Do Directors Pay VAT in the UAE?
Quick Answer
If you’re a natural person (an individual, not a company) sitting on a board of directors in the UAE, whether for a government entity or a private company, the fees you earn from that role are not subject to VAT. This applies regardless of whether you’re a UAE resident or based abroad.
There are important exceptions, though: if a company (rather than an individual) supplies a director, if you’re a freelancer attending board meetings without actually holding a director title, or if you earn income from other business activities alongside your directorship, VAT rules may still apply.
The Current Rule: Director Services and VAT
If you serve as a director in your personal capacity, the fees you earn for that role are outside the scope of UAE VAT. This is true whether the board belongs to a government entity or a private company.
In VAT terms, sitting on a board as an individual is simply not treated as a service you are selling. So you don’t add VAT to your director’s fees, and those fees don’t count when working out whether you need to register for VAT.
Why This Matters
If you’re a business owner who pays directors’ fees, you don’t need to worry about VAT being added to invoices from your individual board members (as long as they qualify under the conditions below).
If you’re a director yourself, you may be able to deregister for VAT if board fees were the only reason you were registered in the first place.
The Three Conditions That Must Be Met
Not every “director” automatically qualifies for this VAT exclusion. Three specific conditions must all be true at the same time:
1. The Service Must Be Provided by a Natural Person
This exemption is only for individuals, not companies. If your business is registered as a director on behalf of a client (a common setup for corporate service providers or nominee director companies), those fees are still subject to VAT. The exclusion doesn’t extend to a company that delegates one of its staff to sit on a board in the company’s name, as that arrangement remains a taxable supply.
It doesn’t matter whether the individual director lives in the UAE or abroad, either way, if they personally hold the director title, the exemption applies.
2. You Must Be Formally Appointed as a Director
You need to actually hold the position of director on a board of a government entity or a private company for the exemption to apply. This also extends to any board committee you sit on as part of that same directorship. So, if you’re a board member who also serves on, say, the audit committee or the remuneration committee derived from that same board, your fees from committee work are covered too.
3. The Service Must Be Performed “in Your Capacity as Director”
Only work you do formally as a director is covered. If you’re doing something else, even something that overlaps with board activity, it’s treated differently.
Example: A specialist who isn’t a board member but is invited to give a presentation at a board meeting for a one-off fee. Because this person isn’t formally appointed as a director, their fee for that meeting is subject to VAT (assuming they cross the registration threshold), even though the payment came from board-related activity.
What’s Still Subject to VAT
| Situation | VAT Treatment |
|---|---|
| Individual formally appointed as a director, acting in that role | No VAT |
| Individual sitting on a board committee derived from the same board | No VAT |
| A company (legal person) supplying a director on its books | VAT applies |
| A freelancer/consultant attending board or committee meetings without holding the director title | VAT applies |
| A director’s other business activities (e.g., renting out commercial property, consulting, freelance work) | VAT applies as normal |
Does Director Income Count Toward the VAT Registration Threshold?
No. Since director’s fees earned in your formal capacity as a director are not treated as a taxable supply, that income is excluded when calculating whether you’ve crossed the AED 375,000 mandatory registration threshold (or the AED 187,500 voluntary threshold).
However, if you have other income streams, such as you also do freelance consulting, rent out a commercial property, or run a small trading business, that income still counts toward the threshold as normal. Director’s fees just get taken out of the equation.
Example: Fatima sits on the board of a private company and earns AED 200,000 a year in director’s fees. She also runs a small marketing consultancy on the side, billing AED 150,000 a year to various clients.
- Her AED 200,000 in director’s fees: excluded from the VAT threshold calculation.
- Her AED 150,000 in consultancy fees: counted normally.
Since her consultancy income alone doesn’t cross AED 375,000, she isn’t required to register for VAT, even though her total income exceeds that figure. If her consultancy income alone had crossed AED 375,000, she’d need to register for VAT on the consultancy business, but her director’s fees would still stay outside the scope of VAT.
Do I Need to Deregister?
If board fees were the reason you originally registered for VAT, and you no longer have other taxable income that crosses the threshold, you’re required to apply for VAT deregistration. The UAE law requires registrants to deregister once they stop meeting the conditions for mandatory registration.
A few practical points:
- Deregistering doesn’t wipe out any VAT or penalties you already owed while you were registered.
- If you have other ongoing taxable activities, you’ll need to reassess whether you still meet the threshold based on those activities alone.
- It’s worth talking to your accountant before deregistering, since getting the timing wrong can create its own compliance issues.
Frequently Asked Questions
Do UAE company directors need to charge VAT on their fees?
No. Individual directors do not charge VAT on fees earned in their formal capacity as a board member, whether the appointing entity is government or private.
Does this apply to non-resident directors too?
Yes. The exemption applies regardless of whether the director lives inside or outside the UAE, as long as they’re a natural person formally appointed to the board.
Do director's fees count toward my VAT registration threshold?
No. Since director’s fees aren’t treated as a taxable supply, they’re excluded from the AED 375,000 mandatory (or AED 187,500 voluntary) VAT registration threshold calculation.
What if my company appoints a corporate entity, not an individual, as director?
That arrangement still attracts VAT. The exemption only applies to natural persons personally holding the director role, not to companies acting as directors or delegating staff to serve on a board in the company’s name.
Do committee fees count under this exemption?
Yes, as long as the committee is derived from the same board you serve on as a director. Fees for that committee work are treated the same way as your main director’s fees.
I was VAT-registered only because of my director income. What should I do now?
If board fees were your only reason for registering, and you have no other taxable income above the threshold, you’re required to apply for VAT deregistration. Speak to us before submitting the application to make sure your timing and outstanding filings are in order.
What if I do other freelance or consulting work besides being a director?
That other income is treated completely separately and follows the normal VAT rules. Only your formal director’s fees are excluded, and everything else counts toward your registration threshold as usual.
This guide reflects UAE VAT legislation and FTA guidance currently in effect at the time of publication. VAT rules are subject to change, and individual circumstances vary. Please consult with us before making registration or compliance decisions.
