The VAT authority in Luxembourg has published a circular regarding the VAT regime for directors of Luxembourg based companies.

Circular no. 781 mentions that the activity performed by independent directors of Luxembourg companies is subject to VAT regime, making therefore the activity carried out by such directors subject to the 17% VAT tax rate.

If however, director fees are below the EUR 25,000 annual threshold, the online pharmacy consultation fees shall be exempt of VAT tax.

The Circular further clarifies that (i) in case foreign directors of Luxembourg based companies, the ‘reverse charge’ mechanism shall apply, and (ii) that employees having management functions representing their employer, but not acting independently are not subject to the VAT tax regime.

The above mentioned provisions shall become applicable starting from January 1st, 2017 and will not be retroactive.

For more details regarding the VAT tax regime applicable to directors of Luxembourg based companies, please also consult the FAQ document prepared by the Luxembourg tax authority available here: