Is Director Salary Deductible for UAE Corporate Tax?

A director's salary is deductible for UAE corporate tax only up to market value. See who counts as a connected person and the AED 500,000 disclosure line.

5 November 2026Qawi9 min read

Key takeaways

A UAE company can deduct a director's salary for corporate tax, but only up to the market value of the work the director does, and only if the pay is incurred wholly and exclusively for the business (Article 36 of Federal Decree-Law No. 47 of 2022).
Owners, directors, officers and their related parties are "connected persons"; any pay above market value is added back to the company's taxable income, while pay at market value stays deductible.
The FTA's Public Clarification CTP010 (2026) says an "officer" is identified by real authority to direct the company or bind it, not by job title, so a manager without the word "director" in their title can still be a connected person.
A company reports payments and benefits to a connected person in the Connected Persons schedule of its corporate tax return once they pass AED 500,000 per person (as of November 2026, as described by Deloitte and Simmons & Simmons; check the current EmaraTax form).
Dividends paid by a UAE company are not deductible, so an owner paid only by dividend gives the company no deduction, while a market-rate salary does.
Corporate tax applies at 9% only on taxable income above AED 375,000, so a disallowed slice of salary raises the tax bill only where taxable income is already above that line.

Is a director's salary deductible for UAE corporate tax?

Yes, but with a ceiling. Salary paid to a director is deductible when it is incurred wholly and exclusively for the company's business and does not exceed what an unrelated party would be paid for the same work.

The base rule sits in Article 28 of Federal Decree-Law No. 47 of 2022: an expense is deductible when it is incurred wholly and exclusively for the taxable person's business. Article 36 then adds a second test for connected persons. A payment or benefit to a connected person is deductible only if, and to the extent that, it corresponds with market value. The excess is not deductible. Article 36(5) points to the arm's length rules in Article 34 for deciding what market value is.

Ordinary employees who are not owners, directors, officers or related parties sit outside Article 36. The FTA's guide on determining taxable income treats employee costs as generally deductible, provided they are not excessive (as summarised by PwC, August 2024).

Who counts as a connected person under UAE corporate tax?

A connected person is an owner of the company, a director or officer of the company, or a related party of either. Article 36(2) sets out all three groups.

An owner means any natural person who directly or indirectly holds an ownership interest in the company or controls it. There is no minimum percentage in that definition, so a shareholder with a small stake who also works in the business is still an owner for Article 36.

The table below shows how the main payee types are treated.

Payee	Treated as connected person?	Deduction test
Employee with no ownership, no board seat, no binding authority	No	Wholly and exclusively for the business; not excessive
Shareholder of any size who also works in the company	Yes (owner)	Market value, plus wholly and exclusively
Board member (executive or non-executive)	Yes (director)	Market value, plus wholly and exclusively
CEO, general manager, CFO, COO, CCO or another person with ultimate decision or binding authority	Yes (officer)	Market value, plus wholly and exclusively
Related party of an owner, director or officer	Yes	Market value, plus wholly and exclusively

Accurate as of November 2026. Sources: Federal Decree-Law No. 47 of 2022, Article 36; FTA Public Clarification CTP010; BDO and Grant Thornton UAE summaries.

Article 36(6) switches the market value limit off for a company whose shares are traded on a Recognised Stock Exchange, for a company supervised by a competent UAE regulatory authority, and for any person a Cabinet decision names. Most owner-managed SMEs fall into none of these.

What does the FTA mean by "director" and "officer"?

The FTA treats a director as a person who sits on the board or an equivalent governing body, and an officer as a person with real authority over the company's direction or its contracts. Titles do not decide it. This was set out in Public Clarification CTP010, which carries an April 2026 date in the FTA's file name and was reported by law and audit firms in May 2026.

A person can be an officer if they meet any one of three tests, according to the Grant Thornton and Simmons & Simmons summaries of the clarification:

They have authority and responsibility for planning, directing and controlling the company's activities, using the functional-authority idea from IAS 24.
They can take strategic financial, operational or commercial decisions.
They can enter into agreements or approve actions that legally or contractually bind the company, for example through a power of attorney, as the manager named on the trade licence, or in board resolutions.

A job title containing "director" does not by itself make someone a director for Article 36, and a senior title does not by itself make someone an officer. People who only carry out decisions, make recommendations or hold limited administrative powers generally fall outside the definition (BDO summary). Only individuals can be directors or officers for this purpose.

The clarification applies to every taxable person, including free zone companies.

How do you work out market value for a director's pay?

Market value is what an unrelated company would pay for the same work, and Article 36(5) borrows the arm's length principle from Article 34 to test it. The law gives no salary formula, so the practical job is to show that the figure is reasonable for the role, the hours and the market.

Here is a workable sequence:

Write down what the person actually does for the company: duties, hours and whether the work is full time. Pay for a role that is mostly passive is hard to defend.
Find external reference points for the same role, size of business and sector, such as published salary surveys or recruitment-agency salary guides, and keep a copy.
Compare total pay, not just basic salary: allowances, housing, bonus, school fees and other benefits all count as payments or benefits to a connected person.
Record the approved amount in a signed shareholder or board resolution, and pay it through payroll rather than by ad hoc transfers.
Re-check each year, because the role, the hours and the market change.

Say a mainland consulting company pays its owner AED 600,000 a year while the benchmark evidence supports AED 400,000 (a hypothetical example). The AED 200,000 difference is added back to taxable income. If the company's taxable income is already above AED 375,000 without that add-back, the extra tax is 9% of AED 200,000, which is AED 18,000.

What must you report about payments to connected persons?

You report them in the Connected Persons schedule of the corporate tax return, filed on EmaraTax. Deloitte's guidance on the return says the schedule is completed when the total value of transactions with at least one connected person, including that person's related parties, exceeds AED 500,000, and that payments above AED 500,000 per connected person are then disclosed.

The return asks for the market value of the service or benefit. The difference between the amount paid and the market value is calculated and disallowed. Deloitte also notes that a non-market-value adjustment has to be reported even when the payment is below AED 500,000. Simmons & Simmons adds that the threshold is tested per person, with that person's related parties added together.

If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.

AED 500,000: payments or benefits to a single connected person above which the corporate tax return's Connected Persons schedule must be completed, with that person's related parties added together. Source: FTA corporate tax return Connected Persons schedule, as described by Deloitte Middle East and Simmons & Simmons, checked 5 November 2026. Confirm the figure on the current EmaraTax form.

Should an owner take a salary or dividends?

For the company's own tax position, a market-rate salary is deductible and a dividend is not. A salary above market value loses its deduction in part, which brings it closer to the dividend result.

The FTA's published FAQ states that dividends paid by UAE companies are not deductible for corporate tax, and Article 33 of the law also bars deductions for items such as bribes, fines and penalties, and costs of earning exempt income. That difference matters only where it changes the tax payable. Taxable income up to AED 375,000 is taxed at 0% and the part above that at 9% (Cabinet Decision No. 116 of 2022), so a company with taxable income below that line pays no corporate tax whether the owner takes salary or dividends.

Which route suits you depends on your own facts, so take advice from a qualified adviser before changing how you are paid.

What most guides don't tell you

A small shareholder is still an owner. The definition of owner has no percentage floor, so an employee who holds even a small stake in the company is a connected person on that basis alone. A salary review that only looks at directors and C-suite titles misses this group.

The disclosure test is per person, with relatives and related entities added in. Because the AED 500,000 line is tested for each connected person together with that person's related parties, several modest payments to one family group can cross it even when no single payment looks large. Collect payments by family group or ownership chain, not by payee name.

Substance beats the org chart. Under CTP010 a person with no formal title can be an officer if they in fact direct the business or can bind it. The reverse also holds: a "Director of Operations" who only carries out decisions may not be an officer. Write the authority each senior person has into a board resolution or role description, so the file backs up the classification you use in the return.

Which deadlines apply to your company?

Corporate tax return dates depend on your financial year-end, and the evidence for director pay has to be in place before then. The free calendar of your company's UAE tax and compliance deadlines is personalised from a few questions and comes as a PDF and calendar file: get your UAE compliance calendar.

Frequently asked questions

Can I claim expenses I paid personally for the business?

Yes, if the expense was incurred wholly and exclusively for the business and the company reimburses you or records it as a loan from you, with the invoice and the business purpose on file. If you are an owner, director or officer, the reimbursement is a payment to a connected person, so the amount has to reflect what the service would cost at market value.

What expenses are deductible for UAE corporate tax?

An expense is deductible when it is incurred wholly and exclusively for the business and is not specifically barred. Items the law bars include bribes, fines and penalties, dividends and the cost of earning exempt income, and net interest is generally capped at 30% of EBITDA.

How is taxable income calculated from accounting profit?

A company starts from the net profit in its financial statements, prepared under the accounting standards accepted for corporate tax, usually IFRS. It then adjusts for items the corporate tax law treats differently, such as non-deductible expenses, exempt income and any amount disallowed under the connected person rules.

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

Last checked: 5 November 2026

This is general information, not tax or legal advice for your specific situation.