The Ministry of Finance (MOF) has announced that starting January 2023, board members across institutions in the UAE will not be subject to value added tax (VAT).
The tax will still be applicable for legal persons who have appointed a board member to act in the name of the legal person.
Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, noted that as per the cabinet decision which will go into effect on 1 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.
Currently, the tasks performed by board members – both legal and natural are considered as taxable services subject to VAT on the condition that the member is providing these services on a regular, continuous and independent basis, provided that the value of the taxable supplies as well as any other taxable services and import transactions exceed the mandatory tax registration threshold.
“Where the director services provided by a member of a board span 1 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,” said Younis Haji Al Khoori.
Furthermore, if a board member registered for VAT no longer fulfils the requirement for mandatory or voluntary registration when the new provisions go into effect, the person must deregister for VAT.
Any activities undertaken by the board member besides their duties as a member if the board of directors will still be subject to VAT.
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