Related Party Transactions in the UAE: Company Law Approvals and Corporate Tax Arm's-Length Rules

Direct answer. Yes, a UAE company can deal with its own director, partner or a company they own. Two sets of rules apply, and the deal must pass both. The first is company law: Federal Decree-Law No. 32 of 2021 on Commercial Companies, and Cabinet Resolution No. 77 of 2022 for limited liability companies. These decide who approves the deal, what the interested person must disclose, and who may not vote. In an LLC with several partners, a related-party deal above 3% of capital goes to the General Meeting. Below that, the board or the manager approves it. The General Meeting can change that percentage. In a joint stock company the line is 5% of capital. The second set is tax: Federal Decree-Law No. 47 of 2022, the Corporate Tax Law. Article 34 says the deal must be priced as if the parties were strangers (the arm's length standard). Article 36 says a payment to an owner, director or their relatives is deductible only up to market value. This guide covers both, in the order you meet them.

What counts as a related party: two definitions, not one

The phrase "related party" means different things in the two laws, so check each one separately. A person can be related under one law and not the other.

"Control" under the Corporate Tax Law

Article 35(2) treats a person as having control if they can exercise 50% or more of the voting rights, choose 50% or more of the board, or receive 50% or more of the profits. Significant influence over how the business is run also counts. So a minority shareholder with a veto agreement can still be a related party for tax.

Connected persons: a wider tax net

Article 36 adds a second tax category, the "Connected Person". It covers any natural person who owns any interest in the company, however small, or controls it. It also covers any director or officer, and the related parties of those people. This is the rule that catches salaries, fees and benefits paid to owners and directors.

For joint stock companies, Article 152(6) of the Companies Law leaves the definition of related parties and deals to the resolutions of the Securities and Commodities Authority (SCA). Read the current SCA rules if your company is listed.

Who must approve the deal under the Companies Law

Approval depends on the company type and the size of the deal measured against the company's capital. If you are unsure which type you run, start with what an LLC is in the UAE or the guide to PJSC and other company types.

LLCs with several partners

Cabinet Resolution No. 77 of 2022 is the resolution that Article 104(2) of the Companies Law asked the Cabinet to issue, defining related parties and deals for LLCs. Article 22(2) sets the 3% line. It also lets the General Meeting raise or lower that percentage "as per the decision-making mechanism prescribed in the General Meeting". The resolution does not say who approves a deal of exactly 3%. So check your memorandum of association and any past General Meeting resolution before you rely on 3%. The MOA and shareholders' agreement guide explains where those terms usually sit.

One-person LLCs

Article 20 applies when one owner holds the whole LLC. Below 5% of capital, the director or the board approves. Above 5%, the General Meeting must pass a special decision, and the relevant party may not vote on it. The resolution does not say what happens at exactly 5%, so treat a deal near the line with care. The register, disclosure and annual-report duties in Article 22 are not expressly limited to multi-partner LLCs, so keep them too.

Joint stock companies

Article 152(2) of the Companies Law sets 5% of capital as the line. Above it, the General Assembly must approve the deal after it has been valued under SCA controls. Below it, the official English translation requires the board's prior consent. The Arabic text we read names the General Assembly for this lower band as well. The Arabic text of the law prevails, so ask a lawyer before you rely on board approval alone for the lower band. Article 152 sits in the part of the law on public joint stock companies. Ask a lawyer how it applies to a private joint stock company.

Free zone companies

Article 5(1) says the Companies Law does not apply to free zone companies on any matter where their free zone's own laws or regulations make special provision. DIFC, ADGM and other free zone companies should read their own regulations first. The tax rules below still apply to them.

Disclosure, voting and record-keeping

Approval is only one step. Each law also sets duties that run from before the deal until the year-end accounts.

1. Disclose early. In an LLC, relevant parties must "promptly disclose" the deal (Cabinet Res. 77/2022, Art. 22(2)(d)). In a joint stock company, the related party must tell the board, before the deal, the nature and terms of the deal, their stake in both companies and the extent of their interest (Art. 152(4)).
2. Record it in the minutes. A director with a common or conflicting interest must notify the board, and the declaration is recorded in the minutes (Art. 150(1)).
3. Abstain from the vote. The interested director may not vote on the resolution (Art. 150(1)). In an LLC, relevant parties among the partners or the board may not deliberate or vote while the conflict exists (Art. 22(2)(e)). At a joint stock company's General Assembly, directors may not vote on resolutions about a conflict of interest (Art. 188(2)).
4. Keep the register. An LLC must keep an automatically updated register of every contract or deal in which a relevant party is involved or has an interest (Art. 22(2)(c)).
5. Report it at year end. An LLC must include related-party transactions in its annual report to the General Meeting (Art. 22(2)(f)).
6. File with the SCA if you are a joint stock company. The chairman must send the SCA a statement on the related party, the deal and their benefit. The related party must confirm in writing that the terms are "fair, reasonable and in favor of the company's shareholders" (Art. 152(5)).

Who may sign the deal on the company's behalf is a separate question from who approves it. See the guide to authorised signatories in a UAE company.

What happens if the rules are ignored

The Companies Law gives the company and its shareholders real remedies, whichever side of the deal you are on.

• The contract can be set aside. If a director fails to disclose an interest, the company or any shareholder may ask the court to invalidate the contract, or to make the director pay back any profit or benefit (Art. 150(2)).
• The director can lose the seat. Under Cabinet Resolution No. 77 of 2022, an LLC board member's membership ends if they fail to disclose a direct conflict. The exception is when the General Meeting lets them stay without a vote or a say in deliberations (Art. 22(1)(b)(4)).
• Dismissal and a three-year bar. A director or executive found by final judgment to have entered conflict-of-interest deals in breach of the law is dismissed by force of law. They cannot sit on a joint stock company board for at least three years (Art. 162(3)).
• Shareholder lawsuits. Shareholders holding at least 10% of the capital may sue a related party on the company's behalf. First, they must ask the board in writing, and the board must refuse or fail to respond within 30 days (Art. 167). Any shareholder may also sue a related party for their own loss (Art. 168).
• Manager liability in an LLC. An LLC manager is liable for fraud, gross error and losses caused by misuse of powers or breach of the law or the MOA. The rules for joint stock company directors also apply to LLC managers (Art. 84).
• Administrative fines. Cabinet Resolution No. 102 of 2022 lists administrative fines for a board member who fails to report a conflict of interest and for breaching the related-party procedures. In the schedule we read, the figures for both sit in the joint stock company columns. Check the current schedule with the Ministry of Economy or your licensing authority.

If a deal has already gone wrong between partners, the guide to free zone shareholder disputes covers the dispute routes.

Corporate tax: the arm's length principle and transfer pricing guidelines

Company-law approval does not settle the tax position. A deal can be properly approved and still be mispriced for tax. Article 34(1) of the Corporate Tax Law says that, in working out taxable income, transactions between related parties "shall meet the arm's length standard". The Federal Tax Authority (FTA) says the rule covers related parties in the mainland, in a free zone and abroad. A deal between two UAE companies is caught too.

What "arm's length" means

Article 34(2) says a related-party deal meets the standard if its results match what unrelated persons would have reached in a similar deal under similar circumstances. Article 34(3) lists five transfer pricing methods:

• the comparable uncontrolled price method;
• the resale price method;
• the cost-plus method;
• the transactional net margin method;
• the transactional profit split method.

You may use another method only if you can show that none of the five can reasonably be applied (Art. 34(4)). The choice must consider the contract terms, the deal's features, the economic circumstances, each party's functions, assets and risks, and their business strategies (Art. 34(5)). If the result falls outside the arm's length range, the FTA adjusts taxable income (Art. 34(8)). It then makes a matching adjustment for the related party (Art. 34(10)).

Fixing a mispriced deal in the tax return

The FTA's public clarification CTP011 (July 2026) says your financial statements should record related-party deals at arm's length. If they do not, you must make a transfer pricing adjustment in the tax return, upward or downward. It is self-assessed. You do not need the FTA's prior approval. A downward adjustment must always be disclosed in the return, whatever the size or type of deal. For a downward adjustment, the FTA says to keep:

• your reasons why the recorded price was not arm's length;
• a benchmarking study supporting the adjusted figure;
• a reconciliation between the financial statements and the tax return;
• evidence of the matching adjustment by the related party.

Payments to owners and directors

Article 36(1) is the rule owner-managed companies need to watch. A payment or benefit to a connected person is deductible only up to the market value of what that person provided. It must also be incurred "wholly and exclusively" for the business. That covers a salary to the owner, a consultancy fee to a director's son, or rent paid to a shareholder for the office. The excess over market value is not deductible. Article 36(6) disapplies this rule for companies whose shares trade on a recognised stock exchange, for companies under a UAE regulator's oversight, and for any other person named by Cabinet resolution.

Moving assets inside a group

Article 26 lets two taxable companies in the same "Qualifying Group" transfer assets or liabilities without recognising a gain or loss. Broadly, a Qualifying Group means common ownership of at least 75%, plus further conditions. The relief is reversed if the asset leaves the group, or the companies stop being in the same group, within two years. It does not replace the company-law approval for the transfer.

Transfer pricing documentation and disclosure

Article 55 gives the FTA three tools:

1. A disclosure form with the tax return. The FTA may require details of your transactions with related parties and connected persons (Art. 55(1)). Its clarification says the tax return form requires this when the transactions exceed the applicable thresholds.
2. A master file and a local file. You must keep both if your related-party and connected-person transactions meet the conditions set by the Minister of Finance (Art. 55(2)).
3. Thirty days to produce evidence. After an FTA request, you have 30 days to hand over the documentation or any information supporting your pricing. The FTA can allow longer (Art. 55(3) and (4)).

The thresholds for the disclosure form and the master and local files are set outside the law and can change. Check the conditions set by the Minister of Finance and the FTA's current disclosure-form requirements with the FTA before you file. The FTA also publishes transfer pricing guidance and public clarifications, CTP011 among them; read the current versions on tax.gov.ae rather than relying on a summary. A business that elects small business relief does not need transfer pricing documentation, according to the FTA. It must still price its related-party deals at arm's length. For the wider filing cycle, see the UAE corporate tax compliance guide. Free zone companies seeking the 0% rate should also read about qualifying income for free zone persons, where arm's length pricing is one of the conditions.

A worked example (illustration only)

Take an LLC with three partners and a capital of AED 1,000,000. Partner A also owns a fit-out contractor, and the LLC wants to hire it for AED 45,000.

• Company law. 3% of capital is AED 30,000. The deal is above that, so it goes to the General Meeting under Article 22(2)(a), unless the General Meeting has set a different percentage. Partner A discloses the interest, the deal is entered in the register, and Partner A does not vote.
• Tax. If Partner A owns 50% or more of the contractor, or controls it, the contractor is a related party of Partner A, who is an owner of the LLC. That makes the contractor a connected person of the LLC under Article 36, so the AED 45,000 is deductible only up to market value, tested with the Article 34 methods (Art. 36(5)), for example against quotes from unrelated contractors for the same scope. If Partner A also owns 50% or more of the LLC, or controls it, the two companies are related parties under Article 35, and the arm's length rule in Article 34 applies as well.
• Year end. The deal appears in the LLC's annual report to the General Meeting. If the price was above market, the LLC considers an adjustment in its tax return.

These figures only show how the rules interact.

Checklist before you sign a related-party deal

• Identify every relationship under both definitions: company law and tax.
• Measure the deal against capital, and check the MOA and past resolutions for a changed percentage.
• Get the disclosure in writing and minuted before approval.
• Make sure the interested person abstains from the deliberation and the vote.
• Obtain the right approval: board, manager, General Meeting or General Assembly.
• Collect pricing evidence such as quotes, comparables or a benchmarking study.
• Enter the deal in the related-party register and the annual report.
• Diary the tax return disclosure, and keep documents ready for a 30-day FTA request.

When to get legal help

Small, routine deals at market price are usually an internal governance task. Get advice before a large or long-term deal, a property sale or lease involving a shareholder, a loan to or from a director, or anything a minority partner may challenge. Get advice too if the FTA has asked for transfer pricing support. You can find a corporate lawyer or a tax lawyer on LEXAI and contact them directly. For a quick first read of your situation, try the LEXAI AI assistant. The full texts are on LEXAI: the Commercial Companies Law, Cabinet Resolution No. 77 of 2022 and the Corporate Tax Law.

This is general legal information, not legal or tax advice. Confirm the current rules with the Ministry of Economy, the SCA, the FTA or a licensed UAE lawyer.