CEO Remuneration Package: What to Know?

Written By Akshaya Ashok, Reviewed By Reyees K P

Published on 09/04/2025

The UAE Corporate Tax Law has brought some big changes to how taxes work, affecting businesses in all fields. As companies deal with these new rules, CEO pay has become a hot topic in corporate governance and tax matters. CEO salaries need to match what independent businesses would offer, to avoid tax problems and keep things transparent. This means that pay should be fair and not overly high. By getting a handle on how CEO compensation works under the UAE Corporate Tax Law, companies can stay compliant, reduce tax risks, and keep good governance practices.

UAE Corporate Tax Law and CEO Remuneration Package

Under the UAE Corporate Tax Law, there is no specified minimum salary for CEOs, emphasizing instead the importance of fair market value and compliance with the arm's length principle. This means that CEO remuneration should be comparable to what unrelated parties would agree on, ensuring that payments are reasonable and justifiable. The significance of this lies in the deductibility of managerial expenses from taxable income, allowing businesses to claim legitimate CEO compensation as a deductible expense, thereby reducing their tax liability.

Best Practices for Setting CEO Compensation Package in the UAE

Benchmarking Against Industry Standards:

Utilize market data to justify pay, incentives, and benefits.

Reliable sources:

• Industry reports:  Data on compensation trends and benchmarks within specific sectors.
• Salary surveys: Detailed analyses of salary ranges for comparable positions.
• Comparable companies: Remuneration practices of businesses with similar size and scope.

Maintaining Proper Documentation:

Records needed:

• Employment contracts: Formal agreements outlining compensation, responsibilities, and terms of employment.
• Performance metrics: Measurable data demonstrating the CEO's contributions and achievements.
• Board approvals: Official records of board resolutions authorizing and justifying the CEO's remuneration.

Documentation supports:

• Tax compliance: Proof of legitimate expenses and adherence to tax regulations.
• Audits: Evidence to justify financial transactions and remuneration during internal or external reviews.

Follow the Arm’s Length Principle:

What is the Arm’s Length Principle?

The Arm's Length Principle is a fundamental concept in taxation that ensures fair and transparent business dealings. In the context of CEO compensation, this principle dictates that pay should mirror what unrelated parties would agree on, meaning that the compensation package should be comparable to what other companies would offer for similar services. Failure to comply with this principle can result in severe consequences, including tax adjustments, penalties, or disallowed deductions. Certain scenarios are more likely to attract scrutiny, such as family-owned businesses where nepotism may be suspected, or multinational subsidiaries where transfer pricing issues may arise.

Seeking Professional Tax and Legal Advice:

Role of tax consultants: Structuring compliant CEO remuneration packages

For expert consultation on tax-efficient remuneration structures, consider consulting firms like Reyson Badger.

When to Involve Legal Advisors?

• Complex ownership structures: When dealing with multi-tiered ownership, international entities, or intricate shareholder agreements.
• Other legal complexities:  For matters involving significant regulatory changes, high-value disputes, or specialized contractual obligations.

What are the Potential Pitfalls and How to Avoid Them?

• Overpaying or Underpaying the CEO: Paying too much can lead to tax issues, while paying too little may cause retention problems; regular industry benchmarking helps maintain balance.
• Lack of Transparency in Compensation Decisions: Unclear pay structures can create mistrust and governance risks, so ensuring an open, well-documented process is essential.
• Failure to Update Remuneration Policies as the Business Scales: Stagnant pay policies can make it hard to attract top talent, so regular reviews aligned with business growth are necessary.

Conclusion

Businesses in the UAE need to have structures for CEO Remuneration Packages that follow the rules. Here are some key points to consider:

• compare your pay against what others in the industry are doing
• keep good records
• Watch out for common mistakes like paying too much or too little
• keep your pay policies updated.
• get advice on taxes and legal issues

To get advice on staying ahead with compliance, ensuring smooth tax filings, and avoiding conflicts, consult Reyson Badger. We suggest getting in touch with our experts to check your CEO remuneration packages and make sure they're following UAE laws.  This way, you can reduce tax issues and focus more on growing your business.

Written By

Akshaya Ashok

Akshaya Ashok is a content writer specializing in creating content focused on accounting and auditing. With over two years of experience, she has developed expertise in crafting professional content for the financial sector.