Executive compensation and bonuses: transfer pricing valuation challenges in the UAE. Why this topic has come to the forefront?

When preparing clients’ tax returns, we encountered a recurring issue: executives’ roles and authority were not clearly defined, payments were not broken down by function and type of remuneration, and bonus policies were either missing or did not reflect actual situation.

The questions begin with determining the individual’s status. We now have fairly clear criteria for who qualifies as a director or officer. Applying those criteria, however, is a separate exercise that many companies do not factor into their budgets and timelines.

A separate question is how to substantiate the amount of remuneration. Salary surveys may contain data on actual pay, candidates’ salary expectations or recruiters’ estimates. Their suitability depends on the underlying data and how closely the surveyed roles match the role being assessed.

We help companies develop a reasoned position on executive remuneration: determine the individual’s status, select an appropriate valuation approach and prepare supporting internal documentation. This is one of the areas we recommend addressing outside the peak tax filing season.

Full analysis is available at the link.