28 July 2026 · The Answer
Are Director Fees Subject to VAT?
No — not when a natural person acts personally as a board member. Since 1 January 2023, under Cabinet Decision No. 99 of 2022 (as clarified by FTA Public Clarification VATP031), the services an individual performs as a formal member of a board of directors — for a government entity or a private company — are not treated as a supply of services at all, so they sit entirely outside the scope of UAE VAT. That means no 5% is charged on the directorship fee, and the income is excluded from the AED 375,000 mandatory registration threshold. The exception is where a company is engaged to provide directorship services, or a business delegates one of its own people to a board in its name and invoices for the arrangement — that remains a taxable business-to-business supply at 5%, because the person is no longer acting personally as an individual.
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Out of scope by law
Individual directors do not charge VAT on their board fees, and this is not a discretionary exemption — it is a structural rule that removes the service from the definition of a taxable supply altogether. Cabinet Decision No. 99 of 2022 amended Article 3 of the VAT Executive Regulation so that a natural person's board-membership function is no longer treated as a supply of services for VAT purposes. Because there is no supply, there is nothing to charge VAT on, and the fee is not counted when testing whether the director must register. The change applies from 1 January 2023 onward, regardless of how long the person has already served on the board.
- Board services of a natural person, personally appointed.
- Removed from the definition of a taxable supply, not merely exempted.
- No VAT charged on the directorship fee at all.
- Excluded from the AED 375,000 registration threshold test.
- Applies from 1 January 2023 under Cabinet Decision No. 99 of 2022.
- Applies equally to government-entity and private-company boards.
When it is taxable
The out-of-scope treatment is narrow, and it is easy to fall outside it without realising. If a company — rather than an individual — is engaged to provide directorship services, the fee is an ordinary taxable supply, because a legal person cannot benefit from a rule written for natural persons. The same applies where a business delegates one of its own employees or partners to sit on a board in the business's name and issues the invoice itself: the director is acting as an extension of the business, not personally, so VAT applies at 5%. Any other services the same individual provides — consultancy, management, advisory work — are also assessed on their own merits and are not automatically out of scope just because the person also happens to be a director.
- A company engaged to provide directorship services.
- A person delegated by a business and invoiced in the business's name.
- Both are taxable B2B supplies of services at 5%.
- Consultancy or management fees from the same person, assessed separately.
- Look at who invoices, and in whose name, not just who attends the meeting.
- Register and charge VAT as normal once these arrangements cross the threshold.
Where the rule comes from
This is not an FTA policy choice made in isolation — it traces to a specific legislative change. Cabinet Decision No. 99 of 2022 amended Article 3 of the VAT Executive Regulation (Cabinet Decision No. 52 of 2017) with effect from 1 January 2023, redefining what counts as a supply of services for VAT. FTA Public Clarification VATP031 then set out how the amendment applies in practice: the functions performed by a natural person as a board member are not a supply of services, whether the board sits under a government entity or a private company. Knowing the reference matters in practice, because it is what you cite in a voluntary disclosure or an FTA query if a bank, auditor, or counterparty questions why no VAT was charged on a director fee.
- Cabinet Decision No. 99 of 2022 amended Article 3 of the VAT Executive Regulation.
- Cabinet Decision No. 52 of 2017 is the underlying Executive Regulation.
- Effective date: 1 January 2023.
- FTA Public Clarification VATP031 explains the practical application.
- Cite VATP031 if a counterparty or the FTA questions the treatment.
A quick worked example
Consider a director appointed personally to the board of a Dubai trading company, earning AED 180,000 a year in board fees. From 1 January 2023, that fee is not a supply of services, so no 5% is added to the invoice, and the AED 180,000 does not count toward the AED 375,000 threshold even if the director has other income close to that figure. If the same person is instead put forward by their consultancy firm, with the firm invoicing the company for the directorship, the answer flips entirely: that fee is a normal taxable supply at 5%, output VAT included, because a business — not an individual — is contractually supplying the service. The boardroom work is identical in both cases; only who is legally supplying it changes the VAT answer.
- Personal appointment, personal invoice: out of scope, no VAT.
- Same work supplied through a company or delegation: taxable at 5%.
- The fee amount and the boardroom duties are irrelevant to the test.
- Only the identity of the supplier — individual or business — decides it.
Related guides
Frequently Asked Questions
For independent directors working out whether their own fees carry VAT.
Do I add VAT to my director fee?
No, not as a natural person appointed personally to a board — those services are out of scope of VAT since 1 January 2023. You raise your fee note or invoice without adding 5%, and you do not need to hold a separate VAT registration for that income alone.
When is a director fee taxable?
When a company is engaged to provide the directorship, or when a business delegates one of its people to a board in its own name and invoices for it. In both cases a legal person, not an individual, is supplying the service, so 5% VAT applies as a normal B2B supply.
Does this apply to government boards too?
Yes. The rule looks at whether the director is a natural person acting personally, not at who the board serves — a natural person's board services for a government entity are out of scope in exactly the same way as for a private company.
Do director fees count toward the AED 375,000 registration threshold?
No, not since 1 January 2023. Because out-of-scope fees are not a supply of services at all, they are excluded from the turnover test used to decide whether a person must register for VAT.
Are non-resident directors covered by the same rule?
The out-of-scope treatment looks at the nature of the service — a natural person acting personally as a board member — so it can extend to non-resident individuals too, though cross-border invoicing and reverse-charge questions should still be checked case by case.
What if I already charged VAT on my director fees after 2023?
That fee was charged in error and should be corrected — typically with a credit note to the company and an adjustment to the relevant VAT return, potentially through a voluntary disclosure if the amounts are material.
Does the out-of-scope rule cover other services I provide to the same company?
No. Only the formal board-membership function is out of scope. Consultancy, management or advisory services performed for the same company are taxed on their own merits, even if invoiced alongside the director fee.
Can Exiloz confirm my position?
Yes. We review your appointment letter and invoicing arrangement, confirm in writing whether your director fees are out of scope, and flag any other services that still need to be charged VAT.
Are your director fees out of scope?
Exiloz reviews your appointment and confirms in writing whether VAT applies to your directorship fees.