The UAE’s Federal Tax Authority (FTA) published a public clarification CTP002 of 21 July 2024, which clarified the definition of “related parties” where there is common ownership and/or control through a government entity.
The corporate tax in the UAE is regulated by Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses and its amendments. As per Article 34 of the corporate tax law, transactions and arrangements between related parties must meet the arm’s length standard in determining taxable income.
Based on this definition, two or more juridical persons can be related parties due to common ownership and/or control, whether direct or indirect.
This Public clarification explains the application of the related parties’ definition per Article 35 of the corporate tax law to structures where common ownership and/or control is by virtue of the UAE federal government or a local government (i.e., emirate-level government). Furthermore, the relevant transaction or arrangement will not be subject to transfer pricing rules or the associated documentation requirements.
As per the public clarification CTP002, taxable persons whose only common ownership of at least 50% or control (either directly or indirectly) is through the federal government or local government are not related parties for the purposes of article 35 of the corporate tax law.
