Who is a connected person for Corporate Tax?

Article 36 – Payments to Connected Persons 1. Without prejudice to the provisions of Article 28 of this Decree-Law, a payment or benefit provided by a Taxable Person to its Connected Person shall be deductible only if and to the extent the payment or benefit corresponds with the Market Value of the service, benefit or otherwise provided by the Connected Person and is incurred wholly and exclusively for the purposes of the Taxable Person’s Business. 2. For the purposes of this Decree-Law, a Person shall be considered a Connected Person of a Taxable Person if that Person is: a. An owner of the Taxable Person. b. A director or officer of the Taxable Person. c. A Related Party of any of the Persons referred to in paragraphs (a) and (b) of Clause 2 of this Article. 3. For the purposes of paragraph (a) of Clause 2 of this Article, an owner of the Taxable Person is any natural person who directly or indirectly owns an ownership interest in the Taxable Person or Controls such Taxable Person. 4. Where the Taxable Person is a partner in an Unincorporated Partnership, a Connected Person is any other partner in that same Unincorporated Partnership, and any Person that is a Related Party of that partner. 5. To determine that a payment or benefit provided by the Taxable Person corresponds with the Market Value of the service or otherwise provided by the Connected Person in exchange, the relevant provisions of Article 34 of this DecreeLaw shall apply as the context requires. 6. Clause 1 of this Article shall not apply to any of the following: Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 43 a. A Taxable Person whose shares are traded on a Recognised Stock Exchange. b. A Taxable Person that is subject to the regulatory oversight of a competent authority in the State. c. Any other Person as may be determined in a decision issued by the Cabinet at the suggestion of the Minister. Chapter Eleven – Tax Loss Provisions

Article 35 – Related Parties and Control 1. For the purposes of this Decree-Law, “Related Parties” means any of the following: a. Two or more natural persons who are related within the fourth degree of kinship or affiliation, including by way of adoption or guardianship. b. A natural person and a juridical person where: 1) the natural person or one or more Related Parties of the natural person are shareholders in the juridical person, and the natural person, alone or together with its Related Parties, directly or indirectly owns a 50% (fifty percent) or greater ownership interest in the juridical person; or 2) the natural person, alone or together with its Related Parties, directly or indirectly Controls the juridical person. c. Two or more juridical persons where: 1) one juridical person, alone or together with its Related Parties, directly or indirectly owns a 50% (fifty percent) or greater ownership interest in the other juridical person; 2) one juridical person, alone or together with its Related Parties, directly or indirectly Controls the other juridical person; or 3) any Person, alone or together with its Related Parties, directly or indirectly owns a 50% (fifty percent) or greater ownership interest in or Controls such two or more juridical persons. d. A Person and its Permanent Establishment or Foreign Permanent Establishment. e. Two or more Persons that are partners in the same Unincorporated Partnership. f. A Person who is the trustee, founder, settlor or beneficiary of a trust or foundation, and its Related Parties. 2. For the purposes of this Decree-Law, “Control” means the ability of a Person, whether in their own right or by agreement or otherwise to influence another Person, including: a. The ability to exercise 50% (fifty percent) or more of the voting rights of another Person. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 42 b. The ability to determine the composition of 50% (fifty percent) or more of the Board of directors of another Person. c. The ability to receive 50% (fifty percent) or more of the profits of another Person. d. The ability to determine, or exercise significant influence over, the conduct of the Business and affairs of another Person.

4.4.3. Partners in the same Unincorporated Partnership Partners in an Unincorporated Partnership, whether the Unincorporated Partnership has applied to be treated as a Taxable Person or not, are Related Parties. 35 This is because of the partners’ shared Control over the Business of the partnership. 4.4.4. Trusts and foundations A Person who is the trustee, founder, settlor or beneficiary of a trust or foundation will be considered Related Parties of the trust or foundation and its Related Parties.36 4.5. Connected Persons Similar to the requirement that transactions conducted between Related Parties should meet the arm’s length principle for Corporate Tax purposes, a payment or benefit provided by a Taxable Person to its Connected Person in exchange for services (or whatever is otherwise provided), is deductible for Corporate Tax purposes only to the extent that it follows the arm’s length principle. A payment or benefit made by a Taxable Person to a Connected Person in excess of the Market Value in relation to such transactions is not deductible for such Taxable Person. This is also subject to the expenditure meeting the general requirements to be deductible under Article 28 of the Corporate Tax Law. Unlike the Related Party rules, the Connected Persons provisions only apply to the Taxable Person making the payment, not the recipient. Article 36 defines a Connected Person as an owner, director or officer of the Taxable Person, or a Related Party of any owner, director or officer. A Taxable Person that is a natural person will not have an owner, director or officer, as these concepts relate to juridical persons. The only aspect of the definition of Connected Person which may apply to a natural person is that partners in an Unincorporated Partnership are Connected Persons with each other (and also the other partners’ Related Parties, such as relevant family members). Example 24: Related Parties, Control and Connected Persons Mr. B is a first cousin of Ms. C. Mr. B owns 75% of Company X (a UAE company). Ms. C owns 20% of Company Y (a UAE company). She owns Preferred Shares 35 Article 35(1)(e) of the Corporate Tax Law. 36 Article 35(1)(f) of the Corporate Tax Law. Corporate Tax Guide | Taxation of natural persons under the Corporate Tax Law | CTGTNP1 33

6.6.2. Control For the purposes of determining whether two or more Persons are Related Parties, Control means the ability of a Person, in their own right or by agreement, to influence another Person including through the ability to, among others: • • • • 6.6.3. Exercise 50% or more of the voting rights of another Person;214 Determine the composition of 50% or more of the board of directors of another Person;215 Receive 50% or more of the profits of another Person;216 or Determine, or exercise significant influence over, the conduct of the Business and affairs of another Person.217 Connected Persons Payments or benefits provided by a Taxable Person to its Connected Persons are deductible only to the extent that the payment or benefit corresponds with the Market Value of the service or benefit provided by the Connected Person, and where the payment or benefit is incurred wholly and exclusively for the purposes of the Taxable Person’s Business.218 For example, an owner of a business will be able to deduct their salary when determining the Business’ Taxable Income but only insofar as this salary corresponds with the Market Value. In order to determine if the value of a service or benefit provided matches its Market Value, the arm’s length principle should be applied.219 Connected Persons capture a broader group of Persons than Related Parties. A Connected Person of a Taxable Person is: • A natural person who directly or indirectly owns an ownership interest in, or Controls, the Taxable Person (for example, the individual owner of a limited liability company);220 214 Article 35(2)(a) of the Corporate Tax Law 215 Article 35(2)(b) of the Corporate Tax Law 216 Article 35(2)(c) of the Corporate Tax Law 217 Article 35(2)(d) of the Corporate Tax Law. 218 Article 36(1) of the Corporate Tax Law. 219 Article 36(5) of the Corporate Tax Law. 220 Article 36(2)(a) of the Corporate Tax Law. General Corporate Tax Guide | Corporate Tax | CTGGCT1 75