Updated August 2025 – The UAE Corporate Tax Law requires businesses to identify Related Parties and assess Control in order to comply with Article 34 and its transfer pricing requirements. A clear classification ensures accurate reporting, reduces audit risk, and keeps documentation in line with Federal Tax Authority (FTA) expectations.
In this article, we will only answer two important questions:
Under UAE Corporate Tax rules, entities and individuals are connected as Related Parties when certain thresholds of ownership, control, or kinship are met. Primary connection types:
This applies to UAE and foreign entities, making the scope wider than many business owners realise.
The generally accepted line for related classification is 50% or more:
This can be met through direct holdings or indirect arrangements via other Related Parties. Even equal ownership of 50% can trigger classification if influence is established.
Example: A company with two shareholders, each holding 50%, where both are brothers; the kinship element confirms Related Party status alongside ownership.
The FTA takes into account family ties that extend well beyond the nuclear family. All degrees apply on both a person’s and their spouse’s side.
| Degree | Examples |
|---|---|
| 1st | Parents, children |
| 2nd | Grandparents, grandchildren, siblings |
| 3rd | Great‑grandparents, great‑grandchildren, uncles, aunts, nephews, nieces |
| 4th | Great‑great‑grandparents, great‑great‑grandchildren, granduncles, grandaunts, grandnieces, grandnephews, first cousins |
This inclusive definition prevents avoidance of classification through extended family arrangements.
The Corporate Tax Law lists certain situations where Related Party treatment applies automatically:
A head office and its UAE or foreign permanent establishment are related for tax purposes. All dealings must observe transfer pricing rules.
All partners are Related Parties. If their only connection is through the partnership, and transactions follow agreed‑upon economic terms, the FTA generally assumes these meet the arm’s‑length requirement.
Trustees, founders, settlors, and beneficiaries are related to the trust/foundation and to each other in dealings linked to that structure.
Control means the ability to influence another person or entity’s decisions or business conduct. It can arise without majority ownership if other rights give significant influence. Indicators include:
Important Point: Control can exist through contractual rights, shareholder agreements, or dominant market position, not just equity stakes.
Incorrect Related Party mapping can cause:
For Article 34 compliance, businesses must:
A practical step for compliance teams is to maintain an updated register. Suggested process:
Once Related Parties are identified:
Transactions commonly scrutinised:
Scenario A: A Dubai company is 55% owned by an individual who also owns 60% of a Sharjah company. Transactions between them are subject to transfer pricing compliance.
Scenario B: Two cousins each own 50% of separate companies. The kinship connection makes the companies Related Parties, requiring arm’s‑length pricing for any dealings.
Scenario C: A UAE foundation has a founder who also owns a trading company. Any transactions between the foundation and the company must follow Related Party rules.
Accurate classification requires an understanding of both the letter of the law and how the FTA applies it in practice. Specialist Tax consultants can:
Our tax advisory team can audit your current setup, address compliance risks, and prepare documentation that meets FTA requirements. Contact us to arrange a review before your next return period.
Mostafa is a seasoned Tax Consultant with over 5 years years of experience gained in diverse taxations matters. He has vast expertise in settling tax disputes with the Federal Tax Authority and handling of tax procedures in compliance with tax laws. He is adept in investigating underlying tax intricacies and offering expert tax advisory. He is also well-versed in conducting tax analysis’s and negotiations with the Tax Regulators, upon tax preparation and filing. Mostafa specializes in the areas of Tax law, Auditing, Accounting and Banking law.