Luxembourg: Remuneration received by board of directors member is not subject to VAT (court decision)

The Luxembourg District Court on November 22, 2024, confirmed the non-applicability of value added tax (VAT) to the directors’ fees received by a member of the board of directors of public limited companies, in accordance with the Court of Justice of the European Union's decision in TP v. Administration de l’Enregistrement, des Domaines et de la TVA (c-288/22).

The CJEU previously held that the director may not have been performing its economic activity independently and therefore may not qualify as a “taxable person” under article 9 of the VAT Directive.

The Luxembourg VAT authorities have stated that this decision must not be considered a precedent and emphasized that the decision's applicability would need to be confirmed on a case-by-case basis. The authorities highlighted that the director in the case did not act on their own behalf and did not bear the economic risks associated with the role, which could be more easily established for non-executive directors of Luxembourg public limited companies.

A formal position from the VAT administration is expected soon to clarify the broader implications of the ruling.

Read a December 2024 report prepared by the KPMG member firm in Luxembourg