Absence of VAT on Directors’ Fees: CJEU Decision and Implications for Luxembourg

• The Luxembourg VAT authorities previously applied a 17% VAT rate on directors’ fees.
• The Court of Justice of the European Union (CJEU) ruled that directors’ fees should not be subject to VAT if the director does not act independently.
• The CJEU stated that directors must personally assume risk and obligations to be considered acting independently.
• As a result of the CJEU decision, Luxembourg resident directors in similar situations should not be considered taxable persons under Luxembourg VAT Law.
• The Luxembourg VAT authorities have issued a circular removing the application of the previous circular until a decision is rendered by the Luxembourg District Court.
• A case-by-case analysis is necessary to determine if each director mandate meets the independence criterion of the CJEU judgment.

Source: goodwinlaw.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.