Supervisory directors must register for Dutch VAT
The policy on the VAT position of supervisory directors has changed. Until recently, supervisory directors were not obliged to register for VAT until they held five or more independent directorships. Under pressure of the European Commission, that policy has recently been repealed. As a result, holding just one supervisory directorship will trigger the obligation to register for VAT. This new policy must be applied as of 1 January 2013. As of that date, registering for VAT will often be inevitable for supervisory directors. VAT will then be chargeable on all payments that a supervisory director receives for his activities. They include not only the fee itself, but also items such as expense allowances and shares or options. Their current value will have to be taken into account.
For companies with a partial VAT deduction, such as banks and insurance companies, the VAT on supervisory directors' fees is an additional cost item.
Non-resident supervisory directors
VAT will also be due on amounts paid out to a non-resident supervisory director. In this case, as the VAT is reverse charged, the company itself should account for VAT. As far as VAT taxable activities are involved the company may deduct this VAT immediately.
Dutch supervisory director with a non-resident company
For a Dutch supervisory director with a non-resident company, VAT is reverse charged to that company. The supervisory director will then not charge Dutch VAT. Subsequently, the non-resident company is required to self-assess the VAT on the supervisory director's fee in its VAT return in its own country (and deduct it, whether or not immediately).
Wages tax / national insurances / employee insurances
For purposes of wage tax, national insurance contributions and the health insurance contribution, a supervisory director is deemed to be an employee. This will remain the same in 2013. The company must accordingly withhold and transfer wage tax, national insurance contributions and the health insurance contribution on the supervisory director's fee. This generally also applies to supervisory directors living abroad. Tax Treaties generally allocate the right to levy tax on a supervisory director's fee to the country in which the company has its registered office, in this case the Netherlands. A non-resident supervisory director may apply for the favourable 30% tax facility in relevant cases. Finally, no employee insurance contributions (such as unemployment insurance contributions) are due on a supervisory director's fee.