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ECJ: the management of real estate investment funds is VAT exempt


According to the ECJ’s decision in case Fiscale Eenheid X (C-595/13), the management of such funds is VAT exempt, provided that the fund is subject to a national or EU regulatory regime. Fund management includes the selection, sale and purchase of immovable property, as well as the required administration and accounting tasks. As a result of the VAT exemption fund managers can not deduct the VAT on their costs.

VAT exemption

Based on the EU VAT Directive, the management of special investment funds is VAT exempt. Some Member States do not apply this exemption to the management of real estate funds.

According to the ECJ, real estate funds fall within the scope of this VAT exemption, provided that these funds have the essential characteristics of a collective investment undertaking (i.e. asset pooling and risk spreading) and that the fund is subject to specific EU or State supervision.


Regarding the scope of the concept 'management' the ECJ decided that the specific activities of a special investment fund consist in the collective investment of the capital raised. Where the assets of such a fund consist of immovable property, these specific activities include the selection, purchase and sale of immovable property, as well as administration and accounting tasks (such as computing the amount of income, the valuation of assets, the distribution of the profits, and the preparation of forecasts). According to the ECJ, the actual property management is – by contrast – not specific to the management of a special investment fund, but inherent to the type of investment. The actual management of the immovable property therefor falls outside the scope of the VAT exemption.

Consequences and recommendations

  • The management of any regulated investment fund is VAT exempt, regardless of the type of investments. The exemption applies to all specific and essential fund management functions, including the selection, sale and purchase of immovable property. Actual property management is however excluded from the exemption;
  • The VAT exemption may be favorable to funds that invest in residential real estate. Managers of such funds may claim a VAT refund with their local Tax Authorities, should they not yet apply the VAT exemption. Any wrongly deducted VAT on costs should however be offset against a VAT refund.
  • Funds investing in commercial real estate funds will most likely be confronted with higher management fees, if and to the extent that fund managers can recharge any irrecoverable VAT under the management agreement.
  • Fund managers may wish to renegotiate contracts, if they cannot pass on all irrecoverable or wrongly deducted VAT to the investment fund.


Portrait of Etienne Cox
Etienne Cox
Willie Ambergen
Tax Lawyer