Connected Persons in CT Law

Connected persons refer to two or more individuals or entities who meet one of the following criteria: one person exercises control over another, both individuals or entities are controlled by the same person or group, or they operate under a common control. Control, in this context, signifies the capacity to exert dominant influence over the management, financial decisions, or operational policies of another individual or entity. The concept of connected persons holds significance within the framework of the UAE Corporate Tax Law due to its implications for expense deductions and the rules governing transfer pricing. For instance, expenses between connected persons may not be eligible for deduction if they are deemed excessive or unreasonable. Additionally, the transfer pricing rules may necessitate that transactions between connected persons adhere to market-based pricing.

 

The subsequent sections of the UAE Corporate Tax Law of 2023 pertain to connected persons:

It is crucial to recognize that both the definition of connected persons and the specific provisions of the UAE Corporate Tax Law of 2023 related to them are intricate and subject to varying interpretations in different scenarios.

If there is uncertainty regarding whether two or more individuals or entities qualify as connected persons, it is prudent to err on the side of caution and treat them as such. This approach can help prevent potential issues with the UAE tax authorities.