​On 9 December 2015, the CJEU delivered its judgement in the case “Fiscale Eenheid X NV cs” C-595/13. The CJEU has decided that the management of property funds that are subject to specific state supervision shall benefit from the VAT exemption for fund management services and that the VAT exempt management does, however, not encompass the actual management of the real property.

The case concerned essentially: 1) whether a property investment company may be regarded as a “special investment fund” for the purpose of the VAT exemption regime for investment funds and 2) if so, whether the term “management” also covers the actual management of the company’s immovable property which the company has entrusted to a third party.

Concerning the first question, the CJEU decided that a property investment company may be regarded as a “special investment fund” within the meaning of the VAT Directive under certain conditions. First of all, it must be subject to specific state supervision. The CJEU did not specify the extent to which an investment fund (or its manager) has to be subject to state supervision. Secondly, it must display characteristics identical to collective investment undertakings within the meaning of the UCITS Directive and carry out the same transactions or at least display features that are sufficiently comparable to enable it to be in competition with UCITS.

With respect to the second question, the CJEU considered that the term “management” which appears in the VAT fund exemption provision does not cover the actual management of the immovable property of a special investment fund. According to the CJEU, the actual management of properties is intended to preserve and build up the assets invested. These services are inherent in any type of investment and are therefore not specific to the activity of a special investment fund. Consequently, the VAT exemption should not be granted for those services. However, the VAT exemption does cover services relating to the selection, purchase and sale of immovable property, as well as the usual administrative and accounting tasks.

In conclusion, funds which directly invest in properties are eligible for the application of the VAT exemption regime, which confirms the Luxembourg interpretation. The condition of state supervision is however key to compliance with this new case law. Regarding the scope of the VAT exemption for management services in particular, considerable attention will have to be focused on the (VAT-exempt) services clearly in connection with the fund management activity as opposed to the (taxable) services which are inherent in the day-to-day management of a specific property.