The DGT clarifies that the remuneration of the sole administrator in RETA is not subject to VAT
Economic independence and VAT treatment of sole administrators in RETA
In the case in question, the Directorate-General for Taxation rules that the remuneration of a sole administrator of a company that is subject to RETA and performs the functions of a managing director should be considered as employment remuneration and not as a self-employed service provision and therefore should not be subject to Value Added Tax.
The Law on Value Added Tax imposes taxes services provided by self-employed persons acting as entrepreneurs or professionals who bear their own risk. The Directorate-General for Taxation, in accordance with the consultation, bases its opinion on the lack of independence and autonomy in the actions of the director, who, on the contrary, provides his services to the company under a dependence, closer to an employment relationship than to the provision of self-employed services. The administrator does not act as an independent entrepreneur when he does not personally assume the economic risk, even if he organizes his work with a certain degree of freedom and even if his fees depend on the company's results. The risk belongs to the company and not to the administrator. Company law confirms that the administrator's personal liability only arises in exceptional cases of willful misconduct or gross negligence, not in the ordinary performance of his duties.
The consultation concludes that the remuneration received by the sole administrator is not subject to VAT, as it is considered that the position is not carried out with real economic independence and the administrator, in the exercise of his or her function, does not behave as a self-employed professional for tax purposes.
This does not affect other services that the administrator may provide to the company outside of their position. If there is a separate professional activity, classified as an economic activity, these services are subject to tax at the standard rate of 21%.
