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Management of special investment funds EU VAT case law

9 cases of the Court of Justice and the General Court of the European Union on this point of VAT law, from 2006 to 2024.

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Under each case, what the Court decided, from its summary. The summaries are AI-generated and are not official documents: open the case for the Court’s own text.

C-639/22 Inspecteur van de Belastingdienst Utrecht

Judgment · 5 September 2024 · Netherlands

Investment risk and the fund management exemption for defined benefit pension funds

Members bear the investment risk only where the amount of pension entitlements and benefits depends primarily on investment performance. Benefits largely predefined by salary and years of service do not qualify. Years of accrual and interruption of accrual are irrelevant. Individual or collective bearing of risk, bankruptcy exposure and a temporary employer guarantee are relevant but not decisive. Neutrality also requires comparison with other non-UCITS funds the Member State treats as special investment funds. The comparability test is narrowed for defined benefit schemes.

C-58/20 K and DBKAG

Judgment · 17 June 2021 · Austria

Outsourced services and the fund management exemption

Both may be exempt where the service is intrinsically connected to the management of special investment funds and supplied exclusively for that purpose, even if not outsourced in its entirety. Retention by the manager of the filing obligation, ultimate responsibility, or of the IT environment and data inputs is not in itself decisive. Software designed for investments generally, usable for other funds, is not specific and so is not exempt. Application left to the national court. Fund administrators, tax reporting providers and fintech licensors supplying management companies of special investment funds can no longer be refused exemption merely because the manager performs part of the process, files the return, or hosts the software.

C-231/19 Blackrock Investment Management (UK)

Judgment · 2 July 2020 · United Kingdom

Fund management exemption and a single supply used for mixed fund portfolios

A single supply of management services provided by a third party's software platform to a manager of both SIFs and other funds falls outside Article 135(1)(g). A single supply takes one tax treatment, and the exemption is defined by the nature of the service, not its destination or recipient, so no apportionment by use and no test based on which funds predominate. A platform usable equally for SIFs and other funds is not specific to SIF management. Fiscal neutrality cannot widen the exemption. Managers buying outsourced platform or administration services covering mixed portfolios cannot recover reverse charge VAT by apportioning a single supply between SIFs and other funds, whichever type predominates.

C-595/13 Fiscale Eenheid X

Judgment · 9 December 2015 · Netherlands

Real estate funds as special investment funds and the limits of "management"

Such property investment companies may be special investment funds where investors pool capital, bear the risk and receive dividends and capital growth, but only if the Member State has subjected them to specific State supervision. The exemption is not confined to investments in transferable securities. However, "management" does not cover the actual management of the immovable property. That is inherent in any investment and not specific to collective investment, unlike selection, purchase and sale plus administration and accounting tasks.

C-464/12 ATP PensionService

Judgment · 13 March 2014 · Denmark

Occupational pension funds as special investment funds

Such pension funds may be special investment funds where they are funded by the beneficiaries, the assets are invested on a risk-spreading basis and the pension customers bear the investment risk. That is the decisive distinction from Wheels. Employer payment, collective agreements, payout form, income tax deductibility and an ancillary insurance element are irrelevant. "Management" covers opening accounts and crediting contributions, plus Annex II accounting and account information services. Those same crediting services, and anything ancillary or forming a single supply with them, are also exempt payment or transfer transactions. For third party pension administrators and their fund clients the ruling unsettles the treatment of contribution processing where the scheme is defined contribution and the members carry the investment risk.

C-26/12 PPG Holdings

Judgment · 18 July 2013 · Netherlands

Employer's deduction of VAT on pension fund administration and asset management costs

The employer may deduct the VAT, provided a direct and immediate link is apparent from all the circumstances. Here the services were acquired solely for the purposes of the employer's taxable activity in discharging a statutory obligation, and the costs form part of its general costs, which the national court must verify. Denying deduction because of the legislative choice to separate employer and fund would breach neutrality. The exemption question did not need answering, having been covered by Wheels. Confirms that employers, not just the fund, can recover VAT on pension administration and asset management costs where they contract for and bear those costs and the costs sit in general overheads. Relevant to any employer operating a separate trustee or foundation pension vehicle, and to advisers reviewing historic assessments and contracting arrangements.

C-275/11 GfBk

Judgment · 7 March 2013 · Germany

Outsourced investment advice as fund management

The services are exempt. Recommendations to buy and sell assets are intrinsically connected to the activity characteristic of a fund management company and so perform the specific and essential functions of fund management, even though the management company implements them and retains final responsibility, and even though advice is not listed in Annex II to Directive 85/611. Absence of a regulatory delegation mandate under Article 5g is irrelevant. Each outsourced element must itself perform specific and essential management functions. Third-party investment advisers and research houses billing fund managers on an asset-based fee can rely on exemption without holding a delegation mandate or regulatory authorisation, and managers cannot be penalised for outsourcing rather than employing in-house advisers. Relevant to UCITS and retail fund promoters, their service providers, and to recovery claims on historically taxed advisory fees.

C-424/11 Wheels Common Investment Fund Trustees and Others

Judgment · 7 March 2013 · United Kingdom

Defined benefit pension funds and the special investment fund exemption

Such a fund is not a special investment fund. It is not a UCITS because it is not open to the public but is an employment benefit confined to employees, and it is not sufficiently comparable to be in competition with UCITS. The decisive features is that scheme members bear no risk from the fund's management, their pension being fixed in advance, and the employer's contributions discharge his legal obligations to employees rather than constituting an investment. Management services supplied to defined benefit occupational pension funds remain taxable, and trustees of such schemes cannot rely on neutrality to claim parity with authorised unit trusts, OEICs or investment trust companies. Relevant to pension scheme trustees, fund managers and their UK VAT advisers.

C-169/04 Abbey National

Judgment · 4 May 2006 · United Kingdom

Scope of the exemption for management of special investment funds

"Management" has an autonomous Community meaning. The reference to national definitions concerns only "special investment funds". The exemption applies whatever the fund's legal form, contractual, trust or statutory. Administrative management outsourced to a third party is exempt provided it forms, viewed broadly, a distinct whole that is specific to, and essential for, fund management. Mere material or technical supplies such as providing IT systems are not. Depositary and trustee functions under Articles 7 and 14 of Directive 85/611 are control and supervision, not management, and are taxable. A clear split for fund groups. Relevant to UCITS, corporate funds and their VAT advisers.

Related topics

Exemptions · Transactions concerning deposit and current accounts · Origin and scope of right of deduction · Right of deduction