A Director is an individual who holds a formal appointment to the board of directors or an equivalent governing body, based on the company’s legal and constitutional documents such as the Memorandum of Association or Articles of Association. Simply having the title “Director” in a job description does not automatically qualify a person as a Director for Corporate Tax purposes. The role must be legally recognized within the governance structure of the entity.
An Officer, on the other hand, is defined based on actual authority and function. This includes individuals who have the power to plan, direct, and control the business, make strategic financial or operational decisions, or legally bind the company. The classification of an Officer depends on substance rather than title, meaning that even individuals without formal executive titles may fall within this definition if they exercise significant decision-making authority.
In practice, this means that senior individuals such as General Managers, CEOs, CFOs, or any person with broad discretionary authority and signing power are likely to be considered Officers. Conversely, individuals who perform routine or administrative functions, or those who operate strictly under supervision without independent decision-making authority, would generally not fall within this category.
The distinction is important because any payments, compensation, or benefits provided to Directors, Officers, or other Connected Persons must comply with Article 36 requirements. Businesses should therefore review their organizational structure, identify individuals who meet these definitions, and ensure that all related payments are properly justified, documented, and aligned with market value.
CTP010 ultimately reinforces a key principle of UAE Corporate Tax: Directors are determined by formal governance roles, while Officers are determined by actual authority and control. Companies are encouraged to assess both legal structure and operational reality to ensure full compliance and avoid potential tax adjustments.
Corporate Tax News Highlights:
Under UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), the Federal Tax Authority (FTA) issued Public Clarification CTP010 to explain how Directors and Officers are identified for the purpose of Connected Person rules under Article 36. The clarification highlights that payments or benefits to Connected Persons are deductible only if they are at Market Value and incurred wholly and exclusively for business purposes. As Directors and Officers fall within the scope of Connected Persons, correctly identifying them is essential for compliance.
How AZ Advisory Services Can Help?
We support businesses in navigating UAE Corporate Tax requirements by providing practical and compliant solutions. Our services include reviewing your organizational structure to identify Directors, Officers, and Connected Persons, assessing compensation and related party transactions, ensuring alignment with Article 36 requirements, and preparing the necessary documentation to support deductibility and disclosures. We help you minimize risk, strengthen compliance, and stay prepared for potential FTA reviews.
