Amended VAT Treatment for Director Services

In order to make certain changes to the Federal Regulation (No. 8 of 2017) on VAT, the UAE government issued the Federal Regulation No.18 of 2022 on VAT. On 21 October 2022, Cabinet Decision No. 99 of 2022 established the implementing regulations for this Value-Added Tax legislation. 

Scope of Amendments to the UAE VAT Law

The following amendments have been made;

  • A new subsection (3) on article 7 has been included in the updated VAT regulation. This supplementary definition establishes that any supply other than those listed in the VAT rules in question shall not be deemed a supplier.
  • Article 3 has been updated to include a new clause stating that the roles of director’s board members, accomplished by a natural person, for any private or public entity, won’t be viewed as a “Supply of Services” while the first clause of the Article 3 clarifies the meaning of “supply of services” by stating that all supplies will be called “supply of services” if they are not supply of goods”. The services cannot include goods in any case. Both goods and services are viewed differently and hence taxed differently in the UAE.
  • According to the new provision, a natural person’s services as a director of a public or private company are exempt from VAT if the person has been nominated to that company’s board of directors. But if a legal entity or person other than the natural person is delivering the services and it meets the requirement for VAT registration in UAE, it will be subject to VAT. 
  • If a firm or other legal entity is offering director services, it implies it is employing or contracting with individuals to take their services, or it is a person working setting up an entity as a single proprietor and providing director services on its behalf or it can be an individual providing these services on behalf of another entity. 
  • The date of supply of such services shall be the earlier of the dates of issuance of any payment receipt, tax invoice, tax invoice due dates, payment submission date (as mentioned on receipt), and expiry dates where the legally designated director board associate is a natural person providing sustained services having successive payouts or invoices. Director services are subject to VAT provided that the director fee is set or decided. Aside from that, it won’t be subject to value-added tax. 

 The value of all of the above person’s supplies must be considered when deciding whether or not they are required for VAT registration in UAE when the director’s payment is not the only income source and other sources are present. This includes those people who receive director service fees in addition to, or instead of, director fees from a corporation.

Avail the Services of Top Tax Agents in the UAE 

For businesses to have an in-depth understanding of the implementation of VAT and how it works in particular, it is commendable to seek the services of top Tax Agents in UAE. So, contact us today and we shall be happy to assist you!

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