Optimize Owner Compensation with Confidence
A payment/benefit made by a Taxable Person (company) to a Connected Person (owner, shareholder, director, officer or a relative of one of those above) is only deductible if both of the following apply:
1. It is the Market Value of the benefit/service provided by the Connected Person.
2. It is incurred wholly and exclusively for the purposes of the Taxable Person’s Business.
Market Value is the price that could be agreed in an unrelated parties’ free market transaction, under similar circumstances (considers the arm’s length principle). Connected Persons include:
What “Benchmarking” Means in Practice
Although it is not a formal requirement under the law, tax professionals and consultants recommend benchmarking (i.e. compare the salary/remuneration received against the market rates for a similar role, industry, company size, experience and responsibility in the UAE), as the main practical approach to demonstrate the payment meets the Market Value test.
This helps to defend the deduction, where an FTA audit/review is being undertaken. The FTA can adjust (disallow) any excess amount above market value, increasing the company’s taxable profit.
Why Owner Salary Benchmarking Matters for UAE Businesses
Running a business in the UAE is not only about how much you can take out for yourself, but also an effort to keep the company strong and compliant with the law. Owner salary benchmarking is a way to ensure you’re earning a fair and defensible compensation based on real market data, industry, company size and your role in the company.
At Business Tax UAE (BTU), we offer complete and practical benchmarking that enables shareholders, directors and active owners to make compensation decisions that are based on UAE market realities and compliant with the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022).
It provides your business more transparency, less hassle with tax filings and better financial-planning clarity. It helps you make confident compensation decisions to support compliance, stability and long‑term growth.
Ensures Corporate Tax Compliance
Under Article 36 of UAE Corporate Tax Law, payments to connected persons (owners/directors) are only deductible to extent that such payments reflect arm’s length value of services actually provided and are incurred wholly and exclusively for Taxable Activities. Correct benchmarks can show that such arm's length principle is being followed and thus minimize risk of adjustments during FTA reviews or audits.
Supports Better Financial Planning
Having a reasonable salary range in mind will help manage cash flow, budget properly, and decide how much to pay yourself and how much to reinvest in growth. It gives you clarity for your books and your long term business decisions.
It provides a clearer view of salary expenses, profitability, and available cash flow. Accurate benchmarking also helps businesses create realistic budgets and make informed long-term financial decisions.
Who Needs Owner Salary Benchmarking in the UAE
Our Owner Salary Benchmarking Services
Benefits of Choosing Our Services
Documents Required for Salary Benchmarking
Why Choose Business Tax in UAE for Owner Salary Benchmarking?
We provide practical solutions that are relevant for the UAE market. Our tax consultants have a deep understanding of the local market trends, Federal Tax Authority’s Corporate Tax guidance, and day-to-day issues that business owners face. Whether you are a small trading company, a growing consultancy or a free zone company, we provide simple and compliant solutions that help you maximise your remuneration.
Frequently Asked Questions
Q1. Is owner salary benchmarking mandatory in the UAE?
No, but it is highly recommended. It provides strong support for demonstrating compliance with the arm’s length principle under the UAE Corporate Tax Law.
Q2. Can a reasonable owner salary reduce my corporate tax?
Yes. For incorporated companies (such as LLCs), a properly documented and market-aligned salary is generally deductible as a business expense, lowering taxable profit, unlike non-deductible dividends or profit distributions.
Q3. Is this service useful for startups and small businesses?
Yes. This service is very beneficial for startups and small businesses as setting up the correct structure of a company from the start will save a lot of time and resources in the long run.
Q4.How often should salary benchmarking be reviewed?
Review your owner salary on an annual basis and also upon any significant change to your business, such as an increase in revenue, size or operations.
Q5. Do you support businesses with multiple owners or directors?
Yes. We provide customized benchmarking for multi-shareholder companies and companies with complex management structures.