DDo you provide individual and independent directorship services for companies in the UAE? If so, you may need to consider whether you are required to register for VAT with the Federal Tax Authority (FTA) and charge VAT on your director fees.
If you provide director services on a regular, ongoing and independent basis, such as acting as an executive or non-executive director on the board of one or more companies, the services may be subject to UAE VAT.
For UAE-resident businesses, VAT registration is mandatory where the total value of taxable supplies and imports exceeds AED 375,000 over the previous 12 months, or is expected to exceed AED 375,000 within the next 30 days. This threshold applies to your total taxable supplies and imports, rather than director fees alone.
Voluntary VAT registration is also available where the value of taxable supplies, imports or taxable expenses exceeds AED 187,500 over the relevant period.
When Are Director Services Subject to VAT?
As outlined in the FTA’s guidance on director services, independent director services can constitute taxable supplies where they are provided on a regular, ongoing and independent basis.
It is important to distinguish independent directorship services from services provided by an employee to their employer. Where an individual acts as an employee and provides services as part of an employment relationship, those activities are generally not treated as a taxable supply for VAT purposes.
Consideration for director services can include director fees, bonuses, stock options, recharges for goods and services, or other forms of payment or consideration.
Independent director services are generally not exempt supplies, meaning that the applicable VAT rules should be considered when determining whether VAT must be charged.
Place of Supply for Director Services
The place of supply is also important when determining the VAT treatment of director services. Where services involve companies or directors based outside the UAE, the applicable place-of-supply rules should be reviewed to determine whether UAE VAT applies.
For more information, please refer to the Federal Tax Authority’s Guide on Directors’ Services.
If you provide independent directorship services and are unsure whether you need to register for VAT or charge VAT on your director fees, professional advice can help you understand your specific obligations.
Please contact James Berry & Associates Legal Consultants for further information and advice regarding VAT and director services in the UAE.
This article is provided for general informational purposes only and does not constitute legal or tax advice. UAE VAT legislation and guidance may change, and the applicable VAT treatment depends on the specific circumstances.
