FTA Clarifies Who is a “Director” and “Officer”
AT A GLANCE
The Federal Tax Authority (FTA) has issued Public Clarification CTP010, providing long-awaited guidance on how the terms “Director” and “Officer” should be interpreted when identifying a Connected Person under Article 36 of the UAE Corporate Tax Law.
Bottom line: the FTA has anchored the analysis in substance over form. Job titles alone do not determine status. What matters is who actually has the authority to direct the business or legally bind it.
WHY THIS MATTERS
- Payments or benefits to a Connected Person are deductible only up to Market Value (arm’s length). Anything in excess is disallowed.
- Connected Person transactions must be separately disclosed in the CT return, with thresholds applying at the per-CP level.
- Misclassifying a senior executive as “not a Connected Person” risks a denial of deductions and penalties on audit.
- CTP010 is clarificatory, so the FTA position is expected to apply from the start of the CT regime (financial years on or after 1 June 2023).
WHO IS A “DIRECTOR”?
- In scope - A person formally appointed to the board of directors or an equivalent governing body (board of trustees, board of governors, etc.) under the laws or constitutional documents of the Taxable Person. Includes executive, non-executive, temporary, permanent and alternate directors, as well as members of board committees.
- Out of scope - The mere use of “Director” in a job title (e.g. Sales Director, Marketing Director) does not, by itself, make the individual a Director for Article 36 purposes.
WHO IS AN “OFFICER”?
- Control test - Authority and responsibility for planning, directing and controlling the activities of the Taxable Person
- Strategic decision test - Final or ultimate authority to take strategic financial, operational or commercial decisions on behalf of the business.
- Binding authority test - Power to enter into agreements or approve actions that legally or contractually bind the Taxable Person, for example through a Power of Attorney, being named as a manager on the trade licence, or being identified in a board resolution.
- Typical examples - CEO, CFO, COO, CCO, General Manager and other C-suite roles, plus authorised representatives with discretionary authority.
- Not an officer - An individual whose role is limited to executing assigned tasks, making recommendations, or operating within parameters set by senior management or the board, even if their title is senior.
ONE IMPORTANT INTERACTION
Where the same person qualifies as both a Related Party (Article 35) and a Connected Person (Article 36), CTP010 confirms the person is treated as a Related Party only. This avoids a double overlay of rules on the same transaction, but the arm’s length principle continues to apply.
WHAT YOU SHOULD DO NOW
- Refresh your Connected Person list. Move beyond job titles and map who really holds strategic or binding authority.
- Review owner, director, GM, C-suite and authorised signatory payments and benefits, including non-cash benefits.
- Benchmark remuneration and other CP payments against Market Value, with role-based comparables and documented reasoning.
- Refresh governance evidence: board resolutions, PoAs, trade licence managers, delegation of authority matrices, employment contracts.
- Reconcile your Connected Person disclosure schedule in the CT Return with the underlying ledger before filing.
How Young Global can help. Our UAE Corporate Tax and Transfer Pricing team can help you reassess your Connected Person population, benchmark CP remuneration, refresh your TP documentation and harden your CT Return disclosures in light of CTP010.
Contact us today at 055 689 0505 or [email protected]
