On 9 December 2015 the European Court of Justice (ECJ) issued a decision in the case of Staatssecretaris van Financiën v. Fiscale Eenheid X N.V.

Fiscale Eenheid X NV was the name of a fiscal unity in the Netherlands, one of the companies of which was A Beheer NV. This company provided services on behalf of entities established by some pension funds, including managing assets (especially immovable property), financial reporting, disposing of assets and performing all activities required by legal provisions and regulations.

The investment capital was pooled by several investors bearing the risk connected with purchasing, owning, managing and selling property for profit. The unit holders received dividends from the profits and also benefited from an increase in the value of their holding.

Fiscale Eenheid argued that all the activities were exempt from VAT under relevant provisions of the Netherlands VAT law. The Inspector argued that only the acquisition and sale of immovable property, and acquisition of new shareholders, was exempt from VAT.

Issues put to ECJ for preliminary ruling

In November 2013 the ECJ was asked for a preliminary ruling on the following issues:

Is Article 13B(d)(6) of the Sixth VAT Directive (77/388), corresponding to Art.135(1)(g) of the EU VAT Directive (2006/112)) to be interpreted as meaning that a company set up by more than one investor for the sole purpose of investing the assets in immovable property may be regarded as a special investment fund within the meaning of that provision?

If so, is article 13B(d)(6) of the Sixth VAT Directive to be interpreted as meaning that the term “management” also covers the actual management of the company’s immovable property, which the company has entrusted to a third party?

Provisions of the relevant law and EU Directive

The Netherlands VAT law states that the management of assets collected by investment funds and investment companies for collective investment is exempt from VAT.

The provisions of Article 13B (d)(6) of the Sixth VAT Directive (77/388) state that the management of special investment funds (as defined by Member States) is exempt from VAT.

ECJ decision

The ECJ ruled that Article 13B (d)(6) of Sixth Council Directive 77/388/EEC of 17 May 1977 (as amended) are to be interpreted as meaning that investment funds where the investment capital is pooled by several investors bearing the risk of purchasing, owning, managing and selling property for profit, where the investors receive dividends from the profits, may be regarded as ‘special investment funds’ provided that the Member State concerned has made those companies subject to specific State supervision.

Article 13B (d)(6) of Sixth Directive 77/388 is to be interpreted as meaning that the term ‘management’ in that Article covers the actual management of the immovable property of a special investment fund.