partner
- Departmental head with ultimate authority
Excluded:
Employees who execute the decisions but do not hold final authority are generally not considered officers.
Corporate Tax Impact on Payments to Directors and Officers
Payments such as:
- Salaries
- Bonuses
- Management fees
- Consulting fees
- Benefits in kind
should meet the normal Market Value standards to qualify for deduction.
If Not:
§ Excessive or unjustified payments may be disallowed
§ The taxable income may increase
§ There will be a chance of additional tax liability
Disclosure Obligations
Under Article 55, businesses need to disclose their transactions with Connected Persons in the tax returns where the prescribed thresholds are exceeded.
This includes:
· Any payments to directors
· Bonus and compensation
· Benefits provided to officers
· Related-party arrangements
Common Risk Areas for Businesses
Many companies may unintentionally trigger compliance risks due to:
- Lack of planning on family management structures
- Showing more shareholder remuneration
- Consultancy fees without proper supporting documents
- Wrong documentation for related party transactions
- Misclassification of senior executives
Family Businesses and SMEs Face Higher Scrutiny
In businesses that are managed by owners, directors, shareholders and executives often overlap.
This creates crucial scrutiny on:
- Profit calculation methods
- Salary arrangements
- Management service arrangements
- Related-party transactions
On the above transactions, proper documentation is a must
Best Practices for Corporate Tax Compliance
To strengthen compliance:
Review governance structures
Clearly define who all are qualifies as directors or officers.
Benchmark remuneration
Ensure compensation to be par with market value.
Maintain documentation
Retain all contracts, board resolutions and salary benchmarking reports.
Review connected person disclosures
Align tax filings with obligations as per Article 55.
Seek professional tax advisory services
Regular reviews by a professional will reduce audit exposure from FTA.
Practical Example
A UAE company pays AED 2 million annually to its owner as remuneration.
Without proper evidence:
Payment over and above market standards will be disallowed
With support:
✔ Comparable salary studies supported by transfer pricing documentation
✔ Approval by the Board of Directors
✔ Documentation of the role performed
The deductive position is significantly stronger.
Key Takeaways for UAE Businesses
The April 2026 clarification confirms:
✔ Formal board role determines the status as “director”
✔ Strategic authority determines “officer” status
✔ Payments must meet Market Value standards
✔ Disclosure obligations are increasing
✔ Family businesses require stronger governance documentation
Conclusion
The FTA’s clarification on director and officer definitions significantly impacts UAE businesses under Corporate Tax.
Ignoring these regulations can result in:
- Disallowance of payments made
- Reassessments on tax workings
- Potential penalties
- Increased risk of FTA audits
Businesses should proactively review their governance structures, remuneration policies and related party arrangements to ensure full compliance.
How a Flying Colour Tax Consultant Can Help
We provide expert assistance on:
✔ Corporate tax governance reviews
✔ Analysis of Connected person transactions
✔ Benchmarking for Salary and management fee
✔ Transfer pricing advisory
✔ Tax return disclosures
✔ FTA audit readiness
Frequently Asked Questions (FAQs)
1. Does having “Director” in my title automatically make me a director for corporate tax?
No. Merely having a job title as Director does not matter. Formal governance appointment determines the role .
2. Can a General Manager be considered an officer?
Yes, if they have strategic authority and decision-making powers.
3. Are payments to directors deductible?
Yes, but only to the extent that reflects Market Value and for a genuine business purpose.
4. Must connected person transactions be disclosed?
Yes, Disclosure is required under FTA regulations and Article 55 if the prescribed threshold is exceeded
5. Can excessive owner salaries trigger tax adjustments?
Yes. Overpayment to owners beyond market value may be disallowed proportionally.
To learn more about FTA Clarifies “Director” and “Officer” Under UAE Corporate Tax: What Businesses Must Know in 2026, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.