Related Party Disclosure Forms

Introduction

Related-party transactions are an integral part of many businesses, especially in group structures, family-owned companies, and multinational enterprises. However, such transactions often attract regulatory scrutiny, as they carry the risk of profit shifting, tax avoidance, and conflicts of interest.

To enhance transparency, regulators require businesses to complete Related Party Disclosure Forms as part of their financial reporting and tax compliance. In the UAE, under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and International Financial Reporting Standards (IFRS), companies must disclose the nature, volume, and terms of transactions with related parties.

What Are Related Party Disclosure Forms?

These forms are structured documents filed alongside financial statements and tax returns, requiring businesses to:

Identify related parties (e.g., parent companies, subsidiaries, associates, shareholders, directors, and key management).

Disclose the nature of related-party transactions (sales, purchases, loans, guarantees, services, royalties, etc.).

Report outstanding balances and commitments with related parties.

Confirm whether such transactions were carried out at arm’s length.

Purpose: To provide regulators, auditors, and stakeholders with assurance that related-party dealings are transparent, justified, and compliant with applicable laws.

Regulatory Basis in the UAE

Corporate Tax Law

All related-party transactions must comply with the arm’s length principle.

The Federal Tax Authority (FTA) requires disclosure to ensure fair profit allocation and prevent tax base erosion.

IFRS (IAS 24 – Related Party Disclosures)

Mandates disclosure of related parties, relationships, and transactions in audited financial statements.

Economic Substance Regulations (ESR)

For certain activities (finance, holding companies, headquarters), disclosure is crucial to demonstrate substance.

Key Elements of Related Party Disclosure Forms

Identification of Related Parties

Parent companies, subsidiaries, sister companies, joint ventures.

Individuals such as shareholders, directors, or close family members.

Types of Transactions to be Disclosed

Sale or purchase of goods and services.

Intercompany loans and interest payments.

Management fees and administrative charges.

Royalty and licensing payments.

Guarantees and commitments.

Outstanding Balances

Receivables, payables, and loan balances with related parties.

Pricing and Terms

Confirmation that transactions were carried out at market (arm’s length) conditions.

Supporting Documentation

Intercompany agreements.

Benchmarking studies.

Transfer Pricing Local File and Master File (where applicable).

Risks of Non-Disclosure

Regulatory Penalties – Failure to disclose related-party transactions can result in fines and additional tax liabilities.

Tax Adjustments – FTA may reallocate income or deny deductions.

Audit Qualifications – Auditors may qualify or disclaim opinions due to inadequate disclosure.

Reputational Damage – Lack of transparency raises governance concerns.

Best Practices for Related Party Disclosures

Maintain a Related Party Register – List all related entities and individuals.

Formalize Intercompany Agreements – Ensure contracts clearly outline terms and pricing.

Conduct Regular Transfer Pricing Reviews – Benchmark key transactions annually.

Prepare Disclosure Forms Early – Align with financial statements and tax filings.

Ensure Consistency – Information in disclosure forms must align with TP documentation, ESR filings, and audited accounts.

Conclusion

Related Party Disclosure Forms are not just a compliance requirement—they are a cornerstone of corporate transparency and good governance. For businesses in the UAE, ensuring accurate disclosure of related-party transactions is critical to comply with Corporate Tax, IFRS, and ESR requirements.

By proactively maintaining registers, formalizing agreements, and preparing disclosures with supporting documentation, businesses can reduce compliance risks and strengthen their financial credibility.

✍️ Prepared by Sheikh Anwar Accounting and Auditing LLC – Registered Auditor with the Ministry of Economy (Auditor Entry No. 5817, Company Entry No. LC4695-01). We specialize in Corporate Tax, Transfer Pricing, VAT, AML, and Financial Audit Compliance, helping UAE businesses meet their disclosure obligations.

🌐 Visit us: www.sa-auditors.com