The European Court of Justice gave its judgment in case C-420/18 (IO) on 13 June 2019. The case deals with the question is a member of a supervisory board can be seen as a taxable person.
Context: Request for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Articles 9 and 10 — Taxable person — Economic activity carried out ‘independently’ — Definition — Activity as a member of the Supervisory Board of a foundation
Note from the editors: This ruling probably means that the Netherlands will have to review its rules with regard to supervisory boards again.
Article in the EU VAT Directive
Articles 9 and 10 of the EU VAT Directive 2006/112/EC.
Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 10 (Taxable person)
The condition in Article 9(1) that the economic activity be conducted “independently” shall exclude employed and other persons from VAT in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer’s liability.
Decision
Articles 9 and 10 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a member of the supervisory board of a foundation, such as the applicant in the main proceedings – which, with regard to the performance of his activities as a member of that board, is in no way hierarchically subordinate to the administrative body or the supervisory board of that foundation, but neither in its own name, nor for its own account, nor under acts his own responsibility, but acts on behalf and under the responsibility of that same board, and also does not bear the economic business risk,since he receives a fixed remuneration which is not dependent on his attendance at meetings or on his actual hours worked – he does not independently carry out an economic activity.
Unofficial translation
Facts (simplified):
- IO is employed as a municipal official and is also a member of the Supervisory Board of Stichting E (hereinafter: the foundation).
- IO receives a gross remuneration for its work as a supervisory director, subject to wage tax and national insurance contributions.
- Until 01.01.2013, IO was not considered as a taxpayer for VAT, based on the national rule that members of a Supervisory Board who held a maximum of four supervisory directorships were not regarded as a taxpayer for VAT. By decision of 27.06.2012, this approval was withdrawn with a transitional arrangement until 01.01.2013 following the European Commission’s request to adjust the VAT rules for the treatment of members of supervisory boards.
- According to the Commission, the work of a Commissioner, even if only for one board, should be regarded as an economic activity for VAT.
- The question is whether IO, for its activities as a member of the Supervisory Board of the foundation, must be regarded as a taxpayer for VAT.
IO, as an individual member of the Supervisory Board, argues that he is subordinate to the Supervisory Board. The Inspector argues that the relationship between the foundation and a member of the Supervisory Board is characterized by equality: there is a contract of assignment and no employment contract.
Questions
Is a member of the Supervisory Board of a foundation, who is in a subordinate position with regard to this Board for his employment and remuneration conditions, but who is not in a subordinate position with respect to the Supervisory Board or the Foundation, performing economic activities independently for VAT?
AG Opinion
None
Decision
Articles 9 and 10 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a member of the Supervisory Board of a foundation, such as the applicant in the main proceedings, who, although he is not bound to the governing body of that foundation by any employer-employee relationship or to the Supervisory Board of that foundation by such a relationship in respect of the performance of his role as a member of that board, does not act in his own name, on his own behalf or under his own responsibility, but on behalf of and under the responsibility of that Supervisory Board and does not bear the economic risk arising from his activities, since he receives a fixed remuneration which is not dependent on his participation in meetings or hours actually worked, does not carry out an economic activity independently.
Summary
A member of the supervisory board of a foundation, who, while exercising his duties as a member of that council, is in no way hierarchically subordinate to the management body or supervisory board of that foundation, but neither in his own does not act in his name or for his own account or under his own responsibility, but acts for the account and under the responsibility of that same council, nor does he bear the economic business risk, since he receives a fixed remuneration that is not dependent on his participation in meetings or of are actually worked hours, does not perform an economic activity independently.
Source
References in the EU Member States to this case
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