Favourable CJEU clarification on the VAT exemption for fund management services

2 mn

On 17 June 2021, the Court of Justice of the European Union (CJEU) rendered its judgment in joined cases K (C-58/20) and DBKAG (C-59/20) dealing with the question of which conditions must exist in order for services rendered by a third-party supplier to the management company of an investment fund to qualify for the VAT exemption for fund management services.

In the first case, a third-party supplier provided tax-related services consisting of ensuring that the income received by unit-holders from investment funds would be taxed in accordance with national law. In the second case, a third-party supplier granted a right to use specialist software designed solely for risk management and performance evaluation of qualifying investment funds.

The CJEU did not make a final substantive assessment as to whether the particular services in the present cases met the criteria for the VAT exemption, instead leaving that to the referring national courts.

The CJEU reiterated its case law establishing that in order to benefit from the VAT exemption, management services provided by a third-party manager must, viewed broadly, form a distinct whole and be specific to, and essential for, the management of special investment funds.


The CJEU came to the conclusion that services provided by third parties to special investment fund management companies can benefit from the VAT exemption for fund management services if they have a close connection with the management of special investment funds and are provided exclusively for the purpose of managing special investment funds, even if they are not fully outsourced; this would include both tax-related work consisting of ensuring that the income received by unit-holders from investment funds is taxed in accordance with national law, as well as the granting of a right to use specialist software designed solely for risk management and performance evaluation of essential calculations.

This is a welcome decision illustrating that, based on the criteria established by the CJEU, any outsourced services provided by third parties to fund management companies can potentially be exempt from VAT, even if they are not fully outsourced, provided that the other relevant conditions set out by the CJEU are met. Fund management companies should therefore review their existing service agreements to check whether they are in line with this new case law.

The Arendt VAT team is at your disposal should you require any further information in this respect.

Download the press release

Luxembourg Newsflash – Favourable CJEU clarification on the VAT exemption for fund management services

pdf168 KB