MD Compensation Rules
- The Oath
- Dr. Constantin Frank-Fahle, LL.M.
- Marcel Trost, LL.M.
The introduction of Corporate Income Tax (“CIT”) in the UAE in 2023 marked a fundamental shift in the country’s tax landscape. Unlike many jurisdictions, UAE CIT applies exclusively to business income, creating unique considerations for payments to “Connected Persons” – typically senior management and controlling shareholders. For managing directors who often wear multiple hats as both employees and owners, determining appropriate compensation levels has become a complex exercise in transfer pricing compliance. The stakes are significant. Excessive compensation risks deduction denial under the UAE CIT, Connected Persons and Transfer Pricing rules. Further, it may, depending on the shareholder position and applicable domestic tax law, be recharacterised as a constructive dividend, particularly relevant for expatriate managing directors operating UAE entities.tax planning.
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