On 21 December 2023 the European Court of Justice (ECJ) published its decision in the case C-288/22 (Administration de l’enregistrement, des domaines et de la TVA) concerning the status of a member of the company’s board of directors.  

The referring court asked whether a member of the board of directors carries out economic activities independently.  

Facts of the case

TP, being a member of the board of directors of multiple companies in Luxembourg, was involved in receiving reports from senior managers and representatives, discussing strategic proposals, choosing operational managers, etc. He also took part in the decision-making regarding the accounts of the companies concerned and the proposals to be submitted to shareholder meetings, strategy, and risk policy.

For performing the above functions TP received a remuneration in the form of a percentage of the profits achieved by the companies. Luxembourg tax authorities considered TP’s activities as economic activities carried out in an independent capacity and subjected his remuneration to VAT.


The Court has pointed out that TP’s activities as a member of the board of directors can fall within the “economic activities” category if:

  1. The activity qualifies as a supply of services for consideration.
  2. The activity is effected on a continuing basis.
  3. The procedures for fixing the amount of remuneration for such activity are foreseeable:
  • If the remuneration in the form of a lump sum, it is determined in advance (use of flat rate and annual nature of remuneration do not affect the existence of a direct link).
  • If the remuneration in the form of percentage fees for achieving target profit but the company does not achieve it, shareholders based on other factors may nevertheless award TP a fee which is objectively in line with the service provided.

Considering the TP’s term of office (6 years), nature of activities and remuneration agreed, the Court concluded that his activities can be considered as economic activities if the percentage fees may also be paid for business years when the company did not achieve profit.

Nevertheless, in the Court’s view, TP could not carry out his activities independently, if he did not act on his own behalf or under his own responsibility and did not bear the economic risk linked to his activity. The fact that the member of the board of directors is generally free to arrange how to perform his work, receives the emoluments, acts in his own name and is not subject to an employer-employee relationship, does not itself affect this conclusion.

How can KPMG assist?

Should you like to further discuss the content and potential impact of the Decision to your business, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.

KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.

Our tax professionals are able to review your company’s current tax position and provide relevant advice and planning on a range of indirect taxes, including VAT, customs duties and excise taxes (such as tax audits, reorganizations and acquisitions, etc.). Furthermore, we can help your company with its administrative obligations and contacts with administrative bodies.

Connect with us

Connect with us

Stay up to date with what matters to you

Gain access to personalized content based on your interests by signing up today