Netherlands: VAT exemption for regulated funds, real estate funds

Netherlands: VAT exemption for regulated funds

The Court of Justice of the European Union (CJEU) issued a judgment finding that the value added tax (VAT) exemption for the management of special investment funds applies also to regulated funds—and may further apply for real estate funds. The actual property management in such funds, however, does not qualify as management and therefore would not be exempt.

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The case is: Staatssecretaris van Financiën v. Fiscale Eenheid X NV cs (C-595/13, 9 December 2015)

Summary

The taxpayer entered into management agreements with three companies that invest in real estate (real estate investment funds). The investors in these real estate investment funds are institutional investors. The activities performed by the taxpayer by virtue of the management agreements consist of the administration and management of the real estate investment funds; attracting investors; the purchase and sale of real estate; and the actual management of the property.

The management of special investment funds is exempt from VAT. The Dutch Supreme Court asked the CJEU whether real estate investment funds qualify as special investment funds. The Supreme Court also requested an opinion as to whether the actual management of the property is covered by the term ‘management’ within the meaning of the abovementioned exemption.

According to the CJEU, to answer the question whether there is a special investment fund, the nature of the investments is irrelevant. Funds that invest in real estate may therefore also fall under the exemption. This is also a confirmation of current Dutch practice.

The CJEU, however, found that the actual management of the property does not qualify as “management” so that such services are not exempt.

 

Read a December 2015 report prepared by the KPMG member firm in the Netherlands: CJEU judgment may have a major impact on the VAT position of investment funds

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