The Director’s Service fee also called as Management Fee is taxable in UAE under the UAE VAT Law. The FTA- Federal Tax Authority has issued a rule on applicability of tax on Management Fee/Director’s Services in the month of April 2018.
The Director’s Service Fee/Management Fee is taxable if the below mentioned conditions are satisfied:
1. The person provides independent director’s services to other legal entity or entities.
2. The annual fee in cash or in kind exceeds the monetary value AED 375,000/-.
3. There is no employer – employee relationship between the such person/director and the company.
Management fee/director’s service fee will not be taxable for the condition if there is an employer – employee relationship between the director and the company and for the last 12 months period, the service fee is not more than the mandatory registration threshold ie; AED 375,000/.
VAT on management fee/director’s service fee is applicable at a standard rate of 5%. The service fee charged in cash, accommodation facility given, stock options, bonuses, or any other facility or consideration given to the director should be considered to arrive the value of the consideration for taxable purpose.
SME Business Management Consultancy provide advisory service in relation to the Director’s Service Fee/Management Fee on UAE VAT on;
1. Review the memorandum of association or board resolution of the company and the financial statement for the previous year/s.
2. Meeting with the accounts department and management of the company
3. Provide support for the director to get registered under FTA once the eligibility for VAT Registration under FTA is confirmed.
4. Extend our service to the director to file the VAT Return with FTA once the registration is successfully done and the due date for filing the return is received.