The UAE Federal Tax Authority has issued Public Clarification CTP010, bringing much-needed clarity to how “director” and “officer” are interpreted under the Corporate Tax regime. While it does not change the law itself, it sets out how the FTA will apply key provisions, particularly around Connected Persons and disclosure obligations.
The clarification moves the focus away from formal titles and toward substance; examining who actually holds authority, makes decisions, and influences the business in practice.
Naturally, this carries immediate implications. Businesses can no longer rely on organizational charts alone, whether it’s about deductibility of payments or compliance requirements and Connected Person identification.
Although a consistent source of confusion until 2024, tax filings are now more clearly defined, thanks to the release of Public Clarification CTP010 on 29 April 2026
The clarification provided by the FTA states that “a director” shall mean any person who is occupying a position on the Board of Directors or other similar management and supervisory authority for that business organization.
This is in accordance with corporate law and usually depends on the appointment and legal status of such a person according to the laws of the company.
But the clarification makes it clear that this shall not form the basis of determination of the term “director”. Some persons who have no official designation of being a director will not be categorized as “directors” under Article 36 but as “officers.”
This term of “officer” is broader and requires a functional analysis.
In accordance with the FTA, an officer is someone whose functions involve occupying a high position in management and who has the power to make important decisions on behalf of the organization. It can refer to any person who:
It should be noted that this classification has nothing to do with job titles. A person with such job titles as “general manager,” “head of the department,” or others could qualify as officers if their functions were important in decision making.
In contrast, a person with a high-level job title but with no ultimate or final decision-making authority cannot qualify as an officer. In this case, FTA talks about persons who have planning, directing, and controlling powers over the business activities of the Taxable Person.
The difference between “Director” and “Officer” isn’t just definitional, but carries direct consequences under UAE Corporate Tax.
This is stated by Article 36 of the Corporate Tax Law, which addresses transactions between the corporation and Connected Person. In accordance with this rule, all payments made to the latter should be arm’s length (market) in their nature.
In practice:
Thus, an incorrect classification of an individual would result in unnecessary tax liabilities.
This clarification makes the definition of “Officer” consistent with the definition provided by IAS 24 on Key Management Personnel (KMP), linking financial reporting directly to tax computation.
In practical terms,
The compensation given to these individuals, whether through salary, bonus, or any other benefit, should be:
As a result, financial reporting can no longer proceed independently of tax matters. Financial reporting now forms an integral part of the tax computation process.
The clarification is not limited to traditional corporate setups. Its implications extend across a wider range of structures, including:
While these structures are already recognised under the UAE Corporate Tax framework, the expectation is now clearer. The FTA will look beyond legal form and documentation to assess how control is actually exercised.
In practice:
Where an individual qualifies as both a Related Party and a Connected Person, they will be treated as a Related Party.
This distinction is important because:
Correct classification is therefore essential to ensure the right framework is applied.
The mere presence of a POA does not decide the issue of Officer classification. What matters is the nature and extent of the authority involved.
The deciding factor remains the same: does the individual have real authority to act, decide, and influence outcomes of the business?
Such a clarification further emphasizes the essential change in focus – the FTA will be considering structures on the basis of substance, not form.
Or put another way, while the job title, the contract and organizational chart are relevant in terms of indicating what the structure could be, this alone would not dictate the decision.
It seems highly likely that in reality, the FTA will analyze the actual functioning of the enterprise on a daily basis – including patterns of decision-making, delegation of authority and the degree of influence exerted by people within the organization.
In essence, this assessment revolves around three basic questions:
All these questions are answered against the background of the other aspects – such as authorization schemes, approvals processes, minute book entries, correspondence and other measures designed to ensure financial control.
When a discrepancy arises between officially stated roles and actual behavior, the former will most likely prevail. This actual control forms the basis of any subsequent classification.
For many organizations in the UAE, this clarification is less about restructuring and more about recalibrating. Making sure what is documented, reported, and disclosed must be consistent with the actual operations of the business.
With that being said, many business structures have been designed historically with a focus on:
While these remain relevant, they are no longer sufficient in isolation. Businesses are now expected to ensure that their formal structures accurately reflect how authority is exercised in practice. This requires alignment across:
Practically, this may include:
Although the clarification is interpretive in nature, it gives an idea of how the FTA will conduct its analysis of senior personnel and the nexus between the individual and the business. This will be one of the crucial aspects of Corporate Tax audits going forward, specifically with respect to senior management compensation and corporate governance.
One important point is that tax exposure now follows authority, not designation. In that regard, businesses must evaluate their corporate governance structure and determine if there are any individuals who could be considered either a director or officer, with the intention of ensuring that:
With the Corporate Tax framework moving into its first full compliance cycle, this will no doubt be part of the FTA’s audit focus.
With over 25 years in Dubai and nearly 30 years as a Chartered and Management Accountant, Hemant has extensive experience across manufacturing, services and technology sectors. He has worked with major corporate groups including Al Tayer, Saif Al Ghurair, Dhabi, and Aditya Birla. Hemant specializes in profitability and cost management, debt restructuring, contract management, and regulatory compliance, having generated approximately USD 47.5 million in savings and profit growth. A confident public speaker and Distinguished Communicator, he lives by the quote: “You get what you reward for. If you want ants to come, you put sugar on the floor” (Charlie Munger), embodying his belief that “Profit has its own intelligence.”
Archana Mundhra is a qualified Chartered Accountant with over 15 years of experience in multinational corporations. Her proficiency lies in financial planning and business intelligence. Her deep financial understanding and profound analytical skills empower her to assist management in realizing their objectives effectively.
Rinkle Jain is a qualified Chartered Accountant and Fellow Member of the Institute of Chartered Accountant of India. A results-driven Chartered Accountant with a distinguished career marked by proficiency in management, financial planning, and catalyzing overall company development.Demonstrates a unique blend of financial acumen, strategic insight, and leadership prowess, contributing significantly to organizational success.
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