Opinion of the Advocate General — ECLI:EU:C:2023:590
Date: 2023-07-13
Language of the case: French
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Luxembourg

Summary C-288/22 – 1 
Case C-288/22 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
29 April 2022 
Referring court:  
Tribunal d’arrondissement (District Court, Luxembourg) 
Date of the decision to refer:  
26 April 2022 
Applicant:  
TP 
Defendant:  
Administration de l’enregistrement, des domaines et de la TVA 
  
1. Subject matter and facts of the dispute: 
1 TP, a lawyer, is a member of the board of directors of a number of public limited 
companies incorporated under Luxembourg law, namely a bank established in 
Luxembourg, a holding company belonging to a logistics group listed on the 
Frankfurt stock exchange, and two holding companies belonging to a 
pharmaceuticals group listed on the Paris stock exchange. As a member of those 
boards, he takes part in decisions concerning the accounts, risk management 
policy and the strategy to be followed by the group in question, and in developing 
proposals to be put to shareholders’ meetings. The day-to-day management of the 
first two companies is carried out by an executive committee made up of the chief 
executive officers or executive directors. The business activities of the other two 
companies do not require an executive committee. 
2 On 28 July 2020, the administration de l’enregistrement, des domaines et de la 
TVA (Registration Duties, VAT and Estates Authority, Luxembourg; ‘the VAT 
Authority’), acting on its own initiative, subjected the director’s percentage fees 
received by TP in 2019 to VAT. By decision of 23 December 2020, the imposition 
of tax on the initiative of the VAT Authority was confirmed on the ground that a 
EN 
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company director independently carries out an economic activity and thus does 
not escape VAT. 
3 TP disputes that his director’s percentage fees are properly subject to VAT. On 
26 January 2021, he brought an application to annul the decision to impose tax on 
the initiative of the VAT Authority before the referring court. 
2. Provisions at issue: 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax 
4 Title III, ‘Taxable Persons’, provides: 
‘Article 9 
1. “Taxable person” shall mean any person who, independently, carries out in any 
place any economic activity, whatever the purpose or results of that activity. 
Any activity of producers, traders or persons supplying services, including mining 
and agricultural activities and activities of the professions, shall be regarded as 
“economic activity”. The exploitation of tangible or intangible property for the 
purposes of obtaining income therefrom on a continuing basis shall in particular 
be regarded as an economic activity. 
… 
Article 10 
The condition in Article 9(1) that the economic activity be conducted 
“independently” shall exclude employed and other persons from VAT in so far as 
they are bound to an employer by a contract of employment or by any other legal 
ties creating the relationship of employer and employee as regards working 
conditions, remuneration and the employer’s liability.’  
3. The parties’ positions: 
TP 
5 TP submits that a member of a board of directors does not carry out his or her 
activity independently, but as a member of a collective organ which represents the 
legal person. 
6 In order to determine whether an activity is carried out independently, ‘it is 
necessary to check whether the person concerned performs his activities in his 
own name, on his own behalf and under his own responsibility, and whether he 
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bears the economic risk associated with carrying out those activities’ (judgment of 
13 June 2019, IO (VAT – Activities of a member of a supervisory board) 
C-420/18, EU:C:2019:490, paragraph 39). 
7 The economic risk associated with the activity of the members of the board is 
borne by the company, and it is the company that bears responsibility to third 
parties. TP submits that the arguments advanced by the VAT Authority regarding 
the potential liability of directors are misconceived. He argues that the principle 
set out in Article 441-8 of the loi concernant les sociétés commerciales (Law on 
commercial companies) is that ‘no personal obligation arises on the part of the 
directors in relation to the commitments of the company’. A director can be 
personally liable only where he or she manifestly exceeds the limits of acceptable 
conduct such that the wrongful act is severable from the function of director. That 
is the position, according to the case-law of the French Cour de cassation (Court 
of Cassation), where the director ‘intentionally commits a wrongful act of 
particular seriousness which is incompatible with the normal performance of his 
or her functions within the company’. 
8 Furthermore, it is important not to conflate decision-making powers with powers 
of representation. The issue of representation of a company has no bearing on 
whether a member of a collective management organ is individually providing 
management services which are subject to VAT. 
9 As to the implementation of decisions taken by the company, TP observes that this 
is generally entrusted to employees of the company, and not to individual 
directors. Where the directors perform individual tasks outside the scope of the 
activity of the collegiate organ, and are remunerated for those specific activities, 
they are acting in a capacity other than that of a member of the collegiate organ. 
Thus, he submits, if an executive director is given responsibility for implementing 
decisions of the board of directors, the remuneration for the day-to-day 
management is treated for tax purposes as salary, and the Court of Justice was 
very clear on that point in its judgment of 18 October 2007, van der Steen, 
C-355/06, EU:C:2007:615. 
10 According to TP, the only question to be considered is whether the contribution to 
the management of a company provided by a director within a collective organ 
could be described as a service provided independently. He submits that the Court 
of Justice’s analysis leads to the conclusion that the ‘service’ is provided by the 
collective organ, and not by its individual members. The board of directors 
collectively discusses the possible options and takes decisions, and the position of 
an individual member may be diametrically opposed to that of the collective 
organ. 
11 TP submits that the board of directors, viewed as a collective management organ, 
is the legal representative of the company, such that the management service it 
collectively provides is deemed to be provided by the company itself. 
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12 Lastly, TP suggests that a reference should be made to the Court of Justice for a 
preliminary ruling on a question worded in essentially the same terms as the first 
question which this court will go on to refer.  
The VAT Authority 
13 The VAT Authority maintains that TP’s activity as a director is economic in 
nature in that it is permanent and remuneration is paid in return for carrying it out.  
14 The permanent nature of the activity is written in to the Law on commercial 
companies, which provides that directors are to be appointed for a renewable term 
not exceeding 6 years. 
15 The services provided by TP also give rise to remuneration, in that he receives 
percentage fees which are approved by a vote of the general meeting of 
shareholders on a proposal from the board of directors. The services provided by 
TP to the companies of which he is a director are thus provided for the purposes of 
obtaining income therefrom. 
16 In order for the transaction to be subject to VAT, there must be a direct link 
between the remuneration received by TP, or in other words his percentage fees, 
and the services he provides to the companies of which he is a director. 
17 The VAT Authority considers that there is such a link in the present case. TP is a 
lawyer of many years’ standing and has a wealth of experience which enables him 
to provide a very high quality of service, in carrying out his mandate as a director, 
to the companies which have appointed him. In exchange for the expertise of an 
eminent specialist, the companies must offer TP a quid pro quo which takes 
account of the quality as well as the quantity of the service he provides to them. 
The remuneration received by TP thus arises from the functions performed by him 
in his capacity as a director. 
18 The VAT Authority adds that remuneration paid in the form of percentage fees 
has the advantage of giving the directors, if they are not shareholders, a stake in 
the success of the activities of the companies, and incentivising them to devote 
their utmost attention to it, so as to generate healthy profits for them. 
19 It rejects the idea that the payment of percentage fees is dependent both on an 
autonomous decision of the general meeting and on the availability of 
distributable profits, such that there is no direct link between the percentage fees 
and the services of the director. First, in Luxembourg law, the payment of 
percentage fees is not dependent on the availability of distributable profits. The 
law does not require percentage fees to be paid out of profits realised by the 
company. Second, the resolution of the general meeting of shareholders to pay a 
higher or lower amount in percentage fees is intimately bound up with the 
importance of the services provided by the directors in the course of the previous 
financial year. 
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20 The VAT Authority observes that where an executive is replaced, the general 
meeting often decides to allocate the percentage fees pro rata, based on the time 
served in the role by each individual. 
21 Thus there is clearly a legal relationship between the service provided by TP and 
the value received in exchange, in the form of percentage fees. 
22 As to the condition of independence, the VAT Authority submits that Article 10 of 
the VAT Directive states that the condition of independence is intended to exclude 
employed and other persons from VAT in so far as they are bound to an employer 
by a contract of employment or by any other legal ties creating the relationship of 
employer and employee. 
23 The VAT Authority observes first of all that the scope of the judgment of 13 June 
2019, IO (VAT – Activities of a member of a supervisory board), C-420/18, 
EU:C:2019:490, which is relied on by TP, is limited to the activity of a member of 
a supervisory board of a foundation established under Dutch law in the context 
described by the court which made the reference in that case, and is not 
transposable to the present case. 
24 More generally, it submits that for the Court of Justice, legal ties creating the 
relationship of employer and employee are characterised by dependence on the 
company as regards working conditions and remuneration, the absence of any 
individual liability to third parties for the consequences of the activity, and the 
consequent absence of any economic risk borne by the service provider in relation 
to the activity. It is necessary therefore to examine whether those conditions are 
met in the present case. 
25 As regards the working conditions of a director, the VAT Authority submits that 
an indication that an economic activity is carried out independently is that the 
operators themselves procure and organise independently, within the limits laid 
down by the law, the staff and the equipment and materials necessary for them to 
carry out their activities. It submits that that is the position with regard to a 
director under Luxembourg law. Furthermore, a director may be dismissed ad 
nutum, and his or her working conditions thus differ from those of persons 
dependent on an employer, who generally enjoy protection from dismissal. 
26 The remuneration of a director depends, at least in part, on the success of the 
business, and thus on the economic risk attaching to the company, which is never 
borne by an employee. 
27 As regards the liability of an executive to third parties and the risk borne by that 
executive in connection with his or her activity, the VAT Authority submits that 
executives have civil liability for acts done in the course of managing the 
company. Such liability exists both vis-à-vis the company and vis-à-vis third 
parties. In contrast, an employee is generally immune from liability for wrongful 
acts committed in the course of his or her work – which is not the case in relation 
to a director, who can be sued by third parties. 
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28 The actual economic risk borne by directors in the exercise of their activity is far 
from being purely hypothetical. Personal claims against directors are becoming 
more and more frequent in Luxembourg in relation to arrears of tax – and 
especially VAT – owed by the company managed by them. Moreover, Article 495 
of the Code de commerce (Commercial Code) permits the liquidation of a 
company to be extended to its de jure and de facto directors, where there has been 
serious misconduct, by declaring them bankrupt. 
29 Consequently, the employment relationship characterised by dependence of the 
employee on the employer is absent from the mandate structure governing 
relations between directors and the company. TP’s argument that the legal status 
of company organ dictates the legal status of agent is irrelevant, because of the 
principle of autonomy of VAT. The VAT Authority submits that the purpose of 
the corporate organ principle is to compensate for certain lacunae in the law 
governing the mandate. The power of a director to represent the company has no 
bearing on the status of the director vis-à-vis the company he or she represents. 
30 Lastly, the VAT Authority returns to the judgment of 13 June 2019, IO (VAT – 
Activities of a member of a supervisory board), C-420/18, EU:C:2019:490, 
paragraph 42, where the Court of Justice observed in particular that ‘the position 
of a member of a Supervisory Board, such as the applicant in the main 
proceedings, unlike that of an entrepreneur, is characterised by the absence of any 
economic risk arising from the activity carried out. According to the referring 
court, that member receives a fixed remuneration which is not dependent on his 
participation in meetings or hours actually worked. Thus, unlike an entrepreneur, 
he does not have a significant influence over his revenue or his expenditure … . In 
addition, it appears that negligence on the part of the member of that Supervisory 
Board, in the performance of his duties, is not likely to have a direct effect on that 
member’s remuneration, since, in accordance with the articles of association of 
the foundation concerned, such negligence may lead to the removal of that 
member only after a specific procedure has been followed’. 
31 Those factors are not present in this case, given that the remuneration of the 
director depends, at least in part, on the success of the business and thus the 
economic risk attaching to the undertaking, and given also that the rules governing 
the liability of a director in Luxembourg law differ from the rules governing the 
liability of a member of a supervisory board which were at issue in that judgment. 
4. Assessment of the referring court: 
32 The referring court would observe first of all that it does not have all the material 
necessary to establish the circumstances in which the mandates at issue are 
exercised, in particular the resolutions of the general meetings which are said to 
have determined TP’s remuneration. Since it does not have the constitutions of the 
companies of which TP is a director, it will apply the general rules of company 
law. 
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33 The dispute between the parties relates essentially to the meaning of the terms 
‘economic activity’ carried out ‘independently’ in Article 9(1) of the VAT 
Directive. 
Economic activity  
34 Under the case-law of the Court, ‘an activity is thus, as a general rule, categorised 
as economic where it is permanent and is carried out in return for remuneration 
which is received by the person carrying out the activity’ (judgment of 29 October 
2009, Commission v Finland, C-246/08, EU:C:2009:671, paragraph 37). ‘It 
follows from that, according to the Court’s case-law, that a supply of services is 
effected “for consideration” within the meaning of Article 2(1) of the Sixth 
Directive only if there is a legal relationship between the provider of the service 
and the recipient pursuant to which there is reciprocal performance, the 
remuneration received by the provider of the service constituting the value 
actually given in return for the service supplied to the recipient … . Consequently, 
according to the case-law of the Court, a supply of services for consideration 
within the meaning of Article 2(1) of the Sixth Directive presupposes a direct link 
between the service provided and the consideration received …’ (judgment of 
29 October 2009, Commission v Finland, C-246/08, EU:C:2009:671, 
paragraphs 44 and 45). 
35 It must therefore be determined whether the percentage fees received by a member 
of the board of directors of a public limited company incorporated under 
Luxembourg law constitute ‘the value actually given in return for the service 
supplied to the recipient’ and whether there is ‘a direct link between the service 
provided and the consideration received’. 
36 TP submits that the ‘service’ is not provided by the individual members of the 
board of directors, but by the collective organ. The remuneration of a member of 
the board of directors of a public limited company incorporated under 
Luxembourg law is not, he submits, remuneration agreed between a service 
provider and a client but compensation granted by the general meeting of 
shareholders. 
37 The VAT Authority submits, for the reasons set out in paragraph 17, that TP’s 
remuneration is referable to the functions performed in the exercise of his 
director’s mandate. It adds that the resolution of the general meeting of 
shareholders to pay a higher or lower amount in percentage fees is intimately 
bound up with the importance of the services provided by the directors in the 
course of the previous financial year. It submits that there is a direct link between 
the service provided by TP and the value received in exchange, or in other words 
the percentage fees. 
38 In the absence of any detail as to the companies and the remuneration paid, the 
referring court proceeds on the basis that TP’s percentage fees were paid out of 
the profits realised by the public limited companies incorporated under 
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Luxembourg law of which he is a director, and that those percentage fees were 
awarded to him by resolution of the general meeting of shareholders. 
39 The two parties to the dispute ask the court to refer a question to the Court of 
Justice as to whether percentage fees received by a natural person, a member of a 
board of directors of a public limited company incorporated under Luxembourg 
law, are to be regarded as remuneration paid in return for services provided to that 
company. As far as the referring court is aware, that question has not previously 
been considered by the Court of Justice. 
40 The first question set out below will accordingly be referred for a preliminary 
ruling. 
Independence 
41 Article 10 of the VAT Directive excludes employed and other persons from VAT 
in so far as they are bound to an employer by legal ties creating the relationship of 
employer and employee as regards working conditions, remuneration and the 
employer’s liability. 
42 As regards working conditions, the Court of Justice has held that ‘there is no 
relationship of employer and employee [where those concerned] themselves 
procure and organise independently, within the limits laid down by the law, the 
staff and the equipment and materials necessary for them to carry out their 
activities (judgment of 25 July 1991, Ayuntamiento de Sevilla, C-202/90, 
EU:C:1991:332, paragraph 11). 
43 The members of the board of directors of a public limited company incorporated 
under Luxembourg law are not subject to obligations as regards their working 
hours or place of work, and have freedom with respect to the organisation and 
performance of their work. There is thus no relationship of employer and 
employee discernable from the working conditions or otherwise, for the purposes 
of Article 10 of the VAT Directive. ‘Consequently, secondly, the question 
whether an activity such as that at issue in the main proceedings must be regarded 
as being carried out independently must be assessed in the light of Article 9 of that 
directive’ (judgment of 13 June 2019, IO (VAT – Activities of a member of a 
supervisory board), C-420/18, EU:C:2019:490, paragraph 37). 
44 In order to establish whether a person independently carries out economic 
activities within the meaning of Article 9 of the VAT Directive, it is necessary to 
ascertain whether, in the pursuit of those activities, he or she is in an employer-
employee relationship vis-à-vis the person by whom he or she was appointed 
(judgment of 29 September 2015, Gmina Wrocław, C-276/14, EU:C:2015:635, 
paragraph 33). 
45 In the present case, it must therefore be determined whether there is an employer-
employee relationship between a director and the public limited company which 
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appointed him. ‘In order to assess whether that employer-employee relationship 
exists, it is necessary to check whether the person concerned performs his 
activities in his own name, on his own behalf and under his own responsibility, 
and whether he bears the economic risk associated with carrying out those 
activities. In order to find that the activities at issue are independent, the Court has 
thus taken into account the complete absence of any employer-employee 
relationship, as well as the fact that person concerned acts on his own account and 
under his own responsibility, is free to arrange how he performs his work and 
himself receives the emoluments which make up his income’ (judgment of 
13 June 2019, IO (VAT – Activities of a member of a supervisory board), 
C-420/18, EU:C:2019:490, paragraph 39). 
46 In the present case, TP submits that the economic risk referred to by the Court of 
Justice is, in reality, the economic risk to which the legal person is directly 
exposed by reason of the decisions of the board of directors. The economic risk 
associated with the activity of the members within the board of directors can be 
seen, on close inspection, to be borne by the company, and it is the company that 
bears responsibility to third parties. TP also submits that, in Case C-420/18, the 
Court of Justice did not take account of the fact that a board of directors, regarded 
as a collective management organ, is the legal representative of the company, such 
that the management service it collectively provides is deemed to be provided by 
the company itself. That case concerned a collective supervisory organ, and not a 
collective management or collective administrative organ. 
47 The VAT Authority submits that rather than determining whether or not the 
corporate organ principle is applicable in VAT cases, it is more pertinent to 
consider whether or not the director fulfils the requirements of independence 
identified by the Court of Justice. 
48 Both parties ask the court to refer a question to the Court of Justice as to whether a 
director of a public limited company incorporated under Luxembourg law carries 
out his or her activities independently. 
49 As far as the referring court is aware, that question has not previously been 
considered by the Court of Justice. As TP rightly observes, while the position of a 
member of a management organ is similar to that of a member of a supervisory 
organ, it also differs in a number of respects. Thus the judgment of 13 June 2019, 
IO (VAT – Activities of a member of a supervisory board), C-420/18, 
EU:C:2019:490 cannot simply be transposed as it stands to the present dispute. 
50 The second question set out below will accordingly be referred for a preliminary 
ruling. 
51 The referring court will give further detail as to the circumstances in which a 
director may be liable, under Luxembourg law, either to the company (in contract) 
or to third parties (in tort). 
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52 Vis-à-vis the company, liability may arise on the part of a director if he or she 
engages in ‘irregular’ conduct (infringement of the law or the company 
constitution). In such a case, the other directors are jointly liable. Liability may 
also arise on the part of a director vis-à-vis the company if he or she engages in 
conduct constituting mismanagement. In such a case, it is necessary to determine 
whether any other ordinarily careful and diligent person would, in the same 
circumstances, have taken the same decision as the director. Liability arising on 
this basis is individual unless the directors engaged in the wrongful conduct 
jointly, in which case they are jointly liable. 
53 Vis-à-vis third parties, a distinction must again be drawn between ‘irregular’ 
conduct and mismanagement. 
54 The liability of directors to third parties in respect of ‘irregular’ conduct arises 
under subparagraph 2 of Article 441-9 of the Law on commercial companies. 
55 As regards directors’ liability to third parties for mismanagement, the corporate 
organ principle, relied on by TP, is applicable. As the director is indeed a distinct 
person, in the eyes of the law, from the legal person he or she represents, the acts 
done by him or her on behalf of the legal person are acts of the legal person and 
not the director. Since the act, and therefore the fault, is attributable to the 
company, the organ is not liable to third parties. 
56 If the director commits a wrongful act which is severable from his or her 
functions, however, he or she will be solely liable for the damage caused. In order 
to be severable from his or her functions, the wrongful act must, in essence, be 
especially serious and must be intentional. 
5. Questions referred: 
57 The referring court seeks a preliminary ruling from the Court of Justice on the 
following questions: 
‘Is a natural person who is a member of the board of directors of a public limited 
company incorporated under Luxembourg law carrying out an “economic” 
activity within the meaning of Article 9 of Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax, and more 
specifically, are percentage fees received by that person to be regarded as 
remuneration paid in return for services provided to that company?’ 
and 
‘Is a natural person who is a member of the board of directors of a public limited 
company incorporated under Luxembourg law carrying out his or her activity 
“independently”, within the meaning of Articles 9 and 10 of Council Directive 
2006/112/EC of 28 November 2006 on the common system of value added tax?’