The Advocate General (AG) has issued his opinion in an EU Court of Justice case (ATP Pension Service) concerning the VAT treatment of administration services provided to a Danish defined contribution (DC) occupational pension fund.

Under the EU VAT Directive, the management of “special investment funds” is exempt from VAT.  The AG expressed the view that this must include occupational pension funds where:

  • Such funds pool the assets of several beneficiaries
  • The risk of the investment is spread over a range of securities
  • The beneficiaries bear the risk of these investments

The AG acknowledged earlier rulings in the Wheels and PPG Holdings cases but noted that the cases concerned defined benefit (DB) schemes. As the members of DB schemes do not bear the risk arising from the management of the fund, the cases differed significantly to the case at hand.

While the AG’s opinion is not binding on the EU Court of Justice, it is rare that the Court would issue a judgement that contradicts the opinion.  The decision of the Court is awaited, but if the judgement follows the AG opinion, investment managers may be able to recover VAT on fees charged to DC schemes. Furthermore pension funds may be able to recover VAT self-accounted for on fees charged by overseas managers.