Ministry announces new VAT exemption

The Ministry of Finance (MoF) has announced that starting from 1st January, 2023, director services undertaken by natural persons serving as members of boards at entities and institutions across the UAE will not be subject to value added tax (VAT).

Meanwhile, VAT will still apply on the director services for legal persons serving as board members that delegate a natural person to act in the name of the legal persons as a member of the board of directors.

Younis Haji Al Khoori, Under-Secretary of Ministry of Finance, noted that as per the Cabinet Decision amending the Executive Regulation of the Federal Decree-Law on VAT, which will go into effect on 1st January, 2023, performing the duties of a member of a board of directors at a government entity or private establishment in exchange for a reward (monetary or benefits in kind) will not be considered as a supply of services for the purposes of VAT.

He stated that before the new legislative amendment is implemented, tasks performed by board members - natural and legal persons alike - are treated as taxable services subject to VAT, on the condition that the member provides them on a regular, continuous, and independent basis, and if the total value of these taxable supplies as well as any other taxable services and import transactions, exceeds the mandatory tax registration threshold.

“Where the director services provided by a member of a board span 1st January, 2023 (effective date of the Cabinet Decision), the date of supply should be considered to determine whether such services are subject to the amended provisions or not,” he added.