Transfer prising in UAE: Preparing for the Corporate Tax Filing Season and New FTA Guidance on Connected Persons and APAs

The FTA has issued Corporate Tax Public Clarification CTP010, providing further guidance on the interpretation of the terms director and officer for the purposes of Article 36 of the Corporate Tax Law.

This clarification is of practical relevance, as it affects three key areas:

• Deductibility of payments to Connected Persons
• Scope of individuals falling within the definition of Connected Persons, and
• Extent of disclosures required in tax reporting

In preparing the 2025 TP Disclosure Form, this issue becomes particularly significant, as the misclassification of individuals may lead not only to inaccurate disclosures and associated penalties, but also to TP adjustments arising from non-arm’s length pricing in controlled transactions. Such adjustments may, in turn, result in the loss of eligibility for the 0% corporate tax rate under the Qualifying Free Zone Person regime for up to five years.

The clarification was issued in the context of Article 36 of the Corporate Tax Law, which provides that payments made to Connected Persons are deductible only to the extent that they comply with the arm’s length principle. Such transactions may also be subject to mandatory disclosure as part of the corporate tax return.

The FTA effectively endorses a broad, substance-based approach to identifying individuals who may be regarded as members of the board of directors or key management personnel. While the term director is traditionally associated with membership of a board of directors or an equivalent governing body established under applicable law or the company’s constitutional documents, the concept of officer is interpreted much more broadly.

In particular, an officer is understood as any individual vested with authority over the strategic direction of the business, exercising control over the company’s operations, or empowered to make decisions that are binding on the taxpayer from a legal or commercial perspective. The FTA further emphasizes that the determining factor is not the formal job title, but rather the actual scope of authority and the individual’s effective involvement in management.

Accordingly, the category of officers may extend beyond traditional roles such as CEO, CFO, COO, or General Manager, and may also encompass consultants, interim managers, authorized representatives or outsourced management personnel, provided that they, in substance, possess the ultimate strategic decision-making or binding authority.

At the same time, the FTA clarifies that the mere inclusion of the term director in a job title does not, in itself, imply that an individual qualifies as a member of the board of directors for the purposes of the Corporate Tax Law. Similarly, employees performing purely administrative or routine operational functions, without independent discretionary authority should not be automatically treated as officers.

The practical significance of this clarification lies primarily in the broader range of individuals who may now be regarded as Connected Persons. This, in turn, heightens the tax risk exposure of companies making payments such as remuneration, bonuses, management fees, or consultancy fees to key employees and senior executives. Where the FTA determines that such payments exceed arm’s length levels, the corresponding amounts may be disallowed as deductible expenses for corporate tax purposes.

In practice, companies should revisit their approach to identifying Connected Persons ahead of the 2025 corporate tax filing season.

Particular attention should be given to situations where an individual does not formally hold a senior management position but is nevertheless involved in the management of the business or possesses authority to make decisions binding on the company.

The FTA has also clarified that classification as a Related Party takes precedence over that of a Connected Person where the same individual meets both definitions. However, the treatment of such cases in the TP Disclosure Form remains open, particularly where the respective disclosure thresholds for Related Parties and Connected Persons may lead to differing outcomes. Against the backdrop of the approaching filing deadline, this ambiguity presents a significant practical challenge for many companies in the UAE.

• Review corporate governance and delegation-of-authority frameworks across the group
• Identify individuals who may fall within the expanded definition of officer
• Confirm the appropriate classification of transactions for TP Disclosure Form purposes
• Reassess the documentation supporting payments to senior executives, consultants and other Connected Persons

Alongside preparations for the 2025 corporate tax filing cycle, companies should also monitor the continued evolution of mechanisms that enhance TP certainty.

A key development to watch is the expected announcement in Q4 2026 of the launch date for accepting applications for unilateral Advance Pricing Agreements (UAPAs) covering cross-border related-party transactions.

As a reminder, on 25 March 2026, the FTA published an updated version of its Policy on Issuing Clarifications and Directives (the Policy), formally introducing a regulatory framework for APAs in the UAE.

While the Policy largely builds on the principles set out in the previously issued Corporate Tax Guide on Advance Pricing Agreements, it establishes, for the first time, formal procedural stages and prescribed timelines for the APA process.

At present, the FTA accepts APA applications only in respect of selected domestic related-party transactions within the UAE. The extension of the regime to cross-border transactions will mark a significant milestone, offering multinational groups an additional avenue for mitigating TP risk and enhancing tax certainty.

The Policy establishes a number of eligibility requirements for UAPA applications. In particular, an application must relate to a term of three to five tax periods commencing on or after 1 January 2028 and generally cover transactions with an aggregate value of at least AED 100 million per tax period, although the FTA may depart from this threshold in certain circumstances.

The UAPA process comprises the following stages: pre-filing consultation, submission of a formal application, review by the FTA (including a TP assessment), and agreement of the UAPA terms. The overall timeframe for concluding an APA should not exceed 30 months from the submission of a complete application, unless circumstances warrant a longer period.

Once concluded, an APA is legally binding on both the taxpayer and the FTA, provided that the underlying critical assumptions remain valid. The agreement applies only to the tax periods and parties expressly covered by its terms. Taxpayers are also required to demonstrate ongoing compliance with the APA by submitting an annual declaration within 90 business days of either the APA anniversary date or the filing of the relevant tax return, whichever is later.

The Policy also provides detailed rules governing the revision, cancellation and revocation of APAs. An APA may be revised where material changes arise that affect the basis on which the agreement was concluded. Revocation may occur in a range of circumstances, including a material misrepresentation, failure to comply with one or more material terms and conditions of the agreement, or a breach of critical assumptions. Taxpayers may apply for renewal of an APA where there have been no material changes to the business operations or facts underlying the relevant transactions or arrangements.

Taken together, the Policy establishes a comprehensive framework for the conclusion, implementation and administration of APAs, aimed at enhancing tax certainty and mitigating TP risks.

• Assess upfront whether the APA framework is applicable to the relevant transactions
• Confirm that all eligibility criteria are met
• Prepare early for a multi-stage process
• Factor in the potentially extended timeline
• Ensure the accuracy and completeness of information disclosed in the АРА application