UAE VAT on Director's Services
FTA has clarified how VAT applies to Director services
Understanding UAE VAT on Director’s Services…
The FTA has clarified how VAT applies to Director services. If you are an independent director or a business appointing one, here are the essential takeaways:
- Are Director Services Taxable?
Yes. Directorship (except where there is Employer -employee relationship exists) is considered a supply of services for VAT purposes., independent directors acting on a regular and ongoing basis are.
- Registration Thresholds
A director must register for VAT and charge a 5% tax on their fees if their total taxable supplies (including director fees and other business income) meet these thresholds:
Mandatory Registration: Exceeds AED 375,000.
Voluntary Registration: Exceeds AED 187,500.
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Place of Supply Rules
VAT only applies if the supply is treated as taking place in the UAE.
Default: The place of supply is the director’s place of residence.
Overseas Recipients: If a UAE director provides services to a company outside the GCC, the services may be zero-rated (0%) under specific conditions.
GCC Residents: If the recipient is in another GCC State and registered for VAT there, the place of supply is the recipient’s location. -
Special Scenarios
a. Director Working Overseas: If a UAE resident director physically performs services outside the GCC (e.g., attending board meetings in the UK), the supply is zero-rated.
common Directors: If one company pays all fees for a director serving multiple boards and later recovers costs from the other companies, there is no VAT on the “cost recovery” between those companies.
Right to Appoint: If Company A has a contractual right to appoint a director to Company B and charges a fee for this, that fee is a taxable supply subject to VAT.