Related Party Transactions in CT Law

In accordance with the UAE Corporate Tax Law of 2023 (CT Law), a related party is defined as follows:

For the purposes of the CT Law, control implies having the capacity to exert a dominant influence over the management, financial, or operational policies of another entity. This influence may be exercised through ownership of shares, voting rights, or other means.

 

An associate, as per this law, is defined as:

It’s essential to note that the CT Law outlines specific, intricate criteria for determining whether two entities qualify as related parties, and it is advisable to consult a tax advisor to understand these regulations thoroughly. The CT Law also introduces particular regulations governing transactions involving related parties. These regulations are designed to prevent related parties from manipulating the prices of goods or services exchanged between them to reduce their tax obligations. For instance, the CT Law mandates that all transactions involving related parties must adhere to the arm’s length principle. This principle requires that the prices for goods or services match those that would be charged in transactions between unrelated parties. Additionally, related parties must maintain proper documentation to substantiate the prices of their transactions, and this documentation must be retained for a minimum of five years.

Businesses subject to the CT Law should carefully evaluate the implications of these related party rules, as non-compliance can lead to penalties and interest charges.

 

Some key points to remember about related parties in the UAE Corporate Tax Law of 2023 include: