Luxembourg: VAT treatment of activities carried out by board member (CJEU Advocate General opinion)

Activity carried out by the individual does not fulfill the conditions to be considered as an independent taxable person

Activity carried out by the individual does not fulfill the conditions to be considered as

The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion on the value added tax (VAT) treatment of activities carried out by a member of a board of directors of a legal person.

The case is identifying information is: C-288/22


The individual is a lawyer and member of the board of directors of several public limited companies (i.e., a bank and several holding companies (listed on various stock exchanges).

As member of the board, the taxpayer takes part in decisions concerning the accounts, risk management policies and strategy. The individual also develops proposals to be put to shareholders’ meetings. According to the taxpayer, the Luxembourg law on commercial companies foresees that the individual’s activity does not come with any personal obligations; the taxpayer can be personally liable only when the taxpayer exceeds the limits of acceptable conduct such as a wrongful act.   

The individual is of the opinion that the remuneration should not be subject to VAT as the individual does not carry out the activity independently, but as a member of a collegiate body. However, the VAT authorities (Administration de l’Enregistrement, des Domaines et de la TVA) applied VAT on the directors’ fees received by the individual in 2019.   

The Tribunal d’arrondissement therefore referred questions to the CJEU as to the treatment of this activity and whether this should be subject to VAT.

Advocate General opinion

The Advocate General assessed whether the individual might be considered as an independent taxable person based on activity as member of a board of directors.

According to the Advocate General:

  • To determine whether an economic activity is carried out by a taxable person independently, it is important to assess the economic risk born by the taxable person. In the case of the individual, he receives a remuneration as part of a collective body. As such, he does not appear to bear any personal liability. Only the body for which he is executing his duties would be liable. In this respect, any liability for gross negligence (which would exist in case of any standard employee/employer relationship) or the fact that the body is liable for the company’s tax debts would not be relevant
  • Secondly, the activities as carried out by the individual (for the benefit of a body) cannot be carried out towards any other parties. The individual did not act on his own initiative, and he was specifically appointed as part of the body in question. Therefore, the individual’s activities constitute a part of the body for which he is active. In this respect, his level of remuneration is not dependent on the workload involved, nor on the outcome of any financial negotiation with the recipient of the service. This would be an indicator that the individual is not carrying out any independent economic activity. The fact that the individual’s remuneration might vary according to the results of the company’s performance does not alter this point of view neither, in the same way as the variable remuneration of an employee does not make him/her a taxable person.
  • Finally, the Advocate General concludes that applying VAT to the remuneration of a board of directors when the body is a legal requirement of the taxable person would be against the principle of neutrality of legal form. This could create distortion of competition in case the individual’s activities would be.

The Advocate General is of the opinion that the activity carried out by the individual does not fulfill the conditions for him to be considered as an independent taxable person. The Advocate General however leaves room to the Tribunal d’arrondissement for determining concretely the existence of an economic activity carried out independently based on the individual’s specific case.

Read a July 2023 report prepared by the KPMG member firm in Luxembourg



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