UAE Corporate Tax and Executive Remuneration: How to Set Pay for Your Local Managing Director
Since the introduction of UAE Corporate Tax, managing directors often ask us what salary is appropriate in the UAE and how to think about what they receive in Japan and in the UAE. We explain what the Corporate Tax rules allow and how to build an appropriate executive remuneration policy.
UAE Corporate Tax in brief
The UAE levies Corporate Tax at the following rates, depending on taxable income.
| Taxable income | Rate |
|---|---|
| Up to AED 375,000 a year | 0% |
| The portion above AED 375,000 a year | 9% |
Taxable income is income less deductible expenses, and Corporate Tax is 9% of the amount by which taxable income exceeds AED 375,000.
Taxable income of AED 400,000:
1. Excess over the threshold: AED 400,000 − AED 375,000 = AED 25,000
2. Corporate Tax: AED 25,000 × 9% = AED 2,250
Personal income tax in the UAE
At the time of writing (October 2026), the UAE does not levy personal income tax, so no tax arises on salaries or dividends received by individuals.
Against this background, we are increasingly asked whether a company can make the most of the absence of personal income tax by raising salaries to reduce taxable income and avoid Corporate Tax.
What the Corporate Tax rules say
Deducting remuneration paid to management
Remuneration paid to management is generally a deductible expense for Corporate Tax purposes. However, remuneration paid to directors, owners or persons connected to them must reflect market rates, in line with the rules on payments to connected persons. Any amount above the market rate is not deductible, so it cannot be used to reduce taxable income. No specific numerical benchmark for the market rate has been published.
The FTA explains that remuneration paid to a company's management is generally deductible, subject to certain specific cases. Where remuneration is paid to a director or owner of the company, or to someone connected to a director, it should reflect the market rate for the role performed and the services provided, and any amount above the market rate is not deductible.
Because no numerical benchmark for the market rate has been published, it is important to document the basis for the amount — for example remuneration levels at companies of similar size and sector, and the responsibilities of the role — in line with the arm's length principle used in transfer pricing. This is the best preparation for a tax audit.
How to design an executive remuneration policy
Designing an appropriate executive remuneration policy in the UAE, with tax audits in mind, matters greatly for owner-managers and executives. The considerations include internal factors, external factors and the method of payment. Once these have been considered, the policy should be documented and approved by resolution at a shareholders' meeting.
- Method of payment: fixed remuneration (appropriate levels by position and the criteria for revisions)
- Executive bonuses (short-term or long-term incentives) and performance-linked pay
- Whether to introduce retirement benefits or share-based remuneration
Under UAE Corporate Tax (9% on the portion above AED 375,000), executive remuneration is deductible as long as it reflects market rates. Because no numerical benchmark has been published, documenting the basis for the amount in line with the arm's length principle, and obtaining a shareholders' resolution, is the best preparation for a tax audit. We recommend considering internal factors, external factors and the method of payment systematically and designing remuneration as a policy.
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