UAE FTA Issues Clarification on 'Related Parties' in Corporate Tax Law

UAE, 22 July, 2024 : The UAE's Federal Tax Authority (FTA) has issued a new public clarification,CTP002, addressing the definition of "Related Parties" under the Corporate Tax Law. This clarification provides essential guidance on how common ownership and/or control through a government entity affects the classification of related parties.

According to Article 34 of the Corporate Tax Law, transactions and arrangements between related parties must adhere to the arm's length standard in determining taxable income. Article 35 further defines "Related Parties," indicating that two or more juridical persons can be considered related due to common ownership and/or control, whether direct or indirect.

This latest public clarification focuses on the application of the related parties' definition to structures where common ownership and/or control is exercised by the UAE Federal Government or a Local Government, such as an Emirate-level government. The FTA's guidance aims to ensure transparency and compliance in the interpretation and application of these provisions within the corporate tax framework.

Source :www.tax.gov.ae