A recent opinion of an Advocate General (AG) of the EU Court of Justice suggests that some defined contribution (DC) pension schemes could be classed as “special investment funds” and thereby avail of a VAT exemption on investment management costs.  The AG’s opinion was sought in a case referred to the EU Court of Justice regarding the VAT treatment of services to a DC occupational pension fund in Denmark.

Under an EU VAT Directive, the management of “special investment funds” is exempt from VAT.  The AG expressed the view that this term must include occupational pension funds where such funds pool the assets of several beneficiaries and allow the spreading of the risk over a range of securities.  He further considered that this is only the case where the beneficiaries bear the risk of the investment.

In giving his opinion, the AG referred to an earlier decision in 2013 in which the EU Court of Justice  found that occupational pension funds could not avail of the VAT exemption.  The AG noted that that case differed significantly to the case at hand as it concerned a defined benefit scheme and therefore the members of that scheme did not bear the risk arising from the management of the fund.

Comment

While not binding on the EU Court of Justice, an AG’s opinion is followed in the majority of cases.  The decision of the Court is awaited, but it is possible that we will see changes to the VAT regime applicable to DC pension schemes in the future.

Case C-464/12 ATP PensionService A/S v Skatteministeriet