TP is a lawyer who is a member of the board of directors for several public limited companies, including a bank and holding companies listed on various stock exchanges. As a board member, he participates in decisions regarding accounts, risk management policies, and strategy, and develops proposals for shareholders’ meetings. TP believes that his remuneration should not be subject to VAT as he is not working independently, but as part of a collective body. However, the VAT authorities have applied VAT to his directors’ fees, leading to questions being referred to the CJEU regarding the treatment of this activity for VAT purposes.
AG Kokott has provided an opinion on whether TP should be considered an independent taxable person for VAT purposes. She notes that it is important to assess the economic risk borne by the taxable person to determine if they are carrying out economic activity independently. In TP’s case, he receives remuneration as part of a collective body and does not appear to bear any personal liability. His activities cannot be carried out towards any other parties, and his level of remuneration is not dependent on workload or financial negotiation outcomes. AG Kokott concludes that applying VAT to the remuneration of a board of directors where the body is a legal requirement of the taxable person would be against the principle of neutrality of legal form. She leaves room for the Tribunal d’arrondissement to determine whether TP’s specific case constitutes an economic activity carried out independently.
Circular 781 confirms the application of VAT on directors’ fees for independent persons who supply director services against consideration since September 30, 2016. The concept of “independence” is crucial, and AG Kokott’s opinion seems to take some distance from the idea that directors’ activities should be considered independent and subject to VAT. The CJEU’s decision and its potential mitigations and consequences will need to be examined closely. If confirmed, this decision would constitute an important change in jurisprudence regarding the VAT treatment of directors’ services.
Source KPMG
See also
- C-288/22 (Administration de l’Enregistrement, des Domaines and de la TVA) – AG Opinion – Member of the Board of Directors of a Public Limited Company is not a Taxable Person
- Roadtrip through ECJ Cases – Focus on ”Taxable person” (Art. 9)
