Salary Benchmarking Reports in the UAE: What Article 36 Really Requires

TL;DR

• “Salary Benchmarking Report” is not an official Federal Tax Authority (FTA) form and is not mentioned in UAE Corporate Tax legislation.
• Federal Decree-Law No. 47 of 2022 requires founder/director remuneration to match Market Value under Article 36.
• The difficult part is not producing a PDF report. The difficult part is defending why the remuneration is commercially reasonable during an FTA review.

A Salary Benchmarking Report is a market-created audit product that appeared in the UAE after the Corporate Tax implementation in 2023–2025. Federal Decree-Law No. 47 of 2022 does not create a mandatory document under that name. What the law actually requires is narrower: payments to founders, directors, and other Connected Persons must correspond to Market Value under Article 36 of the Corporate Tax Law.

The distinction matters because many UAE SMEs were told that a standalone benchmarking report is “mandatory under FTA rules.” Official legislation does not say that. At the same time, the opposite extreme is also dangerous: founders cannot arbitrarily convert company profit into inflated salary deductions without being able to defend the commercial logic behind those payments.

What does Article 36 actually regulate?

Article 36 of Federal Decree-Law No. 47 of 2022 regulates payments to Connected Persons. Connected Persons include founders, shareholders, directors, officers, relatives, and entities under common control. The law states that such payments are deductible only if they correspond to Market Value and are incurred wholly and exclusively for business purposes.

This rule exists because the UAE Corporate Tax allows salary expenses to reduce taxable profit. Without Connected Persons rules, owner-managed companies could theoretically move most business profit into deductible payroll.

The law does not prohibit founder salaries. It prohibits founder salaries that materially exceed Market Value without commercial justification.

Why did Salary Benchmarking Reports appear in the UAE?

Salary Benchmarking Reports appeared after the first Corporate Tax filing cycle because audit firms needed a practical way to support Market Value disclosures in Corporate Tax returns.

The sequence was straightforward:

“The underlying compliance issue is real. The controversial part is how the market started presenting the solution itself. In practice, many founders began hearing a simplified narrative: “FTA requires a Salary Benchmarking Report.”

Official legislation does not contain such wording. The law requires Market Value compliance. The market created a product around the format.”

Which UAE laws govern founder remuneration?

Founder remuneration in the UAE Corporate Tax system is regulated through several interconnected laws and FTA guidance documents.

Article 34 — Arm’s Length Principle

Article 34 applies OECD transfer pricing methodology to Related Party transactions. The law allows the standard OECD methods:

• CUP;
• Resale Price;
• Cost Plus;
• TNMM;
• Profit Split.

This matters because founder remuneration must ultimately survive an Arm’s Length analysis.

Ministerial Decision No. 97 of 2023

This decision defines when the Master File and Local File become mandatory:

• revenue ≥ AED 200 million; or
• MNE group revenue ≥ AED 3.15 billion.

For most UAE SMEs, these thresholds are not reached. However, Article 36 still applies even below those levels.

FTA Transfer Pricing Guide CTGTP1

The guide explains Transfer Pricing support requirements and references:

• functional analysis;
• benchmarking studies;
• supporting records;
• Arm’s Length documentation.

At the same time, the guide never creates a mandatory document called “Salary Benchmarking Report.”

Why did the “mandatory benchmarking” narrative spread so quickly?

One reason the narrative became difficult to challenge is informational asymmetry.

Most founders do not read Federal Decree-Laws, Ministerial Decisions, OECD Transfer Pricing guidance, or FTA technical manuals directly. In practice, they rely on:

• audit firms;
• accounting providers;
• Google search results;
• AI-generated summaries;
• secondary interpretations of UAE tax rules.

This creates a structural problem.

A large number of UAE audit firms now publish articles stating — directly or indirectly — that Salary Benchmarking Reports are “required” for FTA compliance. Once dozens of firms repeat the same interpretation online, search engines and AI systems start treating that interpretation as consensus reality.

As a result, even AI-generated answers often repeat the same conclusion because they aggregate information from publicly available audit-firm content rather than from direct interpretation of UAE legislation.

The difficult part is that the actual answer sits across multiple separate regulatory layers mentioned above. None of those documents creates a mandatory standardized form called “Salary Benchmarking Report.”

But a founder would only discover that after manually reviewing primary legal sources — often without knowing:

• which law matters;
• which article applies;
• where the relevant rule is located;
• how Connected Persons rules interact with Transfer Pricing requirements.

This is why the market narrative became difficult to challenge. The compliance obligation itself is real. The commercial packaging around it became amplified through repetition across audit-firm websites, search results, and AI-generated explanations.

What does the FTA actually check during review?

The FTA checks whether remuneration is commercially defensible. It does not check whether a taxpayer purchased a branded benchmarking package from an audit firm.

The difficult part is functional justification:

• what the founder actually does;
• what risks they assume;
• how central they are to revenue generation;
• whether compensation reflects market reality.

This becomes especially sensitive in founder-led businesses where the same individual:

• owns the company;
• approves the salary;
• manages operations;
• signs contracts;
• drives sales.

In those cases, simplistic comparisons against standard salaried employees may become weak evidence.

The FTA Tax Returns Guide CTGTXR1 introduced Connected Persons disclosure fields that require taxpayers to report:

• actual remuneration amount;
• Market Value amount;
• resulting TP adjustment.

This is why businesses still need defensible support even if no specific report format is legally prescribed.

When does the founder's salary become a tax risk?

Founder remuneration usually becomes sensitive when the compensation materially exceeds commercial norms or when the structure itself creates higher review exposure.

The most common triggers are:

One important nuance is often missed: disclosure thresholds and deductibility rules are not the same thing.

Even if Connected Persons disclosure thresholds are not triggered, Article 36 still applies.

What documentation is usually sufficient?

For many UAE SMEs, reasonable supporting documentation is much simpler than a large formal benchmarking package.

In practice, support files often include:

• founder role description;
• FAR analysis (Functions, Assets, Risks);
• market salary comparisons;
• compensation breakdown;
• business justification for bonuses or benefits.

Public UAE market references may already provide commercially reasonable support:

• Cooper Fitch GCC Salary Guide;
• Hays UAE Salary Guide;
• GulfTalent;
• Bayt;
• Robert Half UAE.

The legal question is not: “Did the taxpayer buy a benchmarking report?” The legal question is: “Can the taxpayer reasonably defend Market Value during FTA review?”

When is a full benchmarking study justified?

A full Transfer Pricing-style remuneration study becomes more rational when tax exposure itself becomes material.

Examples include:

• multi-million AED founder remuneration;
• large free zone groups;
• QFZP structures;
• MNE exposure;
• multiple Connected Persons;
• structures approaching AED 200 million revenue thresholds.

In those cases, detailed benchmarking becomes a defensive tax-control mechanism rather than generic upselling.

At the SME level, proportionality matters more than report thickness.

A Dubai consultancy paying a founder AED 450,000 annually does not create the same review profile as a structure deducting AED 8 million in shareholder remuneration.