Indirect Tax News - October 2019

Members of the Supervisory Board may no longer be VAT entrepreneurs

The Court of Justice of the European Union (CJEU) ruled on 13 June this year in the Dutch IO case on the VAT liability of a member of a Supervisory Board (SB). According to the CJEU, this member cannot be regarded a taxable person for VAT purposes. The case is expected to have major consequences for SB members who have generally been seen as a taxable persons in the Netherlands since 2013. The case may also have a wider impact, including on the discussion about the taxation of directors’ fees in Luxembourg.

The IO case

In the IO case, the CJEU has decided that the activities that a SB member performs for a foundation do not lead to a VAT liability. To be carrying out an economic activity liable to VAT, the SB member would have to perform the work independently with no situation of subordination when exercising that activity.

The CJEU notes that the member does not perform the work on the basis of an employment contract. Also, according to the CJEU, there are no other legal ties that lead to the conclusion that the activity has not been carried out independently. In particular, the member is not bound by instructions from the foundation when determining his method. Nevertheless, the member is not a taxable person for VAT because the he does not perform the work in his own name, on his own account and under his own responsibility. For example, he does not bear any economic business risk because he receives a fixed remuneration based on the Standardization of Remuneration of Senior Officials in the Public and Semi-Public Sector. This reimbursement is not dependent on his performance, participation in meetings or his actual hours worked.


Since 2013, Supervisory Board members normally qualify as taxable persons for their activities in the Netherlands. This ruling may therefore have major consequences. Supervisory directors who currently act as taxable persons may no longer have to pay VAT. They can therefore no longer deduct the input tax on costs incurred. In addition, the judgment may have consequences for VAT deducted in the past.

We do note that the CJEU relies on the facts and circumstances as outlined by the referring court (The Court of Appeal of 's-Hertogenbosch). In its question, the Court of Appeal has already indicated that the Supervisory Board member is in a subordinate position with regard to his employment and remuneration conditions in relation to the Supervisory Board. In our opinion, the judgement does not automatically mean that all Supervisory Board members can no longer be regarded as VAT taxable persons. A case-by-case assessment is necessary.

Madeleine Merkx