- The Court of Justice of the European Union (ECJ) clarified that board members of a Luxembourg public limited company are not subject to VAT.
- The case involved a board member who carried out various activities in conjunction with their position, such as receiving reports, discussing proposals, and participating in decision-making.
- The individual was remunerated with percentage fees based on the companies’ profits.
- The Luxembourg tax authorities argued that board members are subject to VAT as they independently carry out economic activities.
- The |ECJ determined that board members engage in economic activity if their services are provided on a permanent basis and for foreseeable remuneration.
- However, the ECJ concluded that independence depends on factors such as acting on one’s own behalf, under one’s own responsibility, and bearing economic risks.
- In this case, board members who do not act independently are not considered independent for VAT purposes.
- Directors in Luxembourg should revisit their positions if they registered for VAT, charged VAT on their fees, or incurred VAT on the fees.
- The Luxembourg VAT authorities have suspended the application of VAT rules on director fees until the court issues its decision on the case.
Source: bdo.global
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
