Luxembourg Tax Alert 2021-07

New CJEU input on management of investment funds!

New CJEU input on management of investment funds!

Samuel Cazes

KPMG in Luxembourg

The Court of Justice of the European Union (hereafter CJEU) just released a new decision on the potential application of the fund management VAT exemption in the context of administration services and software used for the management of special investment funds. 

What are the main facts in these cases?


Several management companies outsourced to a third-party, K, various services comprising the calculation of income at the level of the funds for tax purposes (e.g. tax statements). To do so, K used the amounts predetermined by the management companies. K also prepared tax returns to be filed by those companies. The latter remained liable for the accuracy of the amounts provided and declared to the authorities.

On the other hand, K was liable to the management companies in case of a damage resulting in an inaccuracy of the declaration of the relevant calculations for tax purposes.

The question at issue in this case concerned the VAT treatment of the services provided by K (which were invoiced by the latter to the management companies without VAT, as benefitting from the VAT exemption provided for under article 135 (1) (g) of the VAT Directive) in relation to fund management services.


DBKAG is a company managing special investment funds. In light of its activity, the company asked for services by a supplier (SC), and providing the right to use a software, essential to assess risk management and performance measurement. DBKAG paid a fee for this service. The SC software at hand was tailored to investments funds. It was further integrated to DBKAG’s existing software. The software performed the calculations of risk and performance based on data entered in the system by DBKAG. These amounts were then used by DBKAG to establish specific reports aimed at providing information to the tax authorities and investors. The services supplied by SC to DBKAG also comprised support services (i.e. training to the staff and updates to the software).

The question at issue in the case at hand concerned the VAT treatment of such services as DBKAG considered they were supposed to benefit from the VAT exemption as provided for in article 135 (1) (g) of the VAT Directive.

What are the main points of this decision?

The CJEU reminds that to be considered as VAT exempt, a service provided by a third-party manager must viewed broadly form a distinct whole and be specific and essential to the management of special investment funds.

Considering the above, the CJEU specifically underlines the following:

  • In accordance with the principle of fiscal neutrality and the objectives of the VAT exemption provided for under article 135 (1) (g), it is not necessary for a service to be outsourced in its entirety for it to form a distinct whole.
  • In principle, the concept of “management” of special investment funds might also include administrative and accounting tasks such as: computing the amount of income and the price of units or shares, the valuation of assets, accounting, the preparation of statements for the distribution of income, the provision of information and documentation for periodic accounts and for tax, statistical and VAT returns, and the preparation of income forecasts. However, to be VAT exempt, such services must be intrinsically connected to the activity of management of the funds.
  • Mere technical and support supplies (like the right to use a software) fall outside the scope of the VAT exemption provided for under article 135 (1) (g). Reiterating the arguments in the Blackrock case law from July 2020(C‑231/19) the CJEU held however that in case the granting of a right to use software is provided exclusively for the purposes of managing special investment funds, and not to other funds, it may be considered to be ‘specific’ for that purpose, provided it would be intrinsically connected to their management.


If the above-mentioned points seem at first glance to broaden the scope of interpretation of the VAT exemption for funds management services, the CJEU however distinctly relies on and recommends a case-by-case assessment of these conditions by the national referring court. In case the latter would come to the conclusion that the reality of the services at issue, performed by K and SC, satisfy the conditions to fall within the scope of article 135 (1) (g) of the VAT Directive, the VAT exemption might apply. In the situation at hand, it would mean that tax related services comply with the Austrian legal requirements of “specificity” and do only apply to special investment funds; or that the software is intrinsically connected to the management of those funds and is exclusively provided to help such management.

Therefore, this case places the responsibility of determining whether the reality of the services performed by a third-party manager complies with the conditions set up by the CJEU onto the national court. In this respect, the CJEU only gives guidance on how these conditions should be interpreted by the national judge, who should confirm the specificity of the supplies at hand, the latter remaining the central criterion for the application of the VAT exemption for fund management services.