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Regulated real estate funds management and VAT

Tax Alert

New opinion of the general advocate: towards a VAT exemption?


An important opinion has been released on May 20th regarding the VAT treatment applicable to the management of real estate investment funds (Case C-595/13, Opinion, May 20th, 2015, Fiscale Eenheid X NV).

In essence, it appears from this opinion that the management of any regulated investment funds would be VAT exempt,regardless of the form of investment – securities or real estate.

The General Advocate also confirms that the concept of "management" shall cover the effective exploitation of the property because this operation is part of the specific tasks of a real estate investment fund.

Should this opinion be confirmed, it could question the VAT taxation of the services supplied to these funds and deprive the fund managers, as well as some of their suppliers, from their rights to deduct VAT and lead to their liability to the French salary tax.


Such a VAT exemption would deprive suppliers from the right to recover the input VAT and would make them liable to the French salary tax.

At this stage, it is important to remember that this opinion is not binding. It is therefore appropriate to await the decision of the Court of Justice of European Union. However, if the opinion of the General Advocate was to be confirmed, the VAT treatment of the suppliers of regulated real estate funds could be deeply modified.

This issue arises both at a national level and at an international level: for example in the situation where a French company manages a property located in France and provides services to a foreign fund or to a foreign management company, this will impact the way the French suppliers’ deduction rights are determined as well as their liability to French salary tax.

This being said, it should be noted that France allows to elect for VAT on the management of funds. However, election to VAT may have adverse effects as it applies to all "financial" services supplied by the electing company (except for some listed revenues). Therefore, a VAT election will not always be the answer and it is important to consider the situation on a case by case basis.

Recommended action

Our clients should consider a VAT audit of management companies’ expenses and revenues in order to be prepared for the decision of the Court and its potential consequences.

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