The European Court of Justice (ECJ), in upholding an opinion given by the Advocate General (P Cruz Villalon), has indicated in ATP Pension Services A/S v Skatteministeriet1 that an occupational pension scheme operating on a defined contribution basis can claim an exemption from VAT on administration expenses paid to a third party.
The case was brought by ATP, which carried out the following tasks on behalf of pension fund customers:
- administrative tasks, constituting, inter alia, the provision of information and specific advice to employers and employees in relation to the retirement schemes provided by the pension funds
- system maintenance and development in relation to the development and maintenance of the platform from which ATP provides its services to pension funds
- services related to payments into and disbursements from pension funds
On its consideration of Article 13B(d)(6) of the Sixth Council Directive of 17 May 1977 – 77/388/EEC, the Court held that pension funds such as those administered by ATP may fall within the scope of the provision if they are funded by the persons to whom the retirement benefit is to be provided, if the funds are invested using a risk-spreading principle, and if the pension customers bear the investment risk. In this regard, the Court held that it did not matter that the contributions were paid by the employer, that the contributions were tax deductible and that the amount paid was based on collective workforce agreements.
The outcome is in contrast to the decision of the ECJ reported last year in Wheels Common Investment Fund Trustees Ltd and others v Her Majesty’s Revenue and Customs2, in which the ECJ ruled that a common investment fund in which the assets of several defined benefit pension schemes were pooled, could not claim an exemption on third-party management fees under the same provisions of the Sixth VAT Directive.
To read the decision click here