Luxembourg Fund Industry welcomes the Opinion of the Advocate General on the VAT exemption for outsourced investment advice
On 8 November 2012, the Advocate General delivered his opinion in the case GfBk
Gesellschaft für Börsenkommunikation mbH v. Finanzant Bayreut (C-275/11) (“GfBk”) concerning the scope of the VAT exemption laid down in Article 135 1. g) of the Council Directive 2006/112/EC of 28 November 2006 (formerly Article 13 B of Directive 77/388/EEC).
The question raised in the preliminary ruling from the Bundesfinanzhof (Germany) to the Court of Justice of the European Union (“CJEU”) was whether the provision of advice on investment in transferable securities by a third party to an investment fund management company constitutes “fund management” for the purposes of the VAT exemption provided in Article 135 1. g) of the Council Directive 2006/112/EC (which relates to the VAT exemption of management services provided to investment funds).
In the Abbey National case (C-169/04), the CJEU had already confirmed that the scope of the exemption covered the portfolio management and administration services supplied by a third party to the extent that they “viewed broadly… form a distinct whole, and [are] specific and essential for, the management of [the] investment funds”. The Luxembourg VAT administration confirmed in Circular n° 723 of 29 December 2006, the (relatively) broad scope of the VAT exemption of management services supplied to investment funds.
According to the Advocate General in GfBk’s case, Article 135 1. g) of Council Directive 2006/112/EC must be interpreted as meaning that an advisory and information service provided by a third party, relating to the management of a special investment fund and the purchase and sale of assets, constitutes an activity of “management” specific and distinct in nature, provided that the service is found to be autonomous and continuous in respect of the activities actually performed by the recipient of the service, which is a matter for the national court to verify.
The Advocate General also clarified that the above treatment is not incompatible with the principle of the fiscal neutrality (i.e., this interpretation of Article 135 1. g) of the Council Directive 2006/112/EC is not contrary to the principle of non-discrimination between taxpayers placed in comparable situations).
The conclusions of the Advocate General have the merit to refine the criteria of the VAT exemption of Article 135 1. g) of the Council Directive 2006/112/EC. If the CJEU follows the conclusions of the Advocate General in GfBk’s case, this will have a positive impact for the Luxembourg investment funds industry.Download entire issue (as pdf)