Areas of Practice

Board Members Beware: Revised VAT Guidance for BOD Members

Share this article

In a swift move, the UAE’s Federal Tax Authority (“FTA”) revokes its previously issued Public Clarification VATP031, replacing it on 13 May 2024 with Public Clarification VATP037 on Performing the function of Director on a Board of Directors by a Natural person. The new Public Clarification highlights key changes made to the Cabinet Decision No. 52 of 2017 on the Executive Regulation of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Executive Regulation”) in respect of the VAT obligations imposed on members of Boards of Directors (“BOD”).

This article aims to provide further insights into the newly issued Public Clarification, highlighting its value and important considerations for previous, current, and future BOD members.

Legislative Trigger

As clarified within the Public Clarification itself, the trigger for the FTA to replace Public Clarification VATP031 with Public Clarification VATP037 is a new amendment introduced to Article 3 of the VAT Executive Regulation via Cabinet Decision No. 99 of 2022. The new amendment introduced a new Clause 2 to ‘Article 3 – Supply of Services’ of the VAT Executive Regulation, stating that “As an exception to Clause 1 of this Article, the functions of a member of a board of directors, performed by a natural person appointed as such, for any government entity or private sector establishment, shall not be considered a supply of Services.”

Accordingly, the FTA swiftly replaced the previously issued Public Clarification VATP031 with Public Clarification VATP037 to clarify the VAT implications resulting from the newly introduced amendment.

Key Concepts

Prior to the effective date of the amendment introduced via Cabinet Decision No. 99 of 2022, services provided by a BOD member to the company for which he is serving as a BOD member were generally subject to VAT at the standard rate of 5% in accordance with the standard VAT provisions.

As of the effective date of the amendment introduced via Cabinet Decision No. 99 of 2022, services provided by a BOD member to the company for which he is serving as a BOD member where two key conditions are met:

  1. The services are provided by a natural person. Specifically, the FTA clarified that a natural person delegated by a business to act as a director for another business in the name of the delegating business will not be deemed as meeting this criterion (i.e., it will be viewed as a B2B supply).
  2. The person is appointed as a director on a BOD of any government/private entity.

Effective Date

As clarified within Cabinet Decision No. 99 of 2022 and the FTA’s Public Clarification VATP037 on Performing the function of Director on a Board of Directors by a Natural person, the effective date for the newly introduced amendment is 1 January 2023.

Transitional Provisions

Perhaps the most important aspects covered in the FTA’s new Public Clarification VATP037 on Performing the function of Director on a Board of Directors by a Natural person are the aspects addressing the transitional provisions in respect of the amended provisions relating to BOD members, especially as the amended Article 3 of the VAT Executive Regulation remains silent in this regard.

In accordance with the new Public Clarification, determining the VAT treatment for the provision of services by a BOD member will depend on the date on which such supplies took place. In other words, regard is to be had to the date of supply provisions regulated in Articles 25 and 26 of the Federal Decree-Law No. 8 of 2017 on Value Added Tax (“VAT Decree-Law”).

In other words, to assess whether the provision of a BOD member’s services are subject to UAE VAT under the old legislation or out of scope of UAE VAT under the new legislation, the following steps must be undertaken by the BOD member:

  1. Assume, in all cases, that the ‘provision’ of services is a ‘supply of services’ for UAE VAT purposes, and hence, subject to the provisions regulating the date of supply for UAE VAT purposes.
  2. Determine the date of supply under the general date of supply rules apply as per Article 25(6) and (7) of the VAT Decree-Law.
  3. Assess the applicability of Article 26 of the VAT Decree-Law in respect of the date of supply in special cases. If applicable, disregard the date of supply determined under step 2 above and re-determine the date of supply under Article 26 of the VAT Decree-Law.
  4. Assess whether the date of supply falls prior or subsequent to 1 January 2023.
  5. Based on the outcome of step 4 above, determine the VAT treatment in accordance with applicable conditions.
  6. If necessary, where an erroneous treatment has been applied, seek to rectify such error in accordance with the legally prescribed remedies within the TPL and VAT legislation.

Finally, BOD members must also carefully assess their registration and deregistration obligations. In straightforward terms, where a BOD member has previously registered for VAT based on the provision of BOD member services, the BOD member may find itself required to deregister if they no longer meet the minimum requirements for continued VAT registration.


In conclusion, the rapid evolution of VAT legislations underscores the importance for BOD members to remain well-informed. The recent replacement of Public Clarification VATP031 with VATP037 by the FTA clarifies a significant shift in VAT obligations, particularly for natural persons serving on BODs.

As we’ve explored, the amendments introduced via Cabinet Decision No. 99 of 2022 and the subsequent Public Clarification VATP037 necessitate careful consideration of transitional provisions and date of supply regulations. BOD members must now navigate these changes diligently to ensure compliance and mitigate potential risks.

By understanding the key concepts outlined in the revised guidance and leveraging the insights provided, BOD members can proactively safeguard themselves against VAT-related challenges. Moreover, staying ahead of regulatory updates and seeking professional guidance where necessary will be paramount in adapting to the evolving VAT landscape.

In essence, while the regulatory landscape may continue to evolve, BOD members equipped with a comprehensive understanding of their VAT obligations and the corresponding legislative changes will be better positioned to fulfill their duties effectively, thereby driving sustainable growth and resilience within their organizations.

This Article is prepared by Mohamed El Baghdady, Partner, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, at Habib Al Mulla & Partners Law Firm.

Seek Legal Counsel

Our expertise in tax law and regulations allows us to provide clients with effective and accurate tax advice, taking into consideration their unique circumstances and needs. Additionally, our experience and knowledge in handling tax disputes enable us to represent clients in discussions with tax authorities, as well as in court proceedings. 

Our track record of successfully resolving tax disputes and helping clients minimize their tax liabilities has likely earned us a reputation as a trusted and reliable tax advisor. Our tax and financial crimes team, led by our Head of Tax and Financial Crimes, Mohamed El Baghdady, has successfully advised and represented clients across various industries, including, but not limited to, consumer goods and retail, services, real estate, oil & gas and banking and finance, before the government authorities, tax tribunals and courts. Our clients have been successful in multiple tax disputes before the committees and courts.

For further information, please contact, Mohamed El Baghdady, Head of Tax and Financial Crimes, on or any of the members of our team.


The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.

Stay up to date with the latest legal news & insights from Habib Al Mulla and Partners

We hold the privacy of your personal information in the highest regard. When you sign up for our newsletter, we want you to know that your data is safe with us. We firmly adhere to the principle of not sharing, selling, or trading your personal information with any third parties.

Share this article

Related Articles