Indirect Tax News - February 2020

VAT taxable person - Independency criterion

On 13 June 2019, the Court of Justice of the European Union (CJEU) published its judgment in the case of IO (C-420/18). The CJEU concluded that based on the facts of the case, a member (an individual person) of a supervisory board carried out an economic activity, but the activity was not carried out independently. As a result, the CJEU ruled that in this specific situation, the activities of a member of a supervisory board did not result in VAT entrepreneurship and, thus, they did not have to register for Dutch VAT purposes.

The basis for this conclusion was that though the supervisory board member could not be regarded as an employee of the foundation nor of the supervisory board, the member did not act in their own name, did not act for their own account, and did not bear any personal  risk when carrying out their  activities. Based on the bylaws of the specific foundation, the board member did not have an individual responsibility for the acts of the supervisory board. Furthermore, the CJEU pointed to the fact that the board member could not be held liable for any damages caused to third parties when acting as such and the board member earned a fixed amount regardless of whether they attended meetings. Therefore, according to the CJEU, the board member did not have any business risk and could not be regarded as carrying out economic activities independently.

The Dutch court of appeal that had requested clarity from the CJEU on this matter recently published its judgment in the IO case. The Dutch court came to the same conclusion as the CJEU. The Dutch court noted that the fact that the member had simply been appointed to the board and that no formal agreement regarding serving on the board had been concluded, did not impact the court’s conclusion.


As a result of the IO judgment, a Dutch Advocate General (A-G) has applied the “IO-criteria” where a person was a member of an advisory committee that advised a public body on objection procedures. Since the activities and level of responsibilities of the advisory committee member were, according to the A-G, mostly comparable to those of the board member in IO, the advisory committee member could not be regarded as carrying out their activities independently. The member is not subordinate to the advisory committee they were part of, as they are expected to act independently and autonomously form their opinion. However, the advisory committee member was, according to the A-G, not individually responsible for the advice the advisory committee provided to the public body. Though the final judgment of the Dutch Supreme Court is still to be delivered, it is interesting to note that the IO-criteria have already been applied in practice.

Impact of the change

Prior to the CJEU decision, the Dutch tax authorities took the position that a supervisory board member could be regarded as a VAT taxable person. Whether this was the case was, according to the Dutch tax authorities, to be assessed on a case-by-case basis. Most of the times supervisory board members were regarded by the Dutch tax authorities as a taxable person, regardless of the fee they received or the number of memberships they held. Generally, the Dutch Tax Authorities did not take into account whether the criteria as set out by the CJEU in the first paragraph were met.[1]

As a result of the CJEU judgment, whether membership of a supervisory board leads to entrepreneurship for VAT purposes should be assessed on a case-by case basis. The importance of such analysis is emphasised by the A-G’s conclusion that applied the same type of assessment to a member of an independent advisory committee of a public body where the advisory committee advises the public body on objection procedures.

Given the CJEU case and its subsequent application, the VAT position of members acting for an independent group that is part of a larger organisation should be assessed on a case-by-case basis. However, there is room to argue that transactions carried out by such members for consideration do not lead to VAT entrepreneurship and thus no VAT should be charged. This argument can be beneficial for (board) members that provide their activities to non-VAT taxable or VAT exempt organisations or companies. Therefore, we suggest you review the Dutch VAT positions in any cases that are similar to the cases discussed above.

Hendy van Hoof

Leoni de Boer


[1] Up until 1 January 2013, the Dutch tax authorities held the view that supervisory board members that held four or fewer memberships were never regarded as Dutch VAT taxable persons, but the Dutch tax authorities changed their practice on the basis of a warning from the EU Commission.