Your general manager is not on the board. Her contract says General Manager, not Director. So when the corporate tax return went in, her package ran through as ordinary payroll and nobody looked at Article 36. The Federal Tax Authority (FTA) now says that call may have been wrong, and the price is a disallowed deduction.
TL;DR: FTA Public Clarification CTP010 says you identify a director or officer by what the person actually does, not by their job title. Anyone caught becomes a connected person, so their pay is only deductible if it matches market value and was incurred wholly and exclusively for the business.
What Did the FTA Actually Change in CTP010?
Nothing in the law changed. Article 36 of the Corporate Tax Law has read the same way since the regime started. What changed is how the FTA expects you to identify the people it applies to.
Public Clarification CTP010, titled "Clarification of director and officer", was issued on 29 April 2026 (Federal Tax Authority, 2026). It sets out a substance-over-form test: actual authority and responsibility decide the question, and the words on an organisation chart do not.
That matters because Article 36 sits on top of the normal deduction rules. Ordinary business costs are deductible under Article 28 if incurred wholly and exclusively for the business and not capital in nature (FTA Determination of Taxable Income Guide, 2024). Payments to a connected person clear a second hurdle as well.
Who Is a Director Under Article 36?
A director is a natural person serving on the board of directors or an equivalent governing body. Executive, non-executive and alternate directors and board committee members are all inside the definition.
The part that catches people is the reverse. Using the word "director" in a job title does not, on its own, make someone a director for Article 36 purposes (KPMG, 2026). A Marketing Director who never sits on the governing body is not automatically caught by the director limb.
Only natural persons qualify. A corporate entity on a board cannot be a director or officer, so payments to it are tested under the related-party rules instead. Where someone qualifies as both a related party and a connected person, they are treated as a related party.
Who Counts as an Officer?
The officer test is the wider of the two, and it is where most owner-managed companies find someone they had not considered. An officer is a natural person with authority and responsibility for planning, directing and controlling the activities of the business, a formulation the FTA borrows from IAS 24, the accounting standard on related party disclosures.
Three things point towards officer status: strategic decision-making power over financial, operational or commercial matters, authority to legally bind the business, or broad delegated control over a function. In practice that means:
- General managers and interim chief executives
- Division heads who hold final sign-off rather than recommending upwards
- Anyone operating under a broad power of attorney
What we see most often is a long-serving general manager who signs contracts, approves spend and hires staff, with no board seat and no "director" in the title. On the CTP010 test, that person is an officer.
Why the Classification Changes Your Tax Bill
Once someone is a connected person, any payment or benefit you give them is deductible only if it meets two conditions. It has to correspond to the market value of the service or benefit provided, and it has to be incurred wholly and exclusively for the purposes of the business (PwC, 2026).
Fail either condition and the excess is added back. Taxable income rises by that amount, and corporate tax applies at 9% above AED 375,000. An officer package sitting AED 400,000 over market value is an extra AED 36,000 of tax, before the cost of correcting the return.
The condition is not a formality. "Wholly and exclusively" lets the FTA reject a cost whose real purpose was personal, even where the business got some secondary benefit. A car, a flat, school fees or a written-off loan all need testing on the same basis as salary.
How Do You Prove a Payment Is at Market Value?
You benchmark it against what an unrelated person would charge for the same role, then keep the evidence. The FTA publishes no safe-harbour figure for director or officer pay, so the burden sits with you.
Four documents do most of the work: an employment or service contract setting out duties and pay, a board resolution approving the remuneration, market salary data for a comparable role and sector, and a delegation of authority matrix showing who can bind the company. The last doubles as evidence on the classification question.
In our experience the classification and the benchmarking fail together. A company that never identified its general manager as an officer has no market-value file for his package, because nobody thought one was needed. Records must be kept for seven years, and failing to keep them carries AED 10,000, rising to AED 20,000 for a repeat violation within 24 months (Ministry of Finance, Cabinet Decision 75 of 2023).
The Disclosure Threshold You Have to Watch
Connected-person transactions have their own reporting trigger, and it is low. Where payments and benefits to connected persons exceed AED 500,000 in aggregate for a tax period, the connected-person schedule goes in with your return, and each category above AED 500,000 is disclosed.
Compare that with the related-party test, which only bites once related-party transactions pass AED 40 million in aggregate, with categories disclosed above AED 4 million (PwC, 2026). Our guide to the related party disclosure form covers how the two schedules sit together.
Adding an officer you had missed can push you over AED 500,000 on its own. One question clients always ask is whether a modest salary is safe. It often isn't, because the aggregate picks up housing, bonuses, benefits in kind and loan balances alongside basic pay.
What Should You Do Before You File?
Work through the people, not the payroll report. Returns for a 31 December 2025 year end were due by 30 September 2026, nine months after the period end, and the same nine-month rule applies to every later period (Gulf News, 2026).
- List everyone with strategic authority, binding authority or a power of attorney, and compare it against your board register.
- Total all payments and benefits to each of those people, including non-cash items, and check the AED 500,000 aggregate.
- Benchmark each package and file the evidence.
- Where a return already went in on the wrong basis, consider a voluntary disclosure rather than waiting for the FTA.
If a position is genuinely unclear, the FTA's private clarification route gives you a written answer on your own facts. See also our guides to UAE corporate tax deductions and the FTA audit window.
Frequently Asked Questions
Does Article 36 apply to free zone companies as well?
Yes. Article 36 applies to every taxable person, including a Qualifying Free Zone Person on a 0% rate. A free zone company still identifies its connected persons, applies the market value test and discloses above AED 500,000, because a failed test can reduce the income qualifying for 0% treatment.
What is the corporate tax rate and threshold in the UAE?
Taxable income up to AED 375,000 is taxed at 0% and the excess at 9%. Companies, and individuals carrying on a licensed business above the turnover threshold, are within scope. Large multinational groups with consolidated revenue above EUR 750 million fall within the separate 15% domestic minimum top-up tax.
When is my corporate tax return due?
Nine months after the end of your tax period. A 31 December 2025 year end had to file and pay by 30 September 2026, and a 30 June year end faces 31 March. Registration is separate: a company incorporated on or after 1 March 2024 registers within three months of incorporation (FTA Decision 3 of 2024).
What penalties apply if I get a connected-person deduction wrong?
An incorrect return carries AED 500 if not corrected before the due date, and late filing runs at AED 500 per month for the first twelve months, then AED 1,000. The larger exposure is the tax itself, because the disallowed amount is taxed at 9%, plus AED 10,000 for record-keeping failures.
Is a shareholder who is not a director or officer still a connected person?
Yes. Article 36 catches an owner of the taxable person, a director, an officer, and the related parties of any of them. A shareholder with no management role is still a connected person, so any salary, rent or service fee you pay them must meet the same market value and business purpose conditions.
If you're not sure whether your general manager or a senior signatory is an officer under CTP010, get in touch. We can review your delegation of authority, test the remuneration against market data, and tell you whether your last return needs a voluntary disclosure before the FTA asks.