Ekonomicka cinnost clenu predstavenstva akciove spolecnosti

Economic activity of members of the Board of Directors of a joint stock company

In judgment C-288/22, the Court of Justice of the EU ("CJEU") dealt with the activities of Mr TP, who was appointed for up to six years as a member of the board of directors of several public limited companies. For this activity, Mr TP received remuneration from the profits made by the companies. The Luxembourg tax authorities found that Mr TP's activity was an independent economic activity and therefore assessed additionally VAT on the remuneration received.

According to the CJEU, Mr TP's activity can, in principle, be regarded as a continuous economic activity if he is entitled to remuneration even for years in which the company did not make a profit. However, for Mr TP's activity to be subject to VAT, it must also be carried out independently, i.e. not in a subordinate relationship on the basis of a contract similar to that between an employer and an employee.

The CJEU reiterated that a member of the board of directors exercises an activity independently if he exercises it in his own name, on his own account, on his own responsibility and bears the economic risk associated with the exercise of that activity. The CJEU concludes that if a member provides his expertise and know-how to the board of directors of a company and participates in the voting of such board, it does not appear that such member bears the economic risk associated with his own activity. It is the company itself that bears the economic risk of such decisions, which will have to face the possible negative consequences of the decisions taken by the board of directors.

We have been following the issue of the economic performance of managing directors and members of statutory bodies for a long time, e.g. HERE. If a Czech executive director or member of the statutory body acts with due care, in principle he does not bear the economic risk described above. Nevertheless, the Supreme Administrative Court is of the opinion that the risks associated with the performance of such activity are significant enough for the court to consider the activity as independent.

If you have any questions, please contact the authors of the paper or the members of the EY team with whom you usually work.

Authors:

Stanislav Kryl

Štěpán Kvíz