1. Market value test
The amount must match what an independent party would pay for the same service in comparable circumstances, measured with the arm's length principle in Article 34.
KMP Salary Benchmarking in the UAE – Owner & Director Pay Under Corporate Tax
Under Article 36 of the UAE Corporate Tax Law, salaries and benefits paid to owners, directors and other connected persons are deductible only up to their market value. A KMP salary benchmarking study compares that pay with what independent companies pay for similar roles, so the deduction can be defended and any excess identified before the corporate tax return is filed.
- Ministry of Economy and Tourism approved auditor
- 500+ clients
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Many UAE businesses pay their owners and directors a salary, bonus or management fee. Since corporate tax began, that pay is deductible only up to market value: anything above it is added back and taxed at 9%, and payments above AED 500,000 must be disclosed in the corporate tax return.
A KMP salary benchmarking study from SGA World shows what independent companies pay for the same role, so you can set a defensible salary, support the deduction and avoid an FTA adjustment. We prepare studies for mainland companies, free zone companies and Qualifying Free Zone Persons in Dubai and Abu Dhabi.
- Connected-person payments capped at market value
- Article 36
- Tax on any excess added back
- 9%
- Payments per person that must be disclosed
- AED 500K
- Salary, bonus, benefits and fees all count
- Total pay
At a glance
KMP Salary Benchmarking: Key Facts
- Who it covers: owners, directors, officers and their close relatives, known as connected persons.
- The rule: pay is deductible only up to market value for the services actually provided.
- The risk: the excess is added back to taxable income and taxed at 9%.
- Disclosure: payments above AED 500,000 to a connected person go in the corporate tax return.
- The evidence: a benchmarking study of comparable roles in similar companies.
- Sole establishments: the owner is the taxpayer, so an owner salary is not deductible at all.
KMP basics
What Is KMP Salary Benchmarking?
Key management personnel (KMP) are the people who direct and control a business: owners who work in it, directors, the general manager, CEO, CFO and other senior officers. When they are also connected persons under the Corporate Tax Law, what the company pays them must be justified by the market.
A salary benchmarking study compares each person's total remuneration with what independent companies of similar size, industry and location pay for an equivalent role. The result is an arm's length range; pay inside the range is supported, and pay above it is the amount at risk.
- Tests the full package, not just basic salary
- Uses roles with similar responsibilities, industry and company size
- Produces an arm's length range and a supportable figure
- Documented for the corporate tax return and FTA queries
Article 36
Who Is a Connected Person Under UAE Corporate Tax?
Article 36 of Federal Decree-Law No. 47 of 2022 applies to payments and benefits to connected persons of a taxable business.
- An owner of the business
- Shareholders and partners with an ownership interest, including owner-managers
- A director or officer
- Board directors, general manager, CEO, CFO and other senior officers
- A related party of an owner, director or officer
- Relatives up to the fourth degree of kinship and companies they control
- A partner in an unincorporated partnership
- Partners and their related parties
Article 36 does not apply to a company whose shares are traded on a recognised stock exchange, or to one regulated by a competent UAE authority such as the Central Bank of the UAE, the Dubai Financial Services Authority, the ADGM Financial Services Regulatory Authority or the Securities and Commodities Authority.
New FTA guidance, April 2026
Who Counts as a "Director" or "Officer"? FTA Clarification CTP010
On 29 April 2026 the FTA issued Public Clarification CTP010 explaining who is a director or officer for Article 36. It takes a substance over form approach: what matters is the person's actual authority, not their job title.
- Director: anyone appointed to the board, including executive, non-executive, temporary, permanent and alternate directors, and members of board committees
- Job titles do not decide it: an employee called "Sales Director" is not a director unless they sit on the board
- Officer: can include general managers, senior employees, authorised signatories and others with significant delegated authority over the business
- Only individuals can be directors or officers for this purpose
- Related party overlap: where someone is both a related party and a connected person, the related party (transfer pricing) rules apply
In practice, more senior staff may now fall within the market value rule than many businesses assumed. We review your organisation chart and authority matrix to identify who is caught.
Why it matters
Is an Owner's Salary Deductible for Corporate Tax?
Yes, but only up to market value, and only if it is incurred wholly and exclusively for the business. Article 36 allows a deduction for a payment to a connected person to the extent it matches the market value of the service provided, measured using the arm's length principle in Article 34.
Commercially, you can pay an owner-director whatever you choose. For tax, only the amount an independent company would have paid for that role is deductible; the excess is added back to taxable income.
Salary, dividend or drawings?
- Salary to an owner of an LLC: deductible up to market value
- Dividend: a distribution of profit that has already been taxed, so not deductible
- Drawings by the owner of a sole establishment: not deductible, because the owner and the business are the same taxable person
Article 36 test
The Two Tests a Connected-Person Payment Must Pass
A payment to an owner, director or officer is deductible only if it passes both tests. Failing either one means the excess, or the whole payment, is added back.
2. Wholly and exclusively test
The payment must be incurred wholly and exclusively for the business, for services actually provided, and not be capital in nature or a disguised distribution of profit.
Worked example
What Happens If Pay Is Above Market Value?
A Dubai trading LLC pays its owner-managing director AED 1,000,000 a year. A benchmarking study shows comparable general managers in similar companies earn up to AED 600,000.
Salary paid to owner-director
- Amount
- AED 1,000,000
- What it means
- Recorded as an expense in the accounts
Market value from benchmarking
- Amount
- AED 600,000
- What it means
- The deductible amount
Excess above market value
- Amount
- AED 400,000
- What it means
- Added back to taxable income
Extra corporate tax at 9%
- Amount
- AED 36,000
- What it means
- Payable every year the excess continues
Comparability
What Decides the Market Value of a Director's Salary?
Market value depends on three things together, sometimes called the "triangle" analysis. A comparable role must match on all three.
The individual
Qualifications, experience, specialist skills and how scarce those skills are in the UAE market.
The role
Responsibilities, decision-making authority, time spent, number of reports and the KPIs the person is measured on.
The company
Industry, revenue, profitability, complexity, number of employees and location (Dubai, Abu Dhabi or a free zone).
Our method
How Is a KMP Salary Benchmarking Study Prepared?
Step
Scope the role
Document the title, responsibilities, seniority, time spent and functions, plus the company's industry, size and location.
Step
Map the full package
Collect basic salary, bonus, housing and other allowances, benefits in kind, director fees and cross-charged management fees.
Step
Find comparable roles
Use recognised UAE and GCC salary survey and recruitment market data for equivalent roles in similar companies.
Step
Build the range
Screen the data and build an interquartile range, the arm's length band for the role's total remuneration.
Step
Test and advise
Compare actual pay with the range, quantify any excess and advise on adjustments before the return is filed.
Step
Document
Deliver a report with the data, search strategy and conclusion, ready for the corporate tax return and FTA queries.
Methods
Which Methods Are Used to Benchmark Executive Pay?
| Method | How it works | When it fits |
|---|---|---|
| Internal comparable (CUP) | Compare with what the company pays an unrelated manager in a similar role | The business employs independent managers at a similar level |
| External comparable (CUP) | Compare with UAE and GCC salary survey and recruitment data for equivalent roles | Most owner-managers and directors |
| Profitability cross-check (TNMM) | Check that after the owner's pay the company still earns a margin similar to independent companies | Where pay is high relative to profit |
| Other reliable methods | Third-party consultancy fees, commission agreements or published research | Specialist or unusual roles with few salary comparables |
Article 34 allows another method where the standard methods cannot be applied reliably. The lack of an exact comparable does not make a study invalid, provided the analysis is reasonable and documented.
What we benchmark
Which Payments Can Be Benchmarked?
Basic salary
Monthly salary for owner-managers, directors and senior officers.
Bonuses and incentives
Annual bonuses, profit shares and performance incentives.
Allowances
Housing, transport, education and other cash allowances.
Benefits in kind
Company cars, accommodation, school fees, insurance and other benefits.
Director fees
Board and sitting fees paid to directors who are connected persons.
Cross-charged management fees
Fees for the services of a connected person charged through a related company.
Beyond salaries
Which Other Payments to Connected Persons Are Caught?
Article 36 covers any payment or benefit to a connected person, not only salaries. The same market value test applies to:
- Rent paid to an owner for an office, warehouse or staff accommodation they own
- Interest on loans from owners or their relatives
- Consultancy or professional fees paid to a director's own firm
- Management fees charged by a company the owner controls
- Company cars, housing and other benefits used by owners or relatives
- Payments to relatives employed in the business
Each needs its own support: a rent valuation, a market interest rate, or a salary benchmark.
Who needs it
When Do You Need a Salary Benchmarking Study?
- An owner works in the business and draws a salary
- The salary is a payment to a connected person
- Directors or relatives of owners are on the payroll
- Their pay must reflect market value
- Pay to one connected person exceeds AED 500,000
- It must be disclosed in the corporate tax return
- A related company charges management fees for an owner's services
- The fee must be supported like a salary
- The company is a Qualifying Free Zone Person
- Arm's length dealings protect the 0% rate
- The FTA asks how a director's pay was set
- The study is the evidence
Remuneration review
Know Your Deductible Salary Before You File
We benchmark each owner's and director's package against the market and tell you how much is deductible, so you can adjust pay or plan for any add-back before the corporate tax return is due.
Your study includes
- Role and responsibility analysis
- Total remuneration mapped component by component
- Comparable salary data and arm's length range
- Deductible amount and any excess quantified
- Report ready for the corporate tax return
Comparison
Salary Benchmarking vs a Transfer Pricing Benchmarking Study
Both use the arm's length principle and the interquartile range, but they test different things.
Question answered
- KMP salary benchmarking
- Is the pay to a connected person at market value?
- Transfer pricing benchmarking
- Is the margin on a related-party transaction at arm's length?
Comparables
- KMP salary benchmarking
- Salary data for equivalent roles
- Transfer pricing benchmarking
- Financial results of comparable independent companies
Legal basis
- KMP salary benchmarking
- Article 36 (connected persons)
- Transfer pricing benchmarking
- Article 34 (related parties)
Typical trigger
- KMP salary benchmarking
- Owner, director and officer pay
- Transfer pricing benchmarking
- Related-party sales, services, loans and royalties
Output
- KMP salary benchmarking
- Deductible remuneration amount
- Transfer pricing benchmarking
- Arm's length margin range
For margins on intercompany transactions, see transfer pricing benchmarking.
Special situations
How Are Special Situations Handled?
- Loss-making company
- A large owner salary while the company makes losses
Document the commercial reason, market rate and expected recovery - Start-up or early stage
- No revenue yet but founders are paid
Benchmark against roles in similar early-stage companies - One person, several group companies
- Pay charged to the wrong entity or twice
Allocate pay by time and services provided to each entity - Owner paid through a related company
- Fees treated as automatically deductible
Benchmark the underlying services like a salary
Free zones
Do Free Zone Companies and QFZPs Need Salary Benchmarking?
Yes. Connected-person rules apply to free zone companies in the same way as to mainland companies. For a Qualifying Free Zone Person, owner and director pay is also part of the arm's length condition that protects the 0% rate.
Pay that is too low can be a problem too: a free zone company with an owner-manager paid well below market may struggle to show adequate substance, another QFZP condition. A benchmark supports both the deduction and the substance position.
Planning
How Much Salary Can a UAE Company Owner Pay Themselves?
As much as the business can justify commercially, but only the market value of the owner's role is deductible for corporate tax. Because the UAE has no personal income tax, the choice between salary and dividends is mainly a corporate tax question:
- A market-value salary reduces taxable profit and saves 9% on that amount
- Pay above market value is added back, and the FTA can treat it as a disguised distribution of profit
- Dividends are paid from profit already taxed, with no further tax for the owner in the UAE
The right mix depends on the company's profit, its free zone status and the owner's role. We model the options before the year starts.
What Documents Support a Director's Salary?
The FTA will look for evidence that the pay was set on a commercial basis. Keep:
- A written employment or service contract for each connected person
- A board or shareholder resolution approving the package
- A role description showing the functions and time spent
- The salary benchmarking study and data used
- Payroll records and proof of payment, including WPS records where applicable
- The connected persons schedule filed with the corporate tax return
Common mistakes
Common Mistakes With Owner and Director Pay
A round-number salary with no benchmark
Nothing shows it reflects market value
Benchmarking basic salary only
Bonuses and benefits are part of the package
Large year-end bonuses to owners
Hard to show the amount was set commercially
Management fees treated as automatically deductible
They are tested like a salary
Using national salary averages
Comparables must match the role and company size
No contract or board approval
Weakens the evidence that pay was agreed in advance
Glossary
Salary Benchmarking Terms Explained
- Connected person
An owner, director or officer of a business, or a related party of one of them.
- Key management personnel (KMP)
People with authority to direct and control the business, such as directors and senior officers.
- Market value
The price independent parties would agree for the same service in similar circumstances.
- Arm's length range
The range of pay, usually the interquartile range, that comparable independent roles receive.
- Total remuneration
Basic salary plus bonuses, allowances, benefits in kind and fees.
- Connected persons schedule
Part of the corporate tax return disclosing payments above AED 500,000 to a connected person.
- Add-back
An amount not deductible for tax, added back to accounting profit to arrive at taxable income.
- Sole establishment
A business owned by one individual with no separate legal personality; the owner is the taxpayer.
Why SGA World
Why Choose SGA World for Salary Benchmarking?
Transfer pricing specialists
The same team that prepares our transfer pricing benchmarking on Orbis and TP Catalyst.
Aligned with your return
Benchmark, connected persons schedule and corporate tax return prepared together.
FTA representation
Support with FTA queries, with representation through Saif Chartered Accountants.
Location: Dubai
Dubai Office
Our Dubai office in The Exchange Tower, Business Bay is the central hub for our audit, accounting and tax services across the UAE.
Dubai
Office 1923, The Exchange Tower, Business Bay, Dubai
Abu Dhabi
Khalidiya Towers M-B6, W10, Al Bateen, Al Khalidiyah, Abu Dhabi
Talk to an auditor
Tell us your company type, jurisdiction and deadline. We will confirm the scope, timeline and fee.
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- Call us+971 4 570 1795
- Email us[email protected]
- Book an appointmentChoose a time that suits you
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Who prepared this page
Written and reviewed by SGA World's audit and tax team
This guide is prepared by chartered accountants at SGA World Auditing Accounting L.L.C S.P.C in Business Bay, Dubai, a Ministry of Economy and Tourism approved audit firm, and checked against Federal Tax Authority legislation and guidance. It is reviewed whenever the rules change.
- Last reviewed 7 October 2026
- Chartered accountants from India and the UK
- FTA representation through Saif Chartered Accountants
Have a question about your company?
Tell us your activity, jurisdiction and deadline. A chartered accountant will reply.
Ask an expertFrequently asked questions
KMP Salary Benchmarking – FAQs
Short answers to the questions UAE businesses ask us most. Still unsure?
Talk to our team01.What is KMP salary benchmarking?
A study that compares the remuneration of owners, directors and other key management personnel with what independent companies pay for equivalent roles, to show it is at market value under UAE corporate tax.
02.Who is a connected person under UAE corporate tax?
Under Article 36, an owner, director or officer of the taxable business, a related party of any of them such as close relatives, and partners in an unincorporated partnership.
03.Who is a director or officer under Article 36?
Under FTA Public Clarification CTP010 (29 April 2026), a director is anyone appointed to the board, including non-executive and alternate directors. An officer can include general managers, authorised signatories and senior staff with significant delegated authority. Actual authority matters, not the job title.
04.Are listed or regulated companies exempt from the connected person rules?
Yes. Article 36 does not apply to companies whose shares are traded on a recognised stock exchange, or to companies regulated by a competent UAE authority such as the Central Bank, DFSA, ADGM FSRA or the Securities and Commodities Authority.
05.Is an owner's salary deductible for UAE corporate tax?
Yes for a company such as an LLC, but only up to market value and only if incurred wholly and exclusively for the business. The excess is added back to taxable income.
06.Can a sole establishment deduct the owner's salary?
No. In a sole establishment the owner and the business are the same taxable person, so drawings are not a deductible expense.
07.What happens if a director's pay is above market value?
The amount above market value is not deductible and is added back to taxable income, where it is taxed at 9%.
08.When must connected-person payments be disclosed?
Payments or benefits to a connected person above AED 500,000 in the tax period are reported in the connected persons schedule filed with the corporate tax return.
09.Is it only the basic salary that is benchmarked?
No. The total package is tested - basic salary, bonuses, allowances, benefits in kind, director fees and management fees charged through related companies.
10.Is a salary benchmark the same as a transfer pricing benchmarking study?
Both use the arm's length principle and an interquartile range, but salary benchmarking uses compensation data for equivalent roles, while transfer pricing benchmarking uses the financial results of comparable companies.
11.Do free zone companies and QFZPs need salary benchmarking?
Yes. Connected-person rules apply to free zone companies, and for a QFZP arm's length dealings and adequate substance are conditions of the 0% rate.
12.Is a dividend to the owner deductible?
No. A dividend is a distribution of profit that has already been taxed, so it is not a deductible expense.
13.How often should KMP pay be benchmarked?
Review it every year, and update the study when a role, the business or pay changes significantly.
14.Can a salary be too low?
For tax deductions, low pay is not a problem. For a Qualifying Free Zone Person, very low pay for the people running the business can weaken the adequate substance condition.
15.How much salary can I pay myself from my UAE company?
Any amount the business can justify commercially, but only the market value of your role is deductible for corporate tax. Pay above market value is added back to taxable income.
16.Is a director's salary taxed personally in the UAE?
No. The UAE has no personal income tax, so the salary is not taxed in the director's hands. The question is only whether the company can deduct it for corporate tax.
17.Does Article 36 apply to rent or loans from owners?
Yes. Any payment or benefit to a connected person is covered, including rent for property they own, interest on their loans and fees to their companies. Each must reflect market value to be deductible.
18.Which method is used to benchmark executive pay?
Usually a comparable uncontrolled price approach using salary data for equivalent roles, sometimes with an internal comparable or a profitability cross-check. Other reliable methods can be used where comparables are limited.
19.Can a loss-making company pay its owner a salary?
Yes, but the salary must still reflect market value and be supported by a commercial reason. Large owner pay in a loss-making company attracts more scrutiny, so documentation matters more.
