28 July 2026 · Dubai FAQ
Dubai Board Directors: Transitional Dates
For director fees that straddle 1 January 2023, the VAT treatment follows the date the underlying services were actually performed rather than the date of invoicing: services performed from 1 January 2023 onward are out of scope, while services performed up to 31 December 2022 keep the previous, taxable treatment even if billed later. Many Dubai-based directors kept charging VAT after the change out of habit, or remained registered when directorship had become their only activity, and both are common, fixable errors. Where VAT was wrongly charged or a registration should have closed, the fix is usually a credit note to the paying company, an adjustment to the affected VAT returns, and — where the amounts are material — a voluntary disclosure to the FTA.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Which rule applies
The FTA's Public Clarification VATP031 sets out that the relevant test for a straddling fee is the tax point — broadly, when the service was actually performed — not the date an invoice happens to be raised or paid. A director fee that relates to board meetings and duties carried out in December 2022 but invoiced in January 2023 still follows the pre-2023 rules, while a fee invoiced in December 2022 for work continuing into 2023 needs to be apportioned between the two periods. Getting this wrong in either direction either overcharges a client unnecessarily or under-declares VAT that was genuinely due.
- The tax point — when the service was performed — decides the treatment, not the invoice date.
- Services performed to 31 December 2022 keep the pre-2023, taxable treatment.
- Services performed from 1 January 2023 are out of scope, regardless of billing date.
- Fees spanning the change should be apportioned between the two periods.
- Annual retainer-style director fees need particular care around the cut-off.
- Document the service period, not just the invoice date, for any straddling fee.
Fix past mistakes
Errors around this change are common precisely because it was a quiet regulatory shift rather than a headline rate change, and many directors and their accountants simply carried on as before. The two recurring mistakes are continuing to charge 5% on personal directorship fees after the cut-off, and staying VAT-registered when directorship had become the only taxable activity and had itself gone out of scope. Both are correctable: wrongly charged VAT is unwound with a credit note and a return adjustment, and an overdue deregistration is filed now rather than left open, with a voluntary disclosure used where the FTA's own thresholds for disclosure are met.
- VAT wrongly charged on personal director fees after 1 January 2023.
- Registration left open when directorship had become the only, now out-of-scope, activity.
- Unwind wrongly charged VAT with a credit note to the paying company.
- Adjust or amend the affected VAT return periods.
- Use a voluntary disclosure where the correction meets the FTA's disclosure thresholds.
- File any overdue deregistration promptly to limit further penalty exposure.
What Dubai boards and directors should check now
Dubai hosts a disproportionate share of the UAE's independent, multi-board directors — free zone board appointments, family-business boards and DIFC-adjacent advisory roles among them — which means the transitional error is correspondingly common here. A useful starting point is pulling every VAT return filed since January 2023 that included director-fee income, checking whether any of it should have been out of scope, and cross-checking whether the person's VAT registration should have closed once that income dropped away. Company accountants who processed director payments through the same payables workflow as ordinary supplier invoices are especially likely to have kept charging or withholding VAT on the old basis by default.
- Pull every VAT return since January 2023 that included director-fee income.
- Check each one against the personal-versus-delegated distinction, not just the amount.
- Confirm whether the registration should have closed once director income dropped out.
- Review payables workflows that may have defaulted to the old, pre-2023 treatment.
How the correction process works
We start with a review of the affected periods to size the exposure — how much VAT was wrongly charged or under-declared, and over how many return periods — before deciding whether a simple return amendment is enough or a formal voluntary disclosure is the more appropriate route. Where VAT was wrongly charged to a company that recovered it as input tax, we coordinate the credit note and the counterparty's own correction so both sides of the transaction reconcile. Where deregistration was simply missed, we file it alongside the correction so the whole history is closed out in one exercise rather than several separate submissions to the FTA.
- We size the exposure across every affected return period first.
- We decide between a simple amendment and a formal voluntary disclosure.
- We coordinate credit notes with counterparties that recovered input tax.
- Overdue deregistration is filed alongside the correction, not separately.
Related guides
Frequently Asked Questions
For Dubai directors reviewing fees and filings that straddle the 2023 change.
How are fees around 1 Jan 2023 treated?
By the date the underlying services were performed, not the invoice date: work performed from 1 January 2023 is out of scope, while work performed up to 31 December 2022 keeps the earlier, taxable treatment even if billed afterward.
I kept charging VAT after 2023 — what now?
That is a common and correctable error. It typically means issuing a credit note to the paying company for the VAT wrongly charged and adjusting the relevant VAT return, with a voluntary disclosure where the amounts meet the FTA's disclosure thresholds.
Do I need to unwind old VAT?
Where VAT was wrongly charged on an out-of-scope director fee, yes — it should be corrected through a credit note and a return adjustment so both your records and the paying company's input-tax position are accurate.
What if my board fee spans the 1 January 2023 cut-off?
Apportion it: the portion relating to board duties performed up to 31 December 2022 follows the old, taxable treatment, and the portion for work from 1 January 2023 onward is out of scope, regardless of when the single invoice was raised.
Should I have deregistered when this change took effect?
If board fees were your only taxable supply and they became out of scope from 1 January 2023, yes, in principle — and if that has not happened yet, filing the overdue deregistration now limits further exposure.
What is a voluntary disclosure, and do I need one?
It is a formal submission to the FTA correcting a past VAT error. Whether you need one depends on the size of the correction relative to the FTA's disclosure thresholds — smaller errors can sometimes be corrected in the next return instead.
Are Dubai directors more exposed to this error than elsewhere in the UAE?
Not by the rule itself, which is federal, but Dubai's concentration of multi-board, independent directors means the transitional mistake shows up more often here simply because there are more affected directors and payables workflows to check.
Can Exiloz clean it up?
Yes. We review your history since January 2023, size any VAT wrongly charged or deregistration missed, coordinate credit notes with counterparties, and file the corrections — including a voluntary disclosure where appropriate.
Straddling the 2023 change? Let's clean it up.
Exiloz reviews your filing history since January 2023 and corrects any director-VAT errors, including overdue deregistration.