Answer:
Under the UAE Corporate Tax Law, Related Parties and Connected Persons are distinct concepts that impact how transactions are treated for tax purposes (Federal Decree-Law No. 47 of 2022, Article 34, Article 35, Article 36).
Related Parties include:
• Individuals related within the fourth degree of kinship or through adoption or guardianship.
• Individuals and entities where the individual and their Related Parties own or 50% or greater control of the entity.
• Entities under common control or 50% or greater ownership.
• Persons and their (foreign) Permanent Establishments, partners in the same Unincorporated Partnership, or relationships involving trusts and foundations.
Connected Persons refer more narrowly to internal stakeholders of a business:
• The owner of the Taxable Person.
• A director or officer of the business.
• Any Related Party of the owner or director.
Key distinction:
Transactions with Connected Persons must be at market value and solely for business purposes to be deductible (Article 34, Article 36).
Transactions with Related Parties must satisfy arm’s length pricing p...