On July 2, 2020, the ECJ reached a verdict in case C-231/19 (Blackrock Investment Management (UK)).
Article in the EU VAT Directive
Article 135(1)(g) of Council Directive
Article 135
1. Member States shall exempt the following transactions:
(g) the management of special investment funds as defined by Member States;
Question
On the proper interpretation of Article 135.1(g) of Council Directive 2006/112/EC1 , where a single supply of management services within the meaning of that Article is made by a third-party provider to a fund manager and is used by that fund manager both in the management of special investment funds (“SIFs”) and in the management of other funds that are not special investment funds (“non-SIFs”):
Is that single supply to be subject to a single rate of tax? If so, how is that single rate to be determined? or
Is the consideration for that single supply to be apportioned in accordance with the use of the management services (for example, by reference to the amounts of the funds under management in the SIFs and non-SIPs respectively) so as to treat part of the single supply as exempt and part as taxable?
AG Opinion
Article 135(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a single supply of management services, such as that at issue in the main proceedings, which is provided by an IT platform belonging to a third-party provider to a fund management company and includes both special investment funds and other funds, does not fall within the scope of the exemption laid down in that provision.
The AG previously concluded that a single supply of management services, such as that at issue in the main proceedings, which is provided by an IT platform belonging to a third-party provider to a fund management company and includes both special investment funds and other funds, does not qualify for the VAT exemption for the management of special investment funds. See our post HERE. The referring court had already concluded that the IT services should be regarded as management in the sense of the fund management exemption. However, the AG advised that Blackrock performed a composite service, which consisted partly of the management of special investment funds, but also partly of the management of other funds. The AG feels that in this case (although there are opposite examples) it would not be correct to apply multiple VAT treatments to one composite service as this would be against the nature of the VAT regime and make it unworkable. It should also be noted that Blackrock did not provide sufficient details that would allow to split the fee. As a result, the service is treated as a whole, and as a part of the service is performed to a non qualifying fund, the conditions for the exemption are not met, and the VAT exemption cannot be applied.
Some analysis relating to the AG’s conclusion can be found here:
Decision
Article 135(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a single supply of management services, provided by a software platform belonging to a third-party supplier for the benefit of a fund management company, which manages both special investment funds and other funds, does not fall within the exemption provided for in that provision.
Source Curia
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