Circular 781-2
- CJUE Ruling on Economic Activity (C-288/22): The European Court of Justice (CJUE) clarified that under Article 9(1) of the EU VAT Directive (2006/112/CE), a member of the board of directors of a Luxembourg public limited company (société anonyme) is engaged in economic activity if they provide services for a fee, and such services are rendered on a continuous basis with predictable remuneration terms.
- Criteria for Independence: While directors may organize their work independently and receive their own remuneration, the CJUE indicated that if they do not assume economic risks or responsibilities for their activities, they cannot be considered independent in the context of VAT obligations. The court determined that the economic risk associated with their activities falls on the company, not the individual director.
- Civil Court Judgment: Following the CJUE’s ruling, the Luxembourg District Court affirmed that the activities of company directors do fulfill the criteria for being classified as economic activities. However, it reinforced that directors do not operate independently since they do not carry the economic risk of their decisions or actions.
- Administrative Measures Post-Judgment: In light of these judicial decisions, the tax administration will not limit their implications solely to directors of public limited companies. All directors, whether individuals or corporate entities, must evaluate their status regarding VAT obligations based on the criteria established by the courts.
- Regularization Process for VAT: Directors identified as VAT-liable can regularize previously charged VAT for non-prescribed years, including 2018 and 2019, through a simplified non-bureaucratic procedure available on MyGuichet.lu. This process allows directors to submit requests for all relevant years in a single effort. It is also noted that directors must return any VAT collected to their respective clients and ensure the clients adjust their VAT deductions accordingly. The administration has indicated that minor expenses will not affect the right to deduct, but significant investment expenses will undergo scrutiny, which may lead to a VAT adjustment.
Source Lux Government
See also
- ECJ Case C-288/22 (Administration de l’Enregistrement, des Domaines and de la TVA) – Judgment – Member Board of Directors is taxable person upon consideration & permanent activity
- Roadtrip through ECJ Cases – Taxable person (Art. 9)
