Is the activity of an independent, non-employee member of the board of directors of a joint-stock company subject to VAT?
C- 288/22 – TP | TP is a lawyer and a member of the board of directors of several Luxembourg joint-stock companies, where he also holds voting rights. His duties include preparing for general assembly decisions and developing proposals and recommendations.
TP received a predetermined fee (allegedly a fixed amount) approved by the general assemblies of the companies for his work. However, he was not personally responsible for the decisions made by the companies in which he participated. The Luxembourg tax authority, considering that TP was not in an employment relationship with any of the companies and organized his work independently, deemed TP’s activity as independently performed economic activity subject to VAT because it had a sufficiently permanent nature, and he was entitled to remuneration qualifying as consideration.
The European Court, in its judgment, did not rule out the possibility that the activity of an independent director of a joint-stock company might fall within the scope of VAT as an “external” advisory activity but pointed out that the characteristics of economic activity and consideration must be examined in each case. According to the court, regularity (the appointment could last up to six years), permanence, and the certainty of the consideration can be established in the basic case.
However, it was questionable whether TP carried out the activity in his name, for his benefit, with his responsibility, and assuming his economic risks. Despite having voting rights in the board of directors, TP formulated proposals in the interest and for the benefit of the joint-stock companies (in this sense, he was not “external”), and the consequences of decisions made by the companies were borne by the companies themselves; nevertheless, the board member was entitled to remuneration. TP’s professional responsibility was therefore more akin to that of an employee. The court did not attach importance to whether the certain remuneration otherwise depended on the profitability of the companies.
