Related Parties Under UAE Corporate Tax (Article 35)

Article 35 casts a wide net on purpose. Two persons are related parties if any of several relationships exists between them, and the list covers ownership, control, family, and business partnership. The definition applies to combinations of natural and juridical persons, so it catches owner-to-company, company-to-company, and person-to-person links.

The practical effect is that most groups will find related-party relationships everywhere once they look. A holding company and each of its subsidiaries, sister companies under the same parent, a company and its 60% shareholder, two companies controlled by the same family members, and a branch and its head office are all related parties. Because the definition is this broad, the mapping exercise - listing every related party of the UAE taxable person - is where transfer pricing compliance begins.

The core company-to-company test is ownership: where one person holds, directly or indirectly, 50% or more of the ownership interests in another, they are related parties. Indirect ownership counts, so a parent holding 60% of company A, which holds 60% of company B, makes the parent and company B related even though the direct link is one step removed. Ownership through multiple chains is aggregated.

Control is the second limb and catches arrangements that ownership percentages miss. A person with the power to direct the management or policies of another - through voting agreements, board appointment rights, or contractual powers - is related to that person even below 50% ownership. Two companies under the common control of the same person or group of persons are related to each other as well, which is the classic sister-company situation.

Article 35 treats natural persons as related parties where they are connected by kinship or affiliation up to the fourth degree. That reaches well beyond spouses and children: it includes parents, siblings, grandparents, grandchildren, uncles, aunts, nephews, nieces, and cousins. Two companies owned by cousins are therefore related parties through their owners, even if the companies have no direct link.

This matters enormously for family businesses, which dominate the UAE private sector. Transactions between a company owned by one brother and a company owned by another, management services from a father's consultancy to a son's company, or property leased from a family member's personal portfolio all fall inside the transfer pricing rules. Family groups should map ownership across the whole extended family, not just the immediate shareholders of record.

Joint ventures surprise many groups. A 50/50 joint venture is related to each of its venturers, and transactions between the JV and either venturer must be at arm's length - the fact that the venturers negotiated the JV terms at arm's length does not automatically make ongoing transactions arm's length. Similarly, a company is related to its branch or permanent establishment, so dealings between head office and branch need arm's length attribution.

Trusts and foundations need care: where a founder or their family controls the trust's decisions, the trust can be related to the family's companies. And former relationships do not always end the analysis - if control or significant influence continues after a share sale, for example through transitional service agreements or board seats, the parties may still be related for the affected period.

Related-party status is the gateway to the whole transfer pricing regime. Once a counterparty is related, every transaction with it must meet the arm's length standard of Article 34, the transaction counts toward the AED 40 million disclosure threshold in the tax return, and it feeds the local file analysis where documentation thresholds are met.

The mapping should be refreshed whenever the group changes - acquisitions, disposals, new family shareholdings, and new joint ventures can all create or end related-party relationships mid-period. Keep the related-party register with the tax file and date each change, so the disclosure form for each tax period reflects the relationships that actually existed during that period.

Transfer pricing is one connected system: the arm's length standard, the method you choose, and the documentation you keep all have to tell the same story. Start by mapping every transaction with a related party or connected person, confirm the pricing method for each category, and keep the supporting analysis on file before the corporate tax return is due. The guides below walk through each building block in detail, so work through the ones that match your transactions.