28 July 2026 · Scope
Who the Rule Covers (and Doesn't)
The out-of-scope treatment covers a natural person formally appointed as a member of a board of directors, whether the board sits under a government entity or a private company. It does not extend to a company or other juridical person that provides directorship services, nor to an individual delegated by a business to sit on a board in that business's name and invoiced through it — both remain taxable B2B supplies at 5%. It also stops at the boardroom door: other services the same individual provides, such as consultancy, management or advisory work, are assessed for VAT under the normal rules and are not swept into the out-of-scope treatment just because the same person also holds a directorship.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Natural-person directorships
The rule is written for individuals, not for the companies or partnerships that might otherwise employ them. A natural person who is formally appointed — by shareholders, a general assembly, or a government decision — as a member of a board of directors performs an out-of-scope function for VAT the moment that appointment takes effect. It makes no difference whether the entity is a private company, a free zone entity, or a government body: what matters is that the person holds the office personally, in their own name, and is remunerated for carrying it out.
- A natural person formally appointed to a board seat.
- Government entity, private company or free zone entity — treatment is the same.
- Covers the formal directorship function, not the underlying business.
- Fee is out of scope of VAT from the appointment date.
- No VAT registration required for this income alone.
- Applies regardless of the size of the director fee.
The taxable cases
Two situations sit outside the exemption and are easy to miss. First, a company or other legal person engaged to provide directorship services is always taxable, because the exemption is written around the natural person, not the function itself. Second, a business that delegates one of its own staff or partners to a board seat, invoicing for the arrangement in its own name, is also making a taxable B2B supply — the individual attending the meetings is, for VAT purposes, standing in for the business rather than acting personally.
- A company or other legal person providing directorship services.
- A business delegating staff to a board and invoicing for it.
- Both are ordinary taxable supplies of services at 5%.
- Consultancy, management or advisory fees from the same director.
- Any such service is assessed independently of the directorship role.
- Mixed engagements should be invoiced and documented separately.
Personal capacity or "in the course of business"?
The dividing line the FTA applies is essentially whether the individual is acting in a personal, independent capacity or in the course of a business. A natural person who accepts a board seat in their own name, is paid directly, and bears the personal legal responsibilities of a director is acting personally — that is the fact pattern the out-of-scope rule targets. Once a company stands between the individual and the board — because the company is contracted to supply the directorship, or because it delegates and invoices for the person's attendance — the same duties are now being carried out in the course of that company's business, and the ordinary VAT rules apply to the company's supply.
- Personal, independent appointment: signals out-of-scope treatment.
- A company standing between the individual and the board: signals a taxable supply.
- Who signs the appointment letter and who issues the invoice both matter.
- Written appointment terms make the classification easier to evidence.
How to evidence your position
Because the FTA can query any out-of-scope treatment during an audit, it helps to hold documents that make the natural-person basis obvious. A board resolution or shareholder appointment naming the individual, a fee note issued personally rather than through a company, and bank details in the director's own name all support the position that the service was performed personally. Where a person sits on several boards under different arrangements — personal on one, delegated through a firm on another — keeping the paperwork for each board separate avoids the two treatments becoming blurred in a single invoice trail.
- Keep the board resolution or appointment letter naming the individual.
- Issue fee notes personally, not through a company, for out-of-scope seats.
- Use personal bank details for out-of-scope director fees.
- Separate the paperwork where the same person holds mixed appointments.
Related guides
Frequently Asked Questions
For anyone working out exactly whose services the rule covers.
Does the rule cover a company acting as director?
No. A company or other legal person that is engaged to provide directorship services is always making a taxable supply, because the out-of-scope treatment is built around the natural person performing the role personally, not around the directorship function itself.
Are my consultancy fees also out of scope?
No. Only the formal board-membership function is out of scope. Consultancy, management or advisory services you provide to the same company — even if invoiced together with your director fee — are assessed under the normal VAT rules.
What about a delegated director?
Where a business delegates one of its own people to a board seat and invoices for the arrangement in its own name, that is a taxable B2B supply at 5%, because the individual is acting on the business's behalf rather than personally.
How do I know if I am acting personally or in the course of business?
Look at who is formally appointed, who issues the invoice, and whose name is on the appointment paperwork. If it is you, personally, with no company standing between you and the board, you are almost certainly acting personally.
Can the same person be both an out-of-scope director and a taxable supplier?
Yes. It is common for one individual to hold a personal, out-of-scope seat on one board while being delegated through a firm to another — each engagement is assessed on its own facts and documented separately.
Does it matter whether the board is for a government entity or a private company?
No. The out-of-scope treatment applies equally to natural-person board seats at government entities and private companies; the classification turns on the nature of the appointee, not the nature of the entity.
What records should I keep to support the out-of-scope position?
A board resolution or appointment letter naming you personally, fee notes issued in your own name, and personal (not corporate) bank details for the payments are the core evidence an auditor or the FTA would expect to see.
Can Exiloz scope my role?
Yes. We review your appointment documents and invoicing pattern, separate your out-of-scope directorship from any taxable services, and set up the paperwork so the position is easy to evidence later.
Where exactly do you fall?
Exiloz reviews your appointment paperwork and confirms whether your role is out of scope or taxable.