A Complete Guide to Related Parties in under UAE Corporate Tax Law (2026)

The UAE Corporate Tax has brought in a sea change to the taxation system for the companies in Dubai and other Emirates in the UAE. Among the various new concepts, the one with most prominence and holds a high risk potential for tax litigations is the concept of related parties What are related parties under UAE Corporate Tax? How does it impact the businesses? We explore these topics below.

What are Related Parties under UAE Corporate Tax?

Under the UAE Corporate Tax Law, Related parties are juridical person (companies/legal entities) or natural persons (individuals) connected to another natural person or a juridical person. These connections can take many forms including ownership, control, or family ties.

Article 35 of the UAE Corporate Tax Law defines related parties and nature of relationships that constitutes related parties. In broad terms below are the types of related parties and relationships:

Natural Persons (Individuals):

1. Two or more natural persons related to the fourth degree of kinship or affiliation, including by adoption or guardianship. This would include the following:

• The first-degree of kinship and affiliation includes a natural person’s parents and children, as well as the parents and children of their spouse;
• The second-degree of kinship and affiliation additionally includes a natural person’s grandparents, grandchildren, and siblings, as well as the grandparents, grandchildren, and siblings of their spouse;
• The third-degree of kinship and affiliation additionally includes a natural person’s great-grandparents, great-grandchildren, uncles, aunts, nieces and nephews, as well as the great-grandparents, great grandchildren, uncles, aunts, nieces and nephews of their spouse;
• The fourth-degree of kinship and affiliation additionally includes a natural person’s great-great-grandparents, great-great-grandchildren, grand uncle, grand aunt, grandniece, grandnephew and first cousins, as well as the great-great-grandparents, great-great-grandchildren, grand uncle, grand aunt, grandniece, grandnephew and first cousins of their spouse.

1. A natural person and a juridical person where:

• The natural person, or one or more Related Parties of the individual, are shareholders in the juridical person, and the natural person, alone or together with its Related Parties, directly or indirectly owns a 50% or greater ownership interest in the juridical person; or
• The natural person, alone or together with its Related Parties, directly or indirectly Controls the juridical person.

1. Two or more Persons that are partners in the same Unincorporated Partnership.
2. A Person who is the trustee, founder, settlor or beneficiary of a trust or foundation, and the trust or foundation, including the trust’s or foundation’s Related Parties

Juridical Persons (companies and other legal entities):

1. Two or more juridical persons where:

• One juridical person, alone or together with its Related Parties, directly or indirectly owns a 50% or greater ownership interest in the other juridical person; or
• One juridical person, alone or together with its Related Parties, directly or indirectly Controls the other juridical person; or
• Any Person, alone or together with its Related Parties, directly or indirectly owns a 50% or greater ownership interest in or Controls such two or more juridical persons.

1. A Person and its Permanent Establishment or Foreign Permanent Establishment.

Who are Connected Persons under UAE Corporate Tax?

Connected persons are similar to related parties who may or may not fall within the relationships specified as above but are defined by the Article 36 of the UAE Corporate Tax Law. The following are connected persons identified by the Corporate Tax in UAE:

1. An owner of the Taxable Person.
2. A director or officer of the Taxable Person.
3. A related party of the persons specified above.

Similar to related parties, transactions entered into by businesses with connected persons hold a special treatment under UAE Corporate Tax Law. In this article when we mention related parties it also means connected persons.

UAE Corporate Tax Update 2026: FTA Clarification on Directors and Officers

One important development for businesses in 2026 is the Federal Tax Authority’s Public Clarification CTP010 – Clarification of Director and Officer, issued on 29 April 2026.

The clarification provides guidance on interpreting the terms “director” and “officer” for the purposes of Article 36 and the related connected-person provisions.

What Does the Clarification Mean for Businesses?

Businesses should assess an individual’s actual role, authority and responsibilities rather than relying solely on their job title.

This is particularly relevant when determining whether payments or benefits provided to senior personnel fall within the connected-person rules.

Companies should review:

• Roles and responsibilities: Identify individuals who qualify as directors or officers under the applicable interpretation.
• Remuneration arrangements: Assess salaries, fees, bonuses and other benefits where the connected-person rules apply.
• Market value: Ensure that relevant payments correspond to the market value of the services or benefits provided.
• Business purpose: Confirm that the expenses are incurred wholly and exclusively for the business.
• Tax reporting: Review applicable disclosure and supporting documentation requirements.

The clarification provides guidance on applying the existing legislation; it should not be described as replacing the definitions in Articles 35 and 36.

Why Are Related Parties Important in UAE Corporate Tax?

Related parties require special attention under UAE Corporate Tax. Identifying related parties and monitoring transactions with them is critical for maintaining corporate tax compliance in Dubai. Here’s why it matters:

• Reporting Obligations: Related parties must be specifically identified and reported under the UAE Corporate Income Tax regulations.
• Transfer Pricing Compliance: Under the UAE Corporate Tax Law, related-party transactions must comply with the arm’s-length principle. Businesses should be able to support their pricing with appropriate commercial evidence and documentation.
• Avoiding Penalties: Incorrect reporting of related party transactions may trigger audits, heavy fines and even serious penal actions.

Knowing the definition of the concept of related parties can assist organizations in minimizing compliance risk while doing business with certainty under Dubai’s tax laws. It is imperative for taxable persons to consult with FTA approved tax agent in Dubai to get the right advice.

The following examples explain how related party classification applies to different business setups in Dubai.

• Family-Owned Businesses: A business owned by siblings or their spouses is a related party due to the family relationship.
• Connected Firms: Companies that have more than 50% of shareholding are connected firms and thus affect their tax returns.
• Free Zone Enterprises: Companies operating in free zones and eligible for 0% UAE Corporate Tax are mandatorily required to maintain transfer pricing documentations and ensure accurate disclosure in their UAE Corporate Tax return to avoid penalties.

UAE Transfer Pricing Disclosure and Documentation Requirements

Businesses should distinguish between the obligation to apply the arm’s-length principle and the separate requirements to disclose transactions or maintain formal transfer pricing documentation.

Related-Party Transaction Disclosure

Under the applicable disclosure framework, related-party transactions generally require disclosure when their aggregate value exceeds AED 40 million during the relevant tax period. Individual transaction categories exceeding AED 4 million are subject to the applicable category-level disclosure requirements.

Connected-Person Disclosure

Payments or benefits provided to connected persons are subject to separate disclosure rules. The relevant threshold is generally more than AED 500,000 per connected person, subject to the applicable return requirements.

Master File and Local File

Under Ministerial Decision No. 97 of 2023, a taxable person is generally required to maintain a master file and a local file if either of the following conditions applies:

• The taxable person’s revenue for the relevant tax period is at least AED 200 million; or
• The taxable person is a constituent entity of a multinational enterprise group with consolidated group revenue of at least AED 3.15 billion for the relevant tax period.

These requirements are subject to the applicable rules and scope of the decision. Businesses below these thresholds may still need to comply with other transfer pricing, disclosure and record-keeping obligations.

What Should Businesses Do About Related Parties?

To remain compliant, businesses must actively manage related party transactions. Here’s how:

• Identify and Monitor: Related parties of the business should be correctly identified and monitored to understand the exposure.
• Maintain Accurate Records: Document all relationships and transactions involving related parties.
• Follow Reporting Rules: Submit detailed reports on related party transactions to tax authorities.
• Adhere to Transfer Pricing: Ensure pricing aligns with market standards to avoid tax disputes.
• Review director and officer payments: Consider the UAE FTA’s CTP010 clarification when assessing connected-person status.
• Expert Tip: Collaborating with UAE Corporate tax or transfer pricing specialists like JAXA Chartered Accountants can simplify these processes, ensuring compliance with Dubai Corporate Tax regulations.

Advantages of Familiarity with Related Parties

Being well-versed in related-party regulations offers several advantages:

1. Enhanced Tax Compliance: Adhering to ALP ensures fair taxation and reduces litigation risks.
2. Optimized Tax Planning: Proper management of related-party transactions helps leverage corporate tax benefits, especially in UAE Free Zones.
3. Reduced Audit Risks: Transparent and well-documented practices minimize the likelihood of tax authority scrutiny.

Understanding related parties equips businesses to navigate complexities confidently while fostering growth.

Conclusion: Stay Compliant with UAE Corporate Tax in 2026

The management and understanding of related parties are crucial in keeping businesses compliant with the UAE Corporate Tax regualtions in 2026. Businesses must maintain accuracy, adhere to the transfer pricing regulations, and assure precise reporting. Engaging with tax consultants in Dubai like JAXA Chartered Accountants facilitates adherence to these regulations, allowing businesses to concentrate on growth with confidence.

Navigating tax laws is not easy, but with proper guidance, your business can remain competitive while growing in Dubai’s market.