Yes. Owners lend money to their own companies all the time, to cover set-up costs, a slow quarter or a large purchase, and UAE law doesn’t require them to charge interest.
Corporate Tax doesn’t stop it either, but it does change the paperwork. A loan from an owner is a related-party transaction, so the company should be able to show what the money is, on what terms, and how it was accounted for.
The short answer depends on which way the money moves
| The arrangement | Corporate Tax position | What to do |
|---|---|---|
| Owner lends to the company, no interest | Usually low risk: the company has no interest expense, so its taxable income isn’t reduced | Put the terms in writing; don’t deduct interest that was never paid |
| Owner lends to the company and charges interest | Deductible only at a market rate and within the interest limits | Support the rate; check Articles 30, 31 and 34 |
| Company lends to the owner, no interest | Higher risk: the FTA can add arm’s length interest to the company’s taxable income | Charge a market rate, or treat the payment for what it really is |
Why Corporate Tax looks at loans from owners
The Federal Decree-Law No. 47 of 2022 (PDF) has two sets of rules for dealings between a company and the people behind it.
The first is the related party rule. You are a related party of your company if you own 50% or more of it or control it, and the holdings of your relatives up to the fourth degree of kinship count towards the 50% (Article 35). Related parties must deal on arm’s length terms: the terms independent parties would agree (Article 34).
The second is the connected person rule. Every shareholder is a connected person, whatever the size of the holding, and so are directors and officers who have a strategic decision making authority (Article 36). A payment to a connected person is deductible only to the extent it reflects market value and is made wholly and exclusively for the business.
So a loan from you to your company is always dealing with a connected person, and usually with a related party too.
Is an interest-free loan to your company a transfer pricing problem?
For the company, usually not. The FTA’s Transfer Pricing Guide confirms that the arm’s length principle applies even when something is provided free or below market value. But an interest-free loan from an owner doesn’t reduce the company’s taxable income. With no interest expense, its profit is higher than it would be under a market-rate loan.
The practical consequence is that there is nothing to deduct. The FTA’s public clarification CTP011 (July 2026), listed on its Transfer Pricing Downward Adjustments, allows a company’s own downward adjustment only under strict conditions. These include evidence that the related party made a matching adjustment, and an individual owner outside Corporate Tax has nothing to match.
Put the loan in writing
No law sets a form for a shareholder loan, but the Transfer Pricing Guide gives more weight to how the parties actually behave than to what a contract says. Paperwork that matches the bank statements settles most questions later.
A short agreement, signed when the money moves, should cover:
- the lender, the borrower and the amount;
- the currency and the date of each transfer;
- the interest rate, stated as 0% if none is charged;
- repayment terms, either on demand or by a fixed date;
- whether the loan ranks behind other creditors;
- whether it can be converted into share capital.
Approve it by a board or shareholders’ resolution and keep both documents with the accounts. Then make every transfer from the owner’s bank account to the company’s, so the trail matches the paperwork.
How should the company account for the loan?
Most owner loans are repayable on demand. Under IFRS 13, a liability with a demand feature is measured at no less than the amount payable on demand, so the company records the loan at what it owes.
A long-term interest-free loan is different. IFRS 9 measures it at present value, using a market interest rate for a similar loan. In practice, when the lender is a shareholder, the difference between the cash received and that present value is usually recorded in equity as a capital contribution. Notional interest is then charged to profit over the term of the loan.
The FTA hasn’t published guidance on whether that notional interest can reduce taxable income. Until it does, take advice before deducting it. Our IFRS compliance team can review the treatment.
What if you charge the company interest?
Interest is allowed, and the company can usually deduct it. Three rules decide how much.
- The rate must be a market rate. Interest paid to an owner above market value is disallowed and should be added back to the Net Profit (Article 34).
- The utilisation of the borrowed funds is a key consideration when determining the deductibility of interest expenses. Under Article 31, interest incurred on related-party loans used to finance dividend distributions, return of capital, capital contributions to related parties, or the acquisition of an entity that subsequently becomes a related party is generally non-deductible. An exception may apply where it can be demonstrated that the principal purpose of the arrangement was not to obtain a Corporate Tax advantage. Establishing this exception may be relatively more straightforward where the lender is subject to Corporate Tax at a rate of 9% or higher on the interest income received. However, this may be more challenging where the lender is an individual shareholder or owner who is not subject to Corporate Tax on such interest income.
- The interest cap applies to large borrowers. Net interest above the greater of 30% of EBITDA or AED 12 million is disallowed for the year and can be carried forward for up to 10 tax periods (Article 30 and Ministerial Decision No. 126 of 2023).
The FTA’s Interest Deduction Guide explains the order in which these rules apply.
For the owner, the interest is usually outside Corporate Tax. Interest earned by lending your own money, where no licence is needed and the lending isn’t run as a commercial business, is personal investment income under Cabinet Decision No. 49 of 2023, whatever the amount.
Loan or share capital: which suits your company?
| Owner loan | More share capital | |
|---|---|---|
| How it is set up | Loan agreement, resolution and bank transfer | Shareholders’ resolution and an amended memorandum of association |
| Getting the money back | Repayment on the agreed terms | Dividends, or a formal capital reduction |
| Interest | Optional; deductible at a market rate | None; dividends aren’t deductible |
| Balance sheet | Liability | Equity |
Many owners start with a loan and convert it into capital later, for example to strengthen the balance sheet before applying for a bank facility. Conversion needs a capital increase registered with the licensing authority, and our business restructuring team handles the steps.
Is there VAT on a shareholder loan?
No. An interest-free loan involves no consideration, so it isn’t a supply. Where interest is charged, it is an exempt financial service, while an explicit fee such as an arrangement fee is standard-rated (Article 42 of the VAT Executive Regulation).
What about the company lending money to you?
This is the direction that carries the risk. An interest-free loan from the company to an owner who is a related party leaves the company’s income below the arm’s length level. The FTA can add the missing interest to its taxable income (Article 34), and as an individual you get no matching relief.
Watch two more points:
- a balance you have owed the company for a long time may be treated as a loan that should carry interest, even with no agreement;
- a joint stock company can’t lend to its board members (Article 153 of the Commercial Companies Law), and the rule arguably extends to LLC managers.
If the money is really a distribution of profit, record it as one.
Do you need to disclose the loan in the tax return?
Most owner-managed companies fall below the disclosure thresholds. Under the FTA’s Corporate Tax returns guidance, a transfer pricing disclosure form is needed when:
- transactions with related parties exceed AED 40 million in the period, in which case each category above AED 4 million is reported; or
- payments or benefits to any one connected person exceed AED 500,000.
Under Ministerial Decision 97 of 2023, a taxable person is required to maintain a Master File and Local File if its annual revenue, on an individual entity basis, amounts to or exceeds AED 200 million, or it is a Multinational Enterprise (MNE) Group with consolidated group revenue amounting to or exceeding AED 3.15 billion.
Further, upon submission of the Corporate Tax Return, the FTA may request the taxable person to furnish the Master File and Local File, which must be submitted within 30 days from the date of the FTA’s request, in accordance with the applicable requirements (Article 55).
Although the disclosure and documentation requirements may not apply where a taxable person elects for Small Business Relief, it remains important to ensure that all transactions with Related Parties and Connected Persons are conducted in accordance with the Arm’s Length Principle.
If your companies are in a Tax Group
Loans between companies in the same Tax Group, which needs 95% common ownership, drop out of the group’s taxable income (Articles 40 and 42). An individual owner can’t be a member of a Tax Group, so this helps only company-to-company lending.
Common mistakes
Leaving the terms unwritten
A transfer with no agreement leaves the company, its auditor and the FTA to guess whether it was a loan, capital or a gift. Our checklist of questions to ask before your next tax filing includes a related-party review.
Mixing personal and company payments
When an owner pays company bills from a personal card, those amounts become part of the loan balance. Record them as they happen, with the invoices in the company’s name; regular bookkeeping keeps the balance accurate.
Deducting interest that was never paid
Notional interest on a 0% loan isn’t an expense the company incurred. Don’t add it to the return without advice.
Charging more than a market rate
Interest above market value is disallowed for the company. Keep evidence of the rate you used, such as bank quotes for similar borrowing.
Letting the company fund you without terms
An open-ended balance owed by an owner invites an adjustment. Agree terms, charge a market rate, or clear the balance.
How A&A can help with owner loans
We review owner and related-party balances before the return is filed, draft simple loan terms, set the accounting treatment, and check whether the disclosure thresholds apply. For larger groups, our transfer pricing team prepares benchmarking and documentation.
See our Corporate Tax services, or talk to us about your related-party balances.
Put the loan on paper
An interest-free loan from you to your company is normal and, for Corporate Tax, usually low risk. Put the terms in writing, move the money through the bank, account for it correctly and don’t deduct interest the company never paid. Money flowing the other way, from the company to you, needs more care.
Frequently Asked Questions
Is an interest-free shareholder loan legal in the UAE?
Yes. No UAE law requires a shareholder to charge interest, and the Commercial Companies Law has no rule against shareholders lending to an LLC. Put the terms in writing.
Do I pay tax on interest my company pays me?
Usually not. Interest from lending your own money, where no licence is needed and it isn’t a commercial business, is personal investment income outside Corporate Tax. That changes if lending becomes a licensed business.
Can I convert my loan into share capital later?
Usually, yes, through a capital increase: a shareholders’ resolution and an amended memorandum of association registered with the licensing authority. Check the registry’s requirements before you start.
Does the loan count towards the transfer pricing disclosure threshold?
Financing between related parties is a related-party transaction, so it counts towards the AED 40 million threshold. Most owner-managed companies stay well below it.
What changes if my company elects Small Business Relief?
You still apply the arm’s length principle, but you don’t file the transfer pricing disclosure form or keep master and local files.
Is a loan from my brother treated the same way?
Usually, if you own 50% or more of the company. A relative up to the fourth degree of kinship is your related party, so his loan to a company you control is a related-party transaction too.
Should the loan be repayable on demand?
That is a commercial choice. On-demand terms keep the accounting simple, because the loan is carried at the amount owed. A fixed long-term loan may need to be discounted under IFRS 9.