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May 15, 2026

This Public Clarification explains the VAT treatment for services performed by a natural person as a director on a board. Effective 1 January 2023, due to the amendment of Article 3(2) of the Executive Regulation by Cabinet Decision No. 99 of 2022, these functions are no longer considered a supply of services for VAT purposes. The guidance outlines conditions for this exclusion, specifying it applies only to natural persons in their formal capacity as appointed directors. It provides crucial transitional rules, referencing Articles 25 and 26 of the VAT Decree-Law to determine the date of supply.

VATP031

VAT Public Clarification

Performing the function of Director on a Board of Directors by a Natural person

Please be informed that Public Clarification VATP031 has been replaced with Public Clarification VATP037

Issue

Article 3 of the Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“Executive Regulation”) has been amended by Cabinet decision No. 99 of 2022, which introduced a new provision.

Article 3(2) of the amended Executive Regulation states that the functions of a member of a Board of Directors (hereafter referred to as “Director”), performed by a natural person, appointed as Director, for any Government entity or private sector establishment, shall not be considered as a supply of services.

The new provision takes effect as from 01 January 2023.

This Public Clarification provides guidance on how to apply the new provision and determine the resulting VAT obligations prior and post the date of 01 January 2023 on concerned natural persons.

Summary

With effect from 01 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.

Prior to 01 January 2023, 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, and
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.

Detailed analysis

General

For the provision of Directors' services not to be considered as a supply of services for VAT purposes according to the amended Executive Regulation, the following conditions must be met:

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.

Natural Person

Only Director services performed by natural persons, whether resident in the UAE or not, can be excluded from the qualification of “supply of services for UAE VAT purposes”.