The UAE Federal Tax Authority (FTA) issued VAT Public Clarification – VATP037 on 13 May, 2024, in which it provided clarification concerning changes in the treatment of the performance of a director’s function by a natural person as a supply of services for VAT purposes.
With effect from 1 January, 2023; the performance of a Director’s function, by a natural person and for a remuneration (monetary or in-kind), on a Board of Directors of any government or private sector entity, shall not be considered to be a supply of services for VAT purposes.
Previously, the general rule was that services provided by Directors, whether the function was performed by a natural person or a legal person, were considered to be services for VAT purposes.
These supplies of services were taxable where:
- The Director performed the services on a regular, ongoing, and independent basis.
- The total value of taxable supplies and imports made by the Director, not limited to but also including the Director services, exceeded the mandatory registration threshold.
