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:

- Section 18(3): This section stipulates that expenses incurred between connected persons may not be deductible if they are considered excessive or unreasonable.
- Section 20(2): This section states that transfer pricing rules apply to transactions between connected persons.
- Section 21(2): This section empowers the UAE tax authorities to adjust a taxpayer's profits if they suspect that the taxpayer engaged in a transaction with a connected person at a price that deviates from arm's length terms.
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.