VAT · Dubai, UAE
UAE VAT on Directors' Fees 2026: When It Applies & When It Doesn't
The 2023 change many directors still get wrong
Since 1 January 2023, the services of a natural person acting as a member of a board of directors (for a government entity or private company) are not treated as a supply of services, and are therefore outside the scope of UAE VAT. So an individual board director does not charge VAT on directorship fees and generally need not register for that income. The exception: where a person is delegated by a business to sit on a board in the business’s name, it remains a taxable B2B supply. This came in through Cabinet Decision No. 99 of 2022, clarified in VATP031.
Plenty of independent directors in Dubai are still charging VAT they should not, or worrying about registering when they no longer need to. The rule changed in 2023 and is clear once you know it. Here it is.
The rule: natural-person directors are out of scope
When it is still taxable
The delegated-director exception
The out-of-scope treatment is for a natural person acting as a director. If instead a company is engaged to provide directorship services, or a business delegates one of its people to sit on a board in the business’s name and invoices for it, that is a taxable B2B supply of services at 5%. The question is always: is the director acting personally, or is a business supplying the service? In practice, the mistake we correct most is the harmless-looking one. A director keeps adding 5% out of habit after January 2023, and ends up sitting on months of VAT that was never his to charge.
What about non-resident directors and other services
The out-of-scope rule looks at the nature of the service (a natural person's directorship), so it can apply to non-resident individuals acting as directors too, though cross-border and reverse-charge questions should be checked case by case. And if the same person provides other services (consultancy, management), those are assessed for VAT on their own merits. Only the directorship element is out of scope.
What Dubai directors should do
- Stop charging VAT on personal directorship fees: they are out of scope from 2023.
- Check if you must deregister: if directorship was your only taxable supply.
- Separate other services: consultancy or management fees may still be taxable.
- Watch the delegated case: a firm or delegated director supplies a taxable service.
- Fix any past errors: correct wrongly-charged VAT, potentially via voluntary disclosure.
A worked example: one person, two treatments
Dr K sits on two boards. For a Dubai private company she is appointed personally and receives AED 200,000 a year in director fees. Since 1 January 2023 that is not a supply of services, so no VAT is charged and the AED 200,000 does not count toward her registration threshold. Separately, her consultancy company is engaged by a bank, and the firm delegates her to the bank’s board for AED 300,000. That is a taxable B2B supply at 5% (AED 15,000 output VAT), because the supplier is a legal person, not the natural person herself. Same individual, same boardroom skills. The VAT answer turns entirely on who is appointed.
What to do about the pre-2023 period
The out-of-scope rule applies from 1 January 2023; before that, independent directors charging above-threshold fees were making taxable supplies. Fees relating to services performed up to 31 December 2022 keep their old treatment even if invoiced later. The tax-point analysis in VATP031 matters for anything that straddled the change. Directors who stayed registered after the change with no other taxable supplies should have deregistered; late deregistration carries its own administrative penalty, so fixing this history cleanly is worth a short professional review. Our steer is usually to deregister once directorship is your only activity, but not reflexively. If you expect consultancy or other taxable work within a few months, holding the registration saves re-applying, so weigh the filing burden against the likely restart.
Common mistakes
The legal basis
The change was made by Cabinet Decision No. 99 of 2022, amending Article 3 of the VAT Executive Regulation (Cabinet Decision No. 52 of 2017) with effect from 1 January 2023, and is explained in FTA Public Clarification VATP031: the functions of a board member performed by a natural person are not a supply of services. Delegated corporate directorships stay taxable at 5%. If directorship was your only registered activity, our VAT deregistration service closes the registration cleanly, and our VAT consultants handle the straddling-period analysis.
Get Your Director VAT Right
Exiloz confirms whether your directorship fees are out of scope, handles any deregistration, and separates taxable services correctly. See our VAT consultancy or talk to a Dubai consultant.
Frequently Asked Questions
Do I charge VAT on director fees in the UAE?
No, not for a natural person acting as a board member. Since 1 January 2023, an individual director's board services are outside the scope of UAE VAT, so no VAT is charged on the directorship fees.
Are board director services subject to VAT?
A natural person's board-director services are out of scope. But where a company provides directorship services, or a business delegates a person to a board in its name, that is a taxable B2B supply at 5%.
Do independent directors need to register for VAT?
Generally not for directorship income alone, since it is out of scope. If the person makes other taxable supplies above the threshold, registration may still be required for those.
Are non-resident directors covered?
The rule looks at the nature of the service — a natural person's directorship — so it can apply to non-resident individuals acting as directors, but cross-border and reverse-charge points should be checked case by case.
Is a firm that provides directors taxable?
Yes. Where a company supplies directorship services, or delegates one of its people to a board and invoices for it, that is a taxable supply of services at 5%.
Can Exiloz review our director VAT?
Yes. We confirm what is out of scope, handle deregistration if needed, and correct any wrongly-charged VAT.
Do director fees count toward the VAT registration threshold?
Not since 1 January 2023 for natural-person directorships — out-of-scope income is excluded from the AED 375,000 test. A delegated corporate directorship remains taxable and does count for the supplying company.
I kept charging VAT on my director fees after 2023. What now?
Incorrectly charged VAT has to be corrected — credit notes to the company, adjustment of the returns concerned, and where relevant a voluntary disclosure. A short review establishes the cheapest compliant fix.
Explore the UAE VAT on Directors' Services Cluster
Each page below goes deeper on one part of this topic.
Step 01 · The AnswerAre Director Fees VAT-ableThe out-of-scope rule for board members.Explore →Step 02 · ScopeWho It CoversNatural persons vs delegated corporate directors.Explore →Step 03 · How ToDeregister as a DirectorHow independent directors exit VAT registration.Explore →Step 04 · DelegatedDelegated & Corporate DirectorshipsWhen directorship stays a taxable service.Explore →Step 05 · Dubai FAQTransitional Dates for Dubai BoardsHandling fees around the 1 Jan 2023 change.Explore →
