{"id":13105,"date":"2024-02-02T14:52:20","date_gmt":"2024-02-02T14:52:20","guid":{"rendered":"https:\/\/vila.es\/?p=13105"},"modified":"2024-02-02T15:51:43","modified_gmt":"2024-02-02T15:51:43","slug":"13105","status":"publish","type":"post","link":"https:\/\/vila.es\/en\/corporate\/13105\/","title":{"rendered":"VAT IS NOT APPLICABLE TO THE REMUNERATION OF BOARD MEMBERS, ACCORDING TO THE CJEU"},"content":{"rendered":"

ES<\/a><\/span>|EN|\u65e5\u672c\u8a9e<\/a><\/span>|DE<\/a><\/span><\/strong><\/p>\n

Tax on the remuneration received by members of the board has been the object of debate and analysis within the Spanish and European legal systems. Some countries consider that said remuneration should be subject to VAT, in as far as it amounts to an economic activity of a commercial nature.<\/p>\n

On the other hand, other countries consider that in most cases board members do not fulfil the requirements to be a taxable person of said tax, since more often than not they do not act on their own behalf and neither to they assume the entire business or professional risk when performing their functions.<\/p>\n

In Spain, tax treatment is based upon the relationship theory, which establishes that it is incompatible to combine a top management labour relationship, focused on the management and representation of a company, with the corporate relationship of director, and therefore one must absorb the other. Depending on which one prevails, the remuneration is taxed either as employment yields or as earnings from economic activity.<\/p>\n

In the majority of cases the corporate relationship prevails due to the activities carried out by the board member, or the relationship with the company.<\/p>\n

Judgement of the Court of Justice (Third Chamber) of 21st<\/sup> December 2023, case C-288\/22.<\/strong><\/p>\n

Recently, on 21st<\/sup> December, the Court of Justice of the European Union (CJEU) passed a judgement dealing with this problem, shedding light on the taxation of services rendered by members of a Board of Directors.<\/p>\n

In this case, a board member forming part of the board of directors of several joint-stock companies incorporated in Luxembourg received a tax assessment subjecting his activity to VAT, which he appealed. His activities as a board member consisted of receiving reports from top management or representatives of the companies, discussing strategic proposals, appointing operative executives and participating in decision making regarding the accounts of the companies and the proposals which would be presented at shareholders\u2019 meetings. In exchange, the board member received remuneration in the form of \u201cpercentage fees\u201d, that is to say, a percentage of the earnings of the companies, as approved by the general shareholders\u2019 meeting.<\/p>\n

The Luxembourg tax authorities upheld that directors of companies carry out economic activities independently and, therefore, their remuneration is subject to IVA. The court in Luxembourg referred the case to the CJEU in order to determine:<\/p>\n