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Dubai: Board members of large companies will be required to pay a value added tax of five per cent on the fees they are given for their services, according to two taxation lawyers and experts.

Board members sit on the board of a company and vote on key business and corporate management issues, often acting as representatives of the shareholders.

They are typically not employees of the company, and as a result are paid a fee to attend board meetings and an annual retainer for their services.

“They provide the service of attending the board, and therefore that fee will be taxed. That’s the expectation,” said Shiraz Khan, a senior tax adviser in law firm Al Tamimi & Company’s tax practice. “It’s not exempt or zero rated,” he added.

The global average compensation for a board member is around Dh132,000, according to a survey conducted by Lodestone Global, which would put the individual below the threshold of Dh375,000 for taxation.

However, board members can make upwards of Dh7 million a year for their services at large, listed companies. This would require them to register for VAT, and pay 5 per cent on their fees.

“The main criteria for the board member’s fee to be taxable is: Are the services provided in an independent capacity by the director or not. If they are independent, then VAT is charged,” said Amit Chib managing partner at Haynes Path Management Consultancy.