This Case alert summarises the AG's opinion released in French on 20 May 2015

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Summary
This is an Advocate General's
opinion and is subject to
approval (or otherwise) from the
full Court. On the face of it, this
seems to be good news for
regulated property funds such as
REITS who, in anticipation of
the judgment of the Court
should be considering lodging
claims for VAT refunds against
their fund managers.
It is conceivable that the
principles established here in
relation to real estate funds could
also apply to other collective
investment funds where VAT is
currently charged on the
management of the fund.
We await the judgment of the full
Court with interest.
22 May 2015
Management of property investment funds
The Advocate General of the Court of Justice has issued her opinion in this interesting
and important case. Unfortunately, the opinion is not yet available in English and, what
follows, is therefore based on an unofficial translation.
The issue in this case was whether a company which invests solely in property (real
estate), should be classified for VAT purposes, along with other types of investment
funds which invest in securities, as a 'special investment fund'. If that is the case, then
management services relating to the management of the property portfolio should be
exempt from VAT.
This is the latest case that has pushed at the boundaries of EU law and is asking the
question of whether, like pension and other investment schemes, an investment in real
estate can be treated for VAT purposes as a 'mutual fund'. Advocate General Kokott
has opined that, in her view, a company created by more than one investor for the sole
purpose of investing the assets they have made ​​in real estate can be considered a
mutual fund within the meaning of the VAT Directive, provided that the company is
regulated by the Member State concerned. As such, it seems that, as far as the
Advocate General is concerned, property funds can be regarded as 'special investment
funds' for VAT purposes.
On the question of 'management', given that the purpose of the VAT exemption is to
ensure that direct investment by an investor is not taxed, equally, indirect investment
through a mutual fund should, similarly, not also be taxed. Exemption for services
provided by fund manager is therefore consistent with the objective of the exemption,
and ensures neutrality in the choice between direct investment in real property and
investment in a real estate fund.
As a consequence, in the Advocate General's opinion, the management of a qualifying
real estate fund should benefit from VAT exemption.
Fiscale Eenheid – Advocate General's
Opinion
Case Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Richard Gilroy London & South East richard.gilroy@uk.gt.com (0)20 7728 3170