According to a judgment of the European Court of Justice on 13 June 2019, a member of a supervisory board (SB) of a foundation does not have to pay VAT on the remuneration for his activities as a member of the supervisory board.
This was decided by the European Court of Justice following a preliminary question on the subject from the Court of Appeal of ‘s-Hertogenbosch.
Why is a commissioner a VAT entrepreneur?
As of 1 January 2013, many members of supervisory boards of housing corporations are subject to VAT. After all, a supervisory board member’s position with one supervisory board is regarded as an economic activity on which VAT is due. Since 1 January 2013, housing corporations that have the legal form of a foundation therefore pay 21% VAT on the fee received by a supervisory director.
What facts underlie this case?
This case concerned a supervisory director who is a member of the supervisory board of a foundation with the objective of permanently offering accommodation to those in need of help. In addition, the man is employed as a civil servant. The supervisory director in question disagreed with the fact that he had to pay VAT on the fee he received from the foundation. He therefore submitted a letter of objection against this tax, which was rejected by a decision of the Tax and Customs Administration. The appeal lodged by the commissioner with the District Court of Zeeland-West-Brabant was declared unfounded by judgment.
How are the proceedings before the court?
The commissioner in question does not leave it at that and appeals against the verdict to the Court of Appeal in ‘s-Hertogenbosch. In dispute at the court of appeal is the question whether the commissioner for his activities at the foundation should be considered as an entrepreneur for VAT purposes or not.
In this respect, it is not disputed that as a member of the Supervisory Board, the supervisory board member concerned permanently participates in economic transactions and therefore performs an economic activity. The decisive factor, however, is the answer to the question of whether the activity is carried out independently or not.
The Court of Appeal has doubts about how this question should be answered and submits the question to the European Court of Justice. This is called a preliminary question.
The Court of Justice determines: Commissioner is not self-employed and therefore not a VAT entrepreneur
In answering the question, it is first examined whether the activity as a member of the supervisory board of a foundation should be regarded as ‘economic’ and then whether that activity is carried out ‘independently’.
The Court of Appeal decided that the supervisory directorship must be regarded as economic because it is performed on a permanent basis (the supervisory director is appointed for four years) and he receives remuneration for this.
With regard to independence, the Court of Appeal ruled that a member of the Supervisory Board, unlike an entrepreneur, does not bear any business risk. In addition, he performs his duties by virtue of his position and therefore not in his own name, for his own account and under his own responsibility. The SB member receives the fee regardless of his participation in a meeting or his actual hours worked. In addition, the auditor’s fee is a fixed amount. An auditor therefore has no direct influence on the remuneration. For these reasons, the Court of Justice decides that the auditor does not carry out the activity independently. This means that the activities carried out by the commissioner for the foundation do not lead to VAT entrepreneurship.
What to do with the VAT obligation for supervisory directors and supervisors after this ruling?
After this preliminary question has been answered, the Court of Appeal of ‘s-Hertogenbosch still has to rule in the proceedings.
For supervisory directors and other supervisors, the judgment means that they may no longer be regarded as VAT entrepreneurs. They will then no longer have to submit a VAT return.
Whether this will actually be the result depends on the ruling and the question whether the State Secretary will come up with a revised policy. For the time being, supervisory board members with usually one supervisory board member will still be able to make use of the small entrepreneurs scheme or opt for a fictitious employee status with a foundation. In all cases, it is wise for a supervisory board member to continue to act in accordance with the Tax and Customs Administration’s policy if he or she is currently regarded as a VAT entrepreneur. This means that a supervisory director must pay VAT (and charge it to the housing corporation or foundation) and then object to this tax.
Information
Are you a supervisory director or supervisor of a housing corporation or foundation and do you have questions about this subject? Please contact Yvonne Jansen.
