The Advocate General of the Dutch Supreme Court issued her conclusion on the interpretation of the Fiscale Eenheid X judgment of the CJEU and in particular, the requirement of "specific State supervision". In the view of the A-G, as for the Netherlands, supervision on the basis of the Dutch Investment Institutions Supervision Act (Wet toezicht belegingsinstellingen) falls within the scope of the "specific State supervision". Although the advice of the A-G is not binding upon the Dutch Supreme Court, this conclusion is a first step to shaping the concept of "specific State supervision" in the Netherlands.

Introduction

On 19 July 2016, the Advocate General of the Dutch Supreme Court (A-G) issued a conclusion, in which she advices the Dutch Supreme Court -that referred the case to the CJEU- on the interpretation of the Fiscale Eenheid X judgment of the Court of Justice of the European Union ("CJEU").

Following CJEU case law, the VAT exemption for portfolio management can only apply if the recipient of the management service is a UCITS fund or sufficiently comparable to a UCITS fund. The latter is the case if:

  1. the fund is financed by the participants;
  2. the fund invests in accordance with the risk-spreading principle;
  3. the participants bear the investment risk; and
  4. the fund is subject to "specific State supervision".

Being subject to "specific State supervision" is a new requirement that follows from the Fiscale Eenheid X judgment, but the CJEU did not elaborate on the exact meaning of this requirement.

Conclusion A-G

In her conclusion, the Dutch A-G takes the view that "specific State supervision" should be similar to supervision on the basis of the UCITS Directive, i.e. it should aim to protect the rights of the investors/consumers. In the Netherlands, supervision on the basis of the Dutch Investment Institutions Supervision Act (Wet toezicht beleggingsinstellingen / Wtb) was - in her view - similar to supervision on the basis of the UCITS Directive.1

The A-G concludes that the requirement of "specific State supervision" is met if the fund obtained a license within the meaning of the Wtb. In her view, falling inside the scope of the Wtb, but being exempt from the requirement to have a license is not sufficient for being subject to "specific State supervision".

The A-G does not exclude that it is possible that other types of supervision can also qualify as "specific State supervision". For example, if the manager of the fund is subject to "specific State supervision", such as managers of Alternative Investment Funds under the Alternative Investment Fund Manager Directive. In such a situation, the managed fund could also be subject to "indirect" "specific State supervision".

Impact

We see that the Fiscale Eenheid X judgment has led to uncertainty as to the application of the VAT exemption and Member States take diverging approaches with respect to the meaning of "specific State supervision". Although the advice of the A-G is not binding upon the Dutch Supreme Court, this conclusion is a first step to shaping the concept of "specific State supervision" in the Netherlands.

The Fiscale Eenheid X judgement is relevant to all types of transactions where capital is being raised from multiple investors and not limited to real estate funds as were at issue in the case hand. We therefore recommend all types of transactions where capital is being raised from multiple investors, for example funds and their managers, to (re)consider their VAT position.