New VAT Public Clarification VATP037: Impact on Director's Role and VAT Obligations

UAE, 13 May, 2024 : The UAE's Federal Tax Authority has issued a new VAT Public Clarification VATP037 regarding the function of a Director on a Board of Directors by a natural person. Please note that Public Clarification VATP037 replaces Public Clarification VATP031.

Key points to be noted:

1. Effective from 1 January 2023, if a natural person performs the function of a Director on a Board of Directors for a remuneration (monetary or in kind), this activity will not be considered a supply of services for VAT purposes.
2. Prior to 1 January 2023, services provided by Directors, whether by a natural person or a legal person, were treated as taxable services for VAT purposes if:

• The Director performed the services regularly, ongoing, and independently.
• The total value of taxable supplies and imports, including Director services, exceeded the mandatory registration threshold.

This Public Clarification offers guidance on applying the new provision and determining the resulting VAT obligations for concerned natural persons before and after 1 January 2023.

Source : www.tax.gov.ae