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Is the management of real estate investment funds VAT exempt?


Based on the EU VAT Directive, the management of special investment funds is VAT exempt in all EU Member States. The Dutch Supreme Court has referred the question to the ECJ for a preliminary ruling, whether this VAT exemption also applies to the management of real estate funds. Advocate General Kokott (“the AG”) has recently published her opinion in this case Fiscale Eenheid X (C-595/13). According to the AG, real estate funds should be regarded as special investment funds, if such funds are under a national or EU regulatory regime. The management of these funds will then be VAT exempt. Furthermore, the AG seems to favor a broad interpretation of the term investment management and considers that property management falls within the scope of the VAT exemption. Should the ECJ adopt the opinion of the AG, this will lead to an extra VAT burden for most real estate fund managers.

Special Investment Funds

In previous ECJ cases regarding the VAT exemption for fund management, the question was commonly whether a certain investment vehicle had the essential characteristics of a special investment fund (i.e. asset pooling and risk spreading). In the current case the ECJ is requested to rule whether the object of the investments is also relevant for the qualification as a special investment fund. According to the AG the nature of the investments is not important. Instead she introduces a new criterion: only funds that are regulated by the UCITS Directive, the AIFM Directive or a national regime may benefit from the VAT exemption.


The purpose of the VAT exemption is to exclude the VAT costs that would not have arisen in case of direct investment, so that the VAT system is neutral as regards the choice between such direct investment and investment through collective investment funds. The exemption should therefore include all specific and essential functions performed by the fund manager in order to maintain the assembled assets and realize profits. In the opinion of the AG, the investment in real estate does not only comprise the sale and purchase of immovable property, but also the “actual exploitation of that property”. Consequently, she believes that – apart from fund management and asset management – also property management falls within the scope of the VAT exemption.

Consequences and recommendations

It should be remembered that the ECJ does not necessarily follow the AG’s opinion and that the outcome of the case is not certain. However, should the ECJ fully adopt the AG’s recommendations, then this would have the following consequences:

  • The management of any regulated investment fund would be VAT exempt, regardless of the type of investments. The exemption applies to all specific and essential fund management functions, which may also include asset and property management;
  • Fund managers would not be entitled to deduct the input VAT on their costs and may want to recharge any irrecoverable VAT to the fund and/or participants. In the future insourcing may be more profitable for tax purposes;
  • The VAT exemption might ultimately be only in the interest of funds that are not liable for VAT on their rental income, such as funds that invest in residential real estate.
  • In cases where the VAT exemption is favorable, fund managers may consider making provisional claims to the local Tax Authorities in order to get a refund of the VAT over their fees, should they not yet apply the VAT exemption.


Willie Ambergen
Tax Lawyer
Portrait of Etienne Cox
Etienne Cox