The United Arab Emirates (UAE) Federal Tax Authority (FTA) has issued a new Public Clarification (VATP037) that replaces the previous VAT Public Clarification (VATP031) on the Value Added Tax (VAT) treatment of services provided by a natural person as a director on a board of directors.

Here are the key points:

Exclusion from VAT

Effective from January 1, 2023, the provision of director services is not considered a supply of services for VAT purposes, provided that:

• The services are provided by a natural person
• The person is appointed as a director on a board of any government entity or private sector establishment

Clarification on Committee Services

The new Public Clarification confirms that the exclusion from VAT also extends to services performed as a member of a committee derived from the same board on which the director serves.

The differences between VATP031 and VATP037 are minimal and include the following changes: 

The Board of Directors section / Page 3 / specifies “For clarity, this exclusion extends to services performed as a member of a committee derived from the same Board on which the Director serves.”

The Capacity as Director section / Page 4 / now has an added sentence: “For example, free-lance services rendered by a third-party natural person who is not a Director during the meetings of a Board of Directors, or any committee derived therefrom are considered to be supplies of services for VAT purposes and will be taxable subject to meeting other conditions.”  

Taxable Services

However, services rendered by a third-party natural person who is not a director during the meetings of a board of directors or any committee derived therefrom shall be considered as a supply of services for VAT purposes and will be taxable subject to meeting other conditions.

Transitional Rules

The same transitional and deregistration rules provided in the previous Public Clarification (VATP031) are applicable to the services performed as a member of a committee by a natural person in the formal capacity as director.

The complete public clarification can be accessed here.

In summary, the UAE government has clarified that director services provided by natural persons on government or private sector boards are now excluded from VAT, including services on committees derived from those boards. However, third-party services during board meetings remain taxable.