Related party: what it means in UAE tax.

What related party means

Also called: Related Parties.

A Related Party is a person or company tied to a Taxable Person closely enough that their deals may not be at market prices. Article 35 of the Corporate Tax Law sets out the links: family relationships up to the fourth degree, ownership of 50% or more, control, a business and its branch, partners in the same partnership, and people connected to a trust or foundation.

The test counts combined holdings. A person's own stake is added to the stakes of their Related Parties, so a family can cross the 50% line even when no single member does. Control goes beyond shares: it includes 50% or more of votes, board seats or profits, or the ability to exercise significant influence over how the business is run.

Once two parties are related, every transaction between them must meet the arm's length standard. For SMEs this often catches sister companies owned by the same family, mainland and free zone entities under common ownership, and loans between shareholders and the company.

How it works

• Two natural persons are related if linked within the fourth degree of kinship or affiliation, including adoption or guardianship (Article 35(1)(a)); the FTA guide says the fourth degree reaches first cousins.
• A person and a company are related where the person, alone or with Related Parties, owns 50% or more of it, or controls it (Article 35(1)(b)).
• Two companies are related where one owns 50% or more of or controls the other, or a common owner holds 50% or more of or controls both (Article 35(1)(c)).
• Control includes 50% or more of voting rights, board composition or profits, or significant influence over the business (Article 35(2)).

Worked example

A Dubai contracting company has share capital of AED 300,000. One shareholder holds 30% and his brother holds 25%. Neither alone reaches 50%, but siblings are related within the fourth degree, so their holdings are combined.

Total share capital	AED 300,000
Shares held by the first shareholder (30%)	AED 90,000
Shares held by his brother (25%)	AED 75,000
Combined family holding (55%)	AED 165,000

At 55% combined, each brother and the company are Related Parties, so their dealings with it must be at arm's length.

Common mistakes

• Testing each shareholder alone instead of adding the holdings of family members and other Related Parties.
• Looking only at share ownership and ignoring control through voting agreements, board seats or influence.
• Assuming a UAE-only group has no related party issues; the rules apply between UAE companies too.

The law

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, Article 35 (Related Parties and Control)
• Federal Decree-Law No. 47 of 2022, Article 34(1) (arm's length standard for Related Parties)

Frequently asked questions

Is my spouse's company a Related Party of my company?

Very likely. A spouse falls within the family degrees covered by Article 35, and if you and your spouse together own or control 50% or more of each company, the two companies are Related Parties.

Does a free zone company count as a Related Party of a mainland company?

Yes, if the ownership or control tests are met. Location does not matter; the link does.

Related terms

Connected person · Arm's length principle · Transfer pricing · Corporate Tax group. See every term in the UAE tax glossary.

For the full picture, read our guide: Transfer Pricing Basics for UAE SMEs That Deal With Their Own Owners.

Need help with Corporate Tax filing? See our Corporate Tax filing service.