Netherlands: VAT exemption for asset management services (pending before Supreme Court)

Netherlands: VAT exemption for asset management service

The Advocate General to the Dutch Supreme Court on 23 September 2020 issued opinions in two asset management cases.


The main question in these cases is whether the value added tax (VAT) exemption for the management of a special investment fund can also apply to individual asset management services whereby investments are pooled on the basis of investment profiles.

Both the Amsterdam and the Arnhem-Leeuwarden appellate courts had held in the two cases that the exemption applied. The Advocate General, however, did not follow those judgments.

The Advocate General stated a belief that both appeals courts had failed to sufficiently assess whether the assets of individual investors pooled in a central account is a “fund” that is comparable to an “undertaking for collective investment in transferable securities” (UCITS), which qualifies for VAT purposes as a special investment fund. According to the Advocate General, the VAT exemption only applies if the “fund” qualifies as a VAT taxable person (a VAT entrepreneur).

Another question addressed in the Advocate General’s opinions is whether the taxpayers meet the requirement of specific state supervision arising from the Fiscale Eenheid X case (no. C‑595/13) of the Court of Justice of the European Union (CJEU). This is another requirement for applying the VAT exemption. The Advocate General took the position that there were sufficient connecting factors for there to be specific state supervision.

KPMG observation

If the Supreme Court issues judgments that follow the Advocate General’s opinions, the cases will be referred back to the appellate courts for reassessment. Some tax professionals consider it could be the fund requirement and VAT entrepreneurship introduced by the Advocate General would be too great a hurdle for applying the VAT exemption to individual asset management via investment profiles.

With regard to the qualification of investment fund, the Advocate General seems to attach great importance to the comparability with a UCITS. The CJEU also used this comparison in the Wheels (no. C-424/11) and ATP (no. C-464/12) cases. The VAT committee, comprising representatives of the European Commission and the EU Member States, regards comparability as a (separate) requirement. Also, the comparability test used by the Advocate General is viewed by some as being far too strict because it ignores the developments in EU regulations for investment funds and also the confirmation given by the CJEU in its judgment in the Fiscale Eenheid X case that alternative investment funds also qualify as special investment funds for VAT purposes. The point is not that other funds must be completely identical to a UCITS in order to be regarded as a special investment fund. Thus, this strict interpretation by the Advocate General could have broader implications with regard to:

  • Investment funds that are not a VAT taxable person
  • Costs directly charged to the investor
  • Pension funds
  • Interpretation of specific state supervision

Read a September 2020 report prepared by the KPMG member firm in the Netherlands

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