PUBLIC CLARIFICATION ON DATE OF SUPPLY FOR INDEPENDENT DIRECTORS

INTRODUCTION
The Federal Tax Authority has issued VAT Public Clarification determine the date of supply for the board fees paid to independent directors. This clarification is named as VATP009.

The new documents set out the explanation for the instances where board fees are known upon conclusion of AGM. It further explains the occasions in which the board fees are known at the outset and involves periodic or multiple payments or where no periodic or multiple payments are included.  

INSTANCES WHERE BOARD FEES IS KNOWN UPON CONCLUSION OF ANNUAL GENERAL MEETING
In certain case board fees for a given year is determined after concluding the Annual General Meeting. In such a case the remuneration of only the Independent Director can be verified. The date of supply in case of determining the board fees after the conclusion of the annual general meeting is the date of completion of provision of services as per Article 25 of the VAT law. The date of supply when the independent director neither issues any invoice nor receives any payment prior to such date is the date of completion of provision of service. The date of supply is triggered when the board fees are known and the independent directors are required to account for VAT accordingly. Tax invoices as per Article 67 of the VAT law should be issued within 14 days of the date of supply.     

INSTANCES WHERE THE BOARD FEES ARE KNOWN AT THE OUTSET AND INVOLVE PERIODIC PAYMENTS OR MULTIPLE PAYMENTS
The date of supply would be determined as per Article 26 of the VAT law in case the provision of director services involves periodic payments or consecutive invoices. The date of supply would be the earliest of:

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

The date of supply would be triggered at the end of the 12th month in the event that 12 months have passed from the date of provision of services and none of the aforesaid events have occurred.

INSTANCES WHERE BOARD FEES ARE KNOWN AT THE OUTSET BUT THERE ARE NO PERIODIC PAYMENTS OR MULTIPLE PAYMENTS
Date of supply would be determined as per Article 25 of the VAT law in case there are no periodic payments or consecutive invoices. The date of supply would be the earliest of :

• Date of issuance of a tax invoice
• The date of completion of provision of services
• Date of receipt of payment