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Date of supply for Independent Directors

The date of supply prescribes the point in time when a VAT Registrant needs to account for VAT. 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.

This Public Clarification discusses the date of supply for the Board fees paid to Independent Directors

Summary

In the scenario where the Board fees for the Independent Directors are not known at the outset and are determined only upon the conclusion of the Annual General Meeting, the date of supply would be triggered when such fees are known.

In other cases where the Board fees are known at the outset, the date of supply would be determined as per Article 26 of the Federal Decree-Law No. (8) of 2017 on Value Added Tax (“VAT Law”) where there are periodic payments or consecutive invoices. However, where there are no periodic payments or consecutive invoices, the date of supply would be determined as per Article 25 of the VAT Law.

Detailed discussion

Instances where Board fees are known only upon conclusion of Annual General Meeting:

There may be instances where the Board fees for a given year are ascertained only after the conclusion of the Annual General Meeting (‘AGM’). It is only at this point that the remuneration, if any, for the Independent Directors is known.

In the event that the Board fees are determined upon the conclusion of the AGM and the Independent Directors neither issue any invoice nor receive any payment prior to such date, the date of supply would be the date on which the provision of services was completed in accordance with Article 25 of the VAT Law.

The FTA is of the view that the services are deemed to be completed only when such fees are known upon conclusion of the AGM, despite the fact that the provision of services may have been physically completed earlier.

In view of the above, the date of supply would be triggered at the time the Board fees are known and the Independent Directors would be required to account for VAT accordingly. Further, the tax invoices would need to be issued within 14 days of the date of supply in accordance with Article 67 of the VAT Law.

Instances where the Board fees are known at the outset and involve periodic payments or multiple payments:

Where provision of Director services involves periodic payments or consecutive invoices, the date of supply would be determined as per Article 26 of the VAT Law i.e. the date of supply would be earliest of:

  • Date of issuance of tax invoice;
  • The date payment is due as shown on the tax invoice;
  • Date of receipt of payment.

In the event that 12 months have passed from the date of provision of services and none of the aforesaid events has occurred, the date of supply will be triggered at the end of the 12th month.

Instances where Board fees are known at the outset but there are no periodic payments or multiple payments:

Where there are no periodic payments or consecutive invoices, the date of supply would be determined as per Article 25 of the VAT Law.

Accordingly, the date of supply would be the earliest of:

  • Date of issuance of a tax invoice;
  • The date on which the provision of services was completed;
  • Date of receipt of payment.

This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of the Federal Law No 7 of 2017 on Tax Procedures, Federal Decree-Law No 8 of 2017 on Value Added Tax and their Executive Regulations

This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.


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The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn't constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn't accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information's provided herein above.

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