CJEU ruled: The end of Luxembourg VAT on director’s fees
- Articles and memoranda
- Posted 21.12.2023
Elvinger Hoss Prussen won a landmark preliminary ruling on 21 December 2023 in which the Court of Justice of the European Union (CJEU) decided in Case C-288/22 that remuneration received by a director for his activity as a member of the board of directors of a Luxembourg limited company is not subject to VAT.
Indeed, the CJUE ruled, following the opinion of the Advocate General on these points, that the activity of member of a board of directors of a limited company under Luxembourg law is not exercised independently for VAT purposes since the board member does not act on his own behalf or under his own liability and does not bear the economic risk linked to this activity. According to the CJUE, this holds true despite the fact that this member freely organizes the modalities of execution of his work, acts in his own name and is not subject to a subordination relationship.
For more information on the context and impact of this decision, please refer to our previous article.
It is important to note that this ruling reverses a Luxembourg administrative practice that has been applied since 2016 (and enshrined in Circular No 781) on the principle that independent directors are taxable persons for VAT purposes and that directors’ fees are subject to VAT.