by on May 14, 2025 with No Comments

The VAT issue

The performance of a contractual mandate is a supply of services that is normally subject to VAT. For this reason, directors who are legal entities must normally charge VAT to the ASBL for the performance of their mandate. By way of derogation, directors who are natural persons do not act independently within the meaning of the VAT Directive and are therefore not subject to VAT for tasks carried out in the context of their mandate as director.

Should the permanent representative therefore make his remuneration subject to VAT, as is required for directors who are legal entities, or can he consider it to be outside the scope of VAT, as is the case for directors who are natural persons? The Belgian tax authorities consider that the permanent representative performs a function similar to that of natural person acting as a director. It therefore accepts that the remuneration he receives is not subject to VAT (QP of 29/02/2024).

Tax treatment of the permanent representative's remuneration

The emoluments received by a permanent representative thus fall outside the scope of VAT and must be subject to the following tax treatment:

  • The ASBL is considered to be a company for tax purposes: the emoluments received by the permanent representative are qualified as the remuneration of director, must be the object of a 281.20 tax form and are subject to withholding tax on professional income.
  • The ASBL is not considered to be a company for tax purposes:
  • The permanent representative is an employee of the legal entity member of the board: his emoluments are qualified as the remuneration of an employee, must be the object of a 281.10 tax form and are subject to the withholding tax on professional income.
  • The permanent representative is a company executive of the legal entity member of the board: his emoluments are classified as the remuneration of a director, must be the object of a 281.20 tax form and are subject to withholding tax on professional income.
  • In all other cases, their remuneration and attendance fees are classified as profits. Remuneration must be reported on form 281.50 and attendance fees on form 281.30. The non-profit organization is then only liable for withholding tax on attendance fees.

The expert's eye

Make sure you classify the remuneration of the permanent representative correctly: depending on whether or not the NPO is considered a company for tax purposes, the remuneration of the permanent representative may be classified differently (remuneration of company directors, remuneration of employees, or profits). Each classification has specific obligations in terms of tax forms (281.20, 281.10 or 281.50) and withholding tax. Correct classification ensures compliance with legal obligations and avoids tax penalties. In short, good management of the classification and tax treatment of permanent representatives' remuneration is essential to ensure compliance and optimize the NPO's tax position.

 

How can we help you?

Would your NPO want to pay the permanent representatives who carry out the corporate directors' mandates? There are a number of advantages to calling on our firm for the tax treatment of permanent representatives of NPOs:

1. Expertise in NPO taxation: Our firm has in-depth knowledge of the tax regulations specific to NPOs, including the nuances of the tax treatment of permanent representatives. We can help you understand and correctly apply the VAT rules and the various categories of remuneration, whether for company directors or employees.

2. Compliance and document management: We assist with preparing and checking the necessary tax documents, including tax forms 281.20, 281.10 and 281.50, and withholding tax. This ensures that all legal obligations are met and that you avoid the risks of non-compliance and potential penalties.

3. Personalised advice and ongoing support: Our firm offers advice tailored to your specific situation. We work with you throughout the year to optimise the tax management of your permanent representatives, taking legislative developments and sector best practices into account.

By choosing our firm, you benefit from specialist expertise, rigorous management of your tax obligations, and personalized support to help keep your organization compliant and efficient. We offer a free video conference to discuss your situation and provide a bespoke solution.