VAT on Director Services
Employees who perform their work and duties to the company are not considered as taxable supply. While the taxable person who perform independent services to the company is considered as taxable supply and is subject to VAT.
VAT Treatment of Director Services
There should be 375000 AED taxable in previous 12 months or is expected to be in next 30 days for mandatory registration. The director can also register on voluntary basis if its services amount is exceeding 187500 AED.
The director must be providing independent services such as Non-executive directors. It will be taxable supply if meets the following conditions
- It is supply of goods or services;
- Consideration received;
- Person doing business in the UAE;
- Not an exempt supply.
Directorship services would not be a supply of goods, and is a supply of services for VAT purposes.
Determining Place of Supply for Director’s Service provided
UAE VAT will only be charged where a supply is treated as taking place in the UAE. The following “Place of supply” rule applies to director services:
- The place of supply for services is the “place of residence of the director”;
- In the case where the recipient of the services has a place of residence in another GCC Implementing State and is registered for VAT there, the place of supply shall be the place of residence of the recipient of services;
- Where the recipient of services is in business and has a place of residence in the UAE, and the director does not have a place of residence in the UAE, the place of supply is the UAE.
Director providing services to overseas company
If a UAE resident director provide services from UAE to a company outside UAE, the services may be zero rated if the company does not have a presence in the UAE, and the performance of the services is not received in the UAE by any person who would be able to recover VAT incurred.
If the services are provided to a company which is resident and registered in another GCC Implementing State, the supply will be treated as taking place in that other Implementing State. Therefore, no UAE VAT will be charged.
Business supplied director
A company or Government entity may provide an employee or director to serve as a director of another Government entity, company or another type of business. In this scenario the normal rules relating to supplies of services should apply. Specifically, the supplier entity must account for VAT on any payment it receives for agreeing to the appointment, provided the place of supply is in the UAE.