VAT exemptions applicable to investment fund advisory services

David Joseph Borg | Published on 08 Mar 2013

VAT exemptions applicable to investment fund advisory servic

In case GfBk (C-275/11) the Court of Justice of the European Union (the Court) has confirmed that advisory and information services provided by a third party to an investment fund management company fulfill the criteria for VAT exemption.

GfBk, an investment advisor, had provided advisory and information services regarding transferable securities to the investment manager of an investment fund. GfBk lacked the power to buy and sell securities on behalf of the fund. The VAT exemption in relation to management of investment funds claimed by GfBk was rejected by the German tax authorities on the ground that the services provided did not constitute management services.

The Court reiterated that the concept of ‘management of special investment funds’ includes ‘advisory services concerning investment in transferable securities provided by a third party to […] the manager of a special investment fund. The fact that the third party has not acted on the basis of a mandate is immaterial.

In the present case, the Court concluded that the direct advice concerning the purchase or sale of transferable securities was essential for the management of the investment fund, and thus rendered the VAT exemption applicable.

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