Highlights from the UAE Growth & Investment Forum by Gulf News

UAE Growth and Investment Forum, by gulf news

On September 19th, FAME Advisory proudly served as a Support Partner for the UAE Growth & Investment Forum, organized by Gulf News. This prominent event brought together industry experts, government officials, and visionary entrepreneurs to explore substantial opportunities for business growth in the UAE.

The event featured meaningful discussions aimed at shaping the future of business in the region. Our Director, CA Nirav Shah, shared valuable insights during an exclusive panel discussion, emphasizing the critical importance of adopting robust accounting and compliance measures to navigate the UAE’s Corporate Tax Framework effectively.

Nirav’s insights sparked a comprehensive dialogue on the competitive advantages available to businesses and how organizations can strategically approach the evolving regulatory environment to drive sustainable growth. Attendees actively engaged in these discussions, highlighting their relevance to operational strategies.

We sincerely appreciate all participants for their contributions to the forum’s success. Your involvement created a rich environment for knowledge exchange. For further insights into Nirav’s discussion, full coverage is available on Gulf News.

As we move forward, FAME Advisory remains dedicated to facilitating discussions that support businesses in navigating the complexities of investment and compliance in the UAE. We look forward to future collaborations and initiatives that promote growth and innovation in the region. Thank you once again to all who attended.

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UAE VAT Amendments: Cabinet Decision No. 100

Ayushi Agrawal

October 7, 2024

The FTA has introduced an amendment to the Executive Regulations of the UAE VAT law through cabinet decision no.100 of 2024 which is amending cabinet decision no 52 of 2017.

These changes will be effective from 15th November 2024 (unless otherwise specified in the article of this decision)

Key Amendment’s and their implications are discussed below

Financial Services

Article 1 includes definition of Virtual Asset. Virtual Asset are defined as “Digital representation of value that can be digitally traded or converted and can be used for investment purposes and does not include digital representations of fiat currencies or financial securities”.

Article 42- Tax Treatment for financial service

Article 42(2) has been amended to include the following within the definition of financial services,

Providing investment fund management services independently for a fee, for funds licensed by a competent authority in the state, including but not limited to managing fund operations and managing investments for the benefit of the fund or on its behalf and monitoring and improving fund performance;
Transferring ownership of virtual assets, including virtual Currencies;
Conversion of Virtual Assets;
Keeping and managing Virtual assets and enabling control over them

Article 42(3) exempt following financial services from VAT retrospectively from 1st Jan 2018,

Transferring ownership of virtual Assets, including virtual currencies.
Conversion of Virtual Assets

Impact– It brings clarity to the taxation of virtual assets. Investment fund management services, virtual currencies considered as exempt financial services from VAT.

Another important amendment is introducing exceptions for the supply effective from 1st January 2023:

Transfer of ownership or disposal rights of government building between government entities
Transfer of ownership or disposal of real estate asset between government entities
Above also covers the right to use or exploit those assets.

Impact – Significant impact for government entities transactions like transfer, lease of these assets will no longer considered to be supply hence such transactions are not subject to VAT.

Article 5 – Exceptions related to Deemed Supply

Exceptions related to Deemed Supply, now has extended to the following supply as well:

Where both the Supplier and Recipient are either government entity or charitable organization then, up to AED 250,000 for each supplier within 12-month period are also falls under exception to deemed supply.

Impact – Encouraging activities between government entities and/or charitable organizations without the burden of VAT.

Article 14 – Tax Deregistration

Clause 9 has been added which states that deregistration does not absolve a Person from having to comply with the provisions of the Decree-Law and this Decision, including filing another Tax Registration application when the Tax Registration requirements are met.

Article 14 (bis) – Tax Deregistration to Protect the Integrity of the Tax System (Newly Added Provision)

The Authority may deregister a Person for Tax if the Authority determines that maintaining such Tax Registration may prejudice the integrity of the Tax system, provided any of the following conditions is met;

The Registrant no longer meets the Tax Registration requirements

The Registrant has not submitted tax deregistration application to the Authority, or the Registrant has initiated a Tax deregistration application with the Authority but has not completed such application

Article 29-Profit Margin Scheme

In a further effort to clarify VAT calculations, Article 29 has defined “Purchase Price” will include all costs and fees incurred when purchasing goods.

Impact – Clarified that for calculation of profit margin under the scheme, whole cost associated with the acquisition of goods are considered.

Are you prepared for the FTA’s new VAT Amendments? Let FAME Advisory provide you with tailored insights and support.

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Proof for Export of Goods

Article 30 – Zero-rating the export of goods

FTA Specifies the documents which are required for Zero rating the export of goods. The FTA has clarified that any of the following documents would be acceptable to prove the export as zero-rated supply,

A Custom declaration and commercial evidence proving the export
A Shipping certificate and official evidence proving the export
A Custom declaration providing the custom suspension if the goods are under custom suspension

The clarification provided by FTA for “official evidence” and “commercial evidence”

Official Evidence

A certificate of export issued by the custom in the state or a clearance certificate issued by those authorities or the competent authorities (Exit Certificate) in the state regarding the goods leaving the state after verifying that the goods have left the state, or a document or clearance certificate certified by competent authorities in the destination country indicating that the goods have entered it.

Commercial Evidence

A document issued by shipping or air transport companies or agents proving the transportation and departure of goods from the state to outside the state, including any one of the following documents:

Airway Bill or Air cargo manifest
Bill of lading or Sea cargo manifest
Land transport bill or Land cargo manifest

In amended provision the term “Shipping certificate” has been clarified which states that certificate issued by shipping or air transport companies or agents equivalent to commercial evidence if it is not available.

Summary

Documents required for Zero rating the export of goods (Till 15th November 2024)

Business must require all the documents mentioned below for export of goods

Options	Particulars
Option 1	Exit Certificate, Custom declaration, Airway bill or bill of lading
Option 2	Custom declaration providing the custom suspension if the goods are under custom suspension

Documents required for Zero rating the export of goods (From 15th November 2024)

Business can retain documents based on any of the following option for export of goods

Options	Particulars
Option 1	Custom declaration and Bill of lading or Airway Bill
Option 2	Exit Certificate or Entry certificate of destination country and shipping certificate
Option 3	Custom declaration providing the custom suspension if the goods are under custom suspension

Impact – These clarity helps the exporter to understand the process and documents require for business applying zero rate on exports.

Article 31- Zero-Rated Services

Amendments have also been made regarding the zero-rating of specific services. Services listed in clauses 3 to 8 of Article 30, and Article 31 of the VAT Decree Law will be subject to the standard rate of VAT if the place of supply is within the UAE, even if they are considered exports of service.

Key Services Affected

Installation Services: Related to goods supplied by others, taxed at the place where the service is performed.
Transport Services: Provided to lessees who are not taxable persons, taxed where the means of transport are made available.
Hospitality Services: Restaurant, hotel, and catering services are taxed at the location of service performance.
Cultural and Educational Services: Taxed where the services are performed.
Real Estate Services: Taxed based on the location of the real estate.
Transportation Services: Taxed where the transportation begins.
Telecommunications and Electronic Services: Taxed based on where the services are enjoyed.

Clarifications on Repair and Maintenance Services

Article 35(1)(b) further clarifies VAT treatment for repair, maintenance, and conversion services for means of transport:

Repair Services: If performed onboard the means of transport.
Maintenance Services: Includes inspection, testing, cleaning, and similar services if carried out onboard.
Conversion Services: Should maintain compliance with conditions of Article 34 on post-conversion.

Impact – These clarifications provide a clear understanding of VAT treatment for these specific services, facilitating better compliance and planning for businesses involved in the transport sector.

Article 38- Zero-rating of Buildings Specifically Designed to be Used by Charities

The definition of “Relevant Charitable Activity” has been deleted.

Article 46- Tax on Supplies of More than One Component

When supplies don’t have a principal component, VAT treatment will be based on overall nature of the supply.

Impact – These changes provide clarity on how to treat composite supplies in VAT

What impact will the recent VAT changes have on your operations? Understand these amendments with us.

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Input VAT Recovery on Health Insurance for dependent

Article 53 – Non-Recoverable Input tax

Allow recovery of input VAT for health insurance, including enhanced health insurance for employees and their dependents within the limit of one spouse and three children under the age of 18.

Nature of Expense	Input tax recovery (Till 15th November 24)	Input tax recovery (After 15th November 2024)
Employee Health Insurance	Yes, business can recover input VAT	Yes, business can recover input VAT
Dependent Health Insurance (Within limit specified)	No, business can’t recover VAT Input tax	Yes, business can recover input VAT

Impact– This amendment relieves businesses, as it allows them to recover VAT on the insurance of dependents.

Article 55-Apportionment of Input Tax

Tax year for the following cases has been amended:

where a Taxable Person applies for Tax deregistration, the Tax year shall end on the last day such Person was a Taxable Person,
where a member joins a Tax Group, the Tax year shall end on the last day before joining the Tax Group, or
where a member leaves a Tax Group, the Tax year shall end on the last day such Person was a member of the Tax Group.

If the tax year is shorter than twelve months, the limit of AED 250,000 mentioned in clause 11 shall be proportionate to the length of such tax period.

Article 58-Adjustments under the capital Assets Scheme

Clause 17 is included in the article which states that the first tax year for a self-developed capital asset is the year it is first used.

Article 59- Tax Invoices

The timeline for issuing Tax invoices has been changed in specific scenarios, such as simplified and tax invoices.
If the tax invoice is a simplified tax invoice (invoice amount up to AED 10,000), the registrant must issue the simplified tax invoice on the date of supply itself.
Business has 14 days to issue the tax invoices (invoice amount over AED 10,000) from the end of the calendar month that includes the date of supply.
Where an agent who is a Registrant makes a supply of Goods or Services for and on behalf of the principal of that agent, that agent may issue a Tax Invoice in relation to that supply as if that agent had made the supply, provided that the principal shall not issue a Tax Invoice, subject to:
- The agent retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the principal supplier,
- The principal supplier retaining sufficient records in such a manner as to determine the name, address and Tax Registration Number of the agent

The Authority may specify the cases in which a Tax Invoice must be issued, even if one of the cases provided for simplified tax invoice of this Article applies.

Impact – These updates aim to streamline compliance and reduce penalties

Article 69 – Foreign Governments

The VAT refund request for foreign governments, international organisations, diplomatic bodies and missions must submit within 36 (thirty-six) months from the date the official incurred such Tax or during any other period specified under the provisions of any international treaty or other agreement in force in the State

Impact – This amendment introduced a timeline for foreign governments for applying for VAT refund.

These changes enhance clarity and flexibility for businesses across various sectors. It is an ideal time to review your VAT practices and ensure compliance with the new regulations.

With the recent amendments to the VAT law, it’s crucial to reassess your VAT practices. FAME Advisory can help you navigate the implications.

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GCC Tax And Regulatory Communique September 2024

Download GCC Tax and Regulatory Communique September 2024

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Guide on VAT Penalties and Fines in UAE

The United Arab Emirates (UAE) has published Cabinet Decision No. (49) of 2021, which amends Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Law in the UAE. The amendments have come in effect since 28 June 2021.After the amendments, VAT penalties and fines in UAE have been reduced substantially as compared to the previous legislation.

This guide compares the penalties that were applicable previously and the new penalties.

A thorough comparison of VAT Penalties and Fines in UAE, before and after Cabinet Decision No. (49) is presented along with the implications of the amendments to VAT Penalties and Fines in UAE.

These amendments marks a significant shift in VAT penalties and fines in UAE, now aiming to foster a more supportive environment for businesses. With such a reduction in penalties across various violations, the UAE tax authority seeks to encourage compliance and promote a culture of voluntary disclosure and accurate record-keeping. Explore the subject thoroughly with our comprehensive guide:

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Guide on Economic Substance Regulations (ESR) Audit Intimation

Federal Tax Authority (FTA), being the National Assessing Authority, may undertake assessments to determine whether a Licensee has met the Economic substance Test or not. FTA can either send additional Information request or issue audit Notice in this regard.

As per the Economic Substance Regulation, UAE entities whose business activities meet the scope and definition of any of the nine ESR relevant activities, are required to prepare and submit Economic substance Notification and Economic Substance Report.

Such relevant activities include:

Banking Business
Insurance Business
Investment Fund management Business
Lease – Finance Business
Headquarters Business
Shipping Business
Holding Company Business
Intellectual property Business (“IP”)
Distribution and Service Center Business

The guide spans over:

How is the Economic Substance Regulations (ESR) Audit notice issued?
What are the details asked under Economic Substance Regulations (ESR) Audit Notice?
How to Submit Economic Substance Regulations (ESR) Audit Response?

This guide summarizes all the practical aspects that we have dealt with so far, while handling ESR audit process for our clients. It will help you at the time of your ESR Audit. Read the full guide for a better understanding of the subject:

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UAE Corporate Tax Return Deadline Extended to 31st December 2024

Ayushi Agrawal

September 26, 2024

Postponement of the Deadline to File a First Tax Return and Settle the Corporate Tax Payable for new companies incorporated on or after 01 June 23.

Federal Tax Authority (FTA) released decision no.7 of 2024

On 26 September 2024, the Federal Tax Authority (FTA) released decision no.7 of 2024 stating the Postponement of the Deadline to File a Corporate Tax Return and Settle the Corporate Tax Payable for Certain Tax Periods for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments.

This decision states that the deadline to file the Corporate Tax Return and settle the Corporate Tax liability has been extended to 31 December 2024 subject to the fulfillment of all the following conditions :

Entities that are incorporated, established or recognised on or after June 2023 and
Entities have a tax period ending on or before 29 February 2024.

Don’t miss this critical deadline. Ensure compliance and avoid penalties by filing and settling your Taxes on time. Act now to avoid last-minute stress!

In conclusion, businesses meeting the criteria must ensure they file their Corporate Tax Return and settle liabilities by 31 December 2024. This extension highlights the importance of timely Corporate Tax Registration through the EmaraTax portal to avoid penalties and ensure compliance with the Federal Tax Authority’s requirements.

Note - Failure to file a Corporate Tax Return and Pay Corporate Tax Liability before 31 December 2024 shall attract a penalty of AED 500 for each month for the first twelve months and AED 1,000 for each month from the thirteenth month onwards.

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FAME at NASSCOM Startup Delegation, Dubai

On September 13, 2024, we had the privilege of attending the NASSCOM Startup Delegation event in Dubai, where our Director, Nirav Shah, partook in a thought-provoking panel discussion alongside other industry leaders. The event highlighted the remarkable growth of India’s tech industry and its increasing collaboration with the UAE.

With India’s tech exports soaring from $15 million in 1988 to an impressive $199 billion today, the delegation’s exploration of market opportunities in the UAE highlights the synergy between Indian and UAE tech ecosystems. As the UAE invests heavily in digital infrastructure and smart cities, the potential for collaboration and innovation between the regions is immense.

Nirav emphasized the importance of initiatives such as the India-UAE Startup Bridge and UAE 4.0, which are fostering stronger ties and innovation in the tech and startup sectors. With India’s thriving startup ecosystem, home to over 140,000 startups and 111 unicorns, the UAE is emerging as a key partner in this journey.

A heartfelt thank you to the Consulate General of India, Dubai, for hosting this event. We look forward to building on these collaborations and unlocking new opportunities.

We are also pleased to see DD News cover this impactful gathering and share the story of India-UAE tech collaboration with a wider audience.

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UAE Federal Tax Authority: Refund Policy for Private Clarification Requests

Ayushi Agrawal

September 18, 2024

The UAE Federal Tax Authority (FTA) issued Decision No. 5 of 2024 on July 19, 2024. The decision, effective from August 1, 2024, sets out the conditions under which fees paid for private clarification requests will be refunded.

Key Provisions of the Decision

The decision outlines specific circumstances under which the FTA will refund fees for private clarification requests:

Withdrawal of request Within Two Days: If the applicant withdraws their private clarification request within two business days of submission, they will be eligible for a refund.
Persons not registered under the Corporate Tax: Private Clarification Requests submitted by individuals or entities not registered under the corporate tax and requests are not related to the inquiry about tax registration.
Tax Audits: Applicants undergoing a tax audit at the time of submitting the private clarification request will receive a refund.
Post-Decision Procedures: Private clarification requests are related to the decision issued by the FTA after submitting the request.
Duplicate Requests: If the duplicate private clarification request is submitted by the same applicant on the same subject, the fee will be refunded.
Legislative Review: If the private clarification requests are related to the subjects under review for legislative amendment in coordination with the Ministry of Finance (MoF) will qualify for refunds.

Refund Process

Refunds will be processed based on the nature and scope of the private clarification request:

Full Refund: If the FTA decides not to issue a clarification for a request covering one or more taxes, the entire fee will be refunded.

Partial Refund: For requests involving multiple taxes where a clarification is issued for only one tax, a partial refund will be given. The refunded amount will be the difference between the fee for a single tax clarification and the fee for multiple tax clarifications.

Don't know how to submit your Private Clarification Request under the new refund policy? Our team is ready to assist you in the submission process.

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Positive Implications of the Policy

This refund policy has several positive effects:

Encouraging Proactive Guidance Seeking: By reducing the financial risk associated with seeking private clarifications, more taxpayers may actively seek guidance on complex tax issues. This can lead to better compliance and fewer errors in tax filings.

Enhancing Trust and Cooperation: Providing clear guidelines and fair treatment helps to build trust and cooperation between taxpayers and the FTA. This can lead to smoother tax administration and more effective dispute resolution.

Supporting SMEs: Small and Medium Enterprises (SMEs), which often have limited resources, will benefit significantly from this policy. It makes obtaining clarifications easier and less costly, ensuring that SMEs meet their tax obligations correctly without incurring excessive expenses.

Improving Request Quality: With clearer guidelines and the possibility of refunds, taxpayers are more likely to submit accurate and complete requests. This diligence reduces the administrative burden on the FTA in processing and responding to requests.

Conclusion

The UAE FTA’s new refund policy for private clarification requests offers taxpayers several benefits. By providing refunds under specific conditions, the policy aims to reduce financial risks and encourage proactive guidance seeking. The policy enhances trust between taxpayers and the FTA, fostering a better quality in clarification requests and supporting efficient tax administration.

Have questions about the new refund policy? Ensure clarity with expert guidance at FAME Advisory

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The Complete Guide on Corporate Tax Refund

This guide serves as the definitive resource on Corporate Tax Refund, thoroughly addressing Article 49 of corporate tax law. It outlines scenarios where a taxable person may have paid more corporate tax than required under the law to the FTA, either through withholding or direct payment. In such cases, the taxable person is eligible to claim a corporate tax refund.

The guide also details the process for applying to the FTA for a refund in accordance with the Tax Procedures Law. Notable instances include situations where withholding tax credits exceed the corporate tax payable or where the corporate tax paid exceeds the amount actually due.

Additionally, the guide provides comprehensive information on circumstances when a refund of corporate tax is not available, the revision process for refund applications, and includes a case study and answers to frequently asked questions.

For a thorough understanding, please read the full guide.

Download the Complete Guide on Corporate Tax Refund

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Taxability of Director’s Services under UAE VAT: Key Insights

Ayushi Agrawal

September 4, 2024

Effective Date for Checking Taxability of Director Service – 01 January 2023

Basic Rule for Taxability of Directors Service

Director services were Taxable where the Director performed the services on a regular, ongoing, and independent basis, and the total value of taxable supplies and imports made by the Director, not limited to but also including the Director services, exceeded the mandatory registration threshold.

Performing the Function of Director on a Board of Directors by a Natural Person

Performing the Function of Director by any person on a Board of Directors was considered as supply of service and was Taxable but as per the new clarification issued by FTA if the performance of a Director’s function After 01 January 2023 by a natural person in Board of Directors of any government entity or of any private sector entity then performance of those Director’s function will not be considered as Supply of Service therefore will not be Taxable whereas if the Director Service is given by either natural person or legal person to Public Joint Stock entity then it will be considered as supply of service and will be Taxable, also Directors Services Provided Before 01 January 2023 is taxable.

Director’s function means services performed in the formal capacity as Director only which means Only Director services performed by any natural person in the formal capacity as director will not be considered as supply of service for the purpose of VAT and will not be taxable i.e. if any other professional Services are provided by director in individual capacity then it will be considered as supply of Service and will be taxable only when the Director is a Taxable person (i.e. Director is registered under VAT).

If any Director who is not the Resident of UAE providing director Service as above then those services will also not be considered as supply of service. There will be no application of the reverse charge mechanism or need for the natural person to register in the UAE for VAT purposes.

If Services performed as a member of a committee derived from the same Board as above on which the Director serves then such services will also be not considered as supply of service for Vat purpose but other services provided by the member, are considered to be supplies of services for VAT purposes and may be taxable subject to meeting conditions for taxable supplies as stated in the VAT legislation

How will a natural person decide VAT Obligation before January 1 2023 or on or after January 1 2023?

If any natural person provides both director service and other professional service then he will have to check the Date of Supply of director service.

If date of supply of director service is before 01 January 2023 then all services by that natural person will be considered as supply of service and will be taxable if meeting the requirements for mandatory registration

But if date of supply of director service is on or after 01 January 2023 then directors service will not be considered as supply of service and will be excluded from calculating the mandatory registration threshold.

If a natural person is registered for Vat and date of supply for director service is on or after 01 Jan 2023 as a result if that person is not meeting the requirements for mandatory registration any more then such natural person must deregister from VAT.

Taxability of Director Service Vs Non-Taxability of Director Service

Sr. No.	Particulars	TAXABLE (All Conditions to be Fulfilled)	NON-TAXABLE (All Conditions to be Fulfilled)
1.	Date of Supply	Date of Supply of Director Service is Before 01 January 2023	Date of Supply of Director Service is On or After 01 January 2023
2	Type of Person	The director is either a Natural Person or a Legal Person	If the Director is a Natural Person (Either Resident or Non-Resident of UAE)
3	Board of Directors	If Director services performed as Director on a “Board of Directors” of a Government Entity or a Private establishment or Any Other Establishment.	If Director services performed as Director on a “Board of Directors” of a Government entity or Private establishment only
4	Type of Service	Any Service provided by the Director- If the Total value of All taxable supplies and imports made by the Director, also including the Director’s services, exceeded the mandatory registration threshold.	AED 10,000 + VAT Only the services performed in the formal capacity as the Director

Does your firm understand the basic rules for director’s services? At FAME Advisory, we help businesses navigate the tax complexities.

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How to determine the Date of Supply for Director Services

The date of supply is determined either as per the general rules or the special rules, depending on whether there will be periodic payments or consecutive invoices.

General Rules

Rule No. 1- Normal for supply of Services –

Date of supply shall be the earliest of any of the following dates:

The date on which the provision of services was completed.
The date of receipt of payment or the date on which the tax invoice was issued.

Rule No. 2- Supply of Services for any contract that includes periodic payments or consecutive invoices -

The date of supply shall be the earliest of any of the following dates:

The date of issuance of any tax invoice.
The date payment is due as specified on the tax invoice.
The date of receipt of payment.
The date of expiration of one year from the date the services were provided.

Special Rules for determining the Date of supply for the Board fees paid to Independent Directors-

Rule No. 3 -

If fees for the Independent Directors are not known in the beginning and are determined only upon the conclusion of the Annual General Meeting, the date of supply would be triggered when such fees are known.

Rule No.4 -

If fees for the Independent Directors are known in the beginning then date of supply will be as per Rule No. 1 and Rule No. 2 as above.

Examples for Better Understanding of Taxability or Non-Taxability of Director Service

Example 1 Natural person performs the function of Director for the calendar year 2022 whereby fees for the services were known at the beginning on 1 January 2022, no payments were released to the natural person during 2022 and no Tax invoices were issued, what will be the Date of Supply in this case? (Refer Rule No.1 & Rule No.4 Above)

In this scenario, the date of supply will be the date of actual completion of the services, and the Director’s services will be considered as Supply of Service and will be taxable regardless of whether payment was made in 2023 or not.

Example 2 The natural person is appointed as Director for 2 consecutive calendar years, i.e., 2022 and 2023. Fees for services to the Board, and any committee derived therefrom, are fixed and known as on 01 January 2022 and automated payments are made on the first business day after the end of each calendar quarter (1 April 2022, 1 July 2022, 3 October 2022, 2 January 2023, 3 April 2023, 3 July 2023, 2 October 2023 and 2 January 2024). It is also agreed between the Director and the entity that the Director issues his/her tax invoice after receipt of the payment, what will be the Date of Supply in this case? (Refer Rule No. 2 & Rule No. 4 Above)

In this scenario, the date of supply will the date of receipt of payment, being the earliest of the dates mentioned in Rule No.2 above. Hence, the payments received on 1 April 2022, 1 July 2022 and 3 October 2022 will be considered as triggering the date of supply for Director’s service which will be considered as a supply of services and will be taxable

But the other payments received on 2 January 2023, 3 April 2023, 3 July 2023, 2 October 2023 and 2 January 2024 will not be considered as Supply of service and will not be taxable because the Date of supply is on or after 01 January 2023.

Example 3 The natural person provide the Director Service for the calendar year 2022 but the fees allocated for that calendar year are only determined after the conclusion of the Annual General Meeting, to be held on 31 March 2023. (Refer Rule No. 3 Above)

In this scenario, the Directors fees was not known on 01 January 2022, the Fees will be known upon the conclusion of AGM on 31 March 2023 despite the fact that the provision of the services may have been physically completed earlier.

Date of supply will be 31 March 2023 which is after 01 January 2023 therefore this service will not be considered as Supply of Service and will not be taxable.

Formal Capacity as Director

Some of the Examples of Director performing the Services in the formal Capacity of Director –

Director Participating in board meetings to take some strategic decisions,
Director Managing the day-to-day affairs of the company,
Director approving the financials or any other documents of the company as an Authorized Signatory Director providing any compliance services in a capacity of director to the company

Some of the Examples of Director performing the Services in Individual Capacity as a professional which will not be considered as Director Performing the Services in the formal Capacity of Director-

Director providing any Professional Services to the company as a freelancer for which issuing Separate Invoices for the Services Rendered.
Director representing the company in a court as lawyer in an individual capacity
Director providing any consultancy services to the company in an individual capacity as a Chartered Accountant.

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August 5, 2024

Author: Ayushi Agrawal

Ayushi Agrawal

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Recent Insights

Ayushi Agrawal

Federal Tax Authority (FTA) released decision no.7 of 2024

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Ayushi Agrawal

Key Provisions of the Decision

Positive Implications of the Policy

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Recent Insights

Ayushi Agrawal

Basic Rule for Taxability of Directors Service

Taxability of Director Service Vs Non-Taxability of Director Service

Examples for Better Understanding of Taxability or Non-Taxability of Director Service

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