20 August 2026 · Related parties
Related Parties & Connected Persons
Related parties are entities and individuals linked by ownership or control — broadly a 50% or greater ownership or voting link, common control by the same person or group, or partnership in the same unincorporated partnership — as set out under Article 35 of the Corporate Tax Law. Connected persons are a narrower but higher-risk category: owners, directors, officers and their relatives. Transactions with both must be priced at arm's length, and payments to connected persons specifically are only deductible up to their arm's length market value under Article 36 — anything paid above that market value is added back to taxable income and taxed at 9%, regardless of how the payment is labelled.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Defining the relationships
The rules reach further than most owners expect, well beyond the obvious parent-subsidiary link most people picture when they hear “related party”. Control, not just ownership percentage, is what the test ultimately looks at — a person who can direct another entity's decisions can be related to it even without holding shares directly. Because the definition is broad, the safest starting point is to map every entity and individual you deal with under common ownership or control, rather than assuming the rule only catches formal group companies.
- Entities under 50%+ common ownership or control.
- A person and a company they control.
- Directors, owners and their relatives (connected persons).
- Partners in the same unincorporated partnership.
- Control by influence, not only by shareholding.
- Both UAE-to-UAE and cross-border relationships are caught equally.
Payments to owners and directors
This is where private and owner-managed companies most often trip up under the new rules, usually without realising it, because paying rent or a salary to the owner felt like an ordinary business decision rather than a transfer pricing issue. Only the portion of a connected-person payment that reflects genuine market value is deductible — the excess is added back to taxable income and taxed at 9%, on top of any related penalties for understating tax. The safest position is evidence gathered at the time the arrangement is set up, not reconstructed after the fact once the FTA asks.
- Salaries, rent and interest paid to owners must be arm's length.
- Only the market-value portion is deductible.
- Excess payments are added back and taxed at 9%.
- Keep evidence that the amount reflects a genuine market rate.
- Interest-free or below-market loans to owners carry the same risk.
- Evidence gathered at setup beats evidence reconstructed later.
What an above-market rent payment actually costs
Take a Dubai trading company that pays its shareholder AED 300,000 a year in rent for a warehouse he owns personally. A benchmarking exercise against comparable warehouses puts the market rate at AED 200,000, so only that amount is deductible — the AED 100,000 excess is added back to taxable income, roughly AED 9,000 of extra corporate tax at 9%, plus exposure to penalties on the understatement. Left unchanged for three years before the FTA reviews it, the same gap becomes AED 300,000 of cumulative add-backs and around AED 27,000 of tax, all for rent that was never benchmarked in the first place.
- A single unbenchmarked payment can create a recurring annual add-back.
- The cost compounds every year the arrangement runs unchanged.
- A one-page market-rate file at setup is far cheaper than the adjustment.
- The same logic applies to salary, interest and management fees to connected persons.
How Exiloz maps related-party risk
We start by building an ownership and control chart that goes beyond the obvious group structure, since indirect control and family relationships are exactly what owner-managed businesses tend to overlook. Every payment to an owner, director or relative is then tested against a market benchmark, and every transaction with a related entity is checked against the method that best fits it. The output is a clear list of what is already defensible, what needs a benchmarking study, and what should be repriced before it becomes a recurring exposure.
- Ownership and control charts that capture indirect relationships.
- Every connected-person payment tested against a market benchmark.
- Related-party transactions matched to the right pricing method.
- A prioritised list of what to fix before the FTA asks.
Related guides
Frequently Asked Questions
For owner-managed and group companies working out who counts as related, and what it costs to get it wrong.
Who is a connected person?
An owner of the business, a director or officer, and their relatives — plus related parties of those people. It is a narrower category than “related party” but the one that catches the most private companies in practice.
Can I pay myself rent or a salary from my company?
Yes, but only the arm's length market amount is deductible. Anything above market value is added back to taxable income and taxed at 9%, and the gap compounds every year the payment continues unchanged.
What ownership level makes two companies related?
Broadly a 50% or greater ownership or voting control link, or common control by the same person or group — including control exercised through influence rather than direct shareholding.
What counts as a "relative" for connected person purposes?
The relevant family relationships extend to close relatives of an owner, director or officer, not just a spouse — the exact scope is set in the Corporate Tax Law and its guidance, so it is worth checking before assuming a family arrangement falls outside it.
Does the related-party rule apply to free zone companies?
Yes. Free zone status affects the tax rate on qualifying income, not whether related-party and connected-person pricing rules apply — those obligations apply to every UAE taxable person regardless of location.
What evidence supports a market-rate salary or rent?
A short benchmarking exercise against comparable independent arrangements — comparable rents in the same area, or comparable salaries for the same role and experience — prepared when the arrangement starts, not reconstructed after a review begins.
Can an interest-free loan to an owner be a problem?
Yes. A loan to a connected person on non-market terms is tested the same way as rent or salary — the arm's length interest that should have been charged can be treated as a taxable benefit if it is not documented and priced properly.
Can Exiloz map our related parties before we set up an arrangement?
Yes, and that is the better time to call us. We identify every related party and connected person, benchmark the payment before it is agreed, and document it so it is defensible from day one rather than repriced after an FTA review.
Map your related-party risk
Exiloz maps every related party and connected person in your structure and benchmarks the payments between them before the FTA reviews them for you.