VAT impact of AIMFD implementation - 26/09/2012
VAT treatment of the intermediation services in the sale of shares of a real estate company - The “DTZ” Case
The European Court of Justice (EUCJ) issued its judgment in an important Case for the real estate sector on Thursday 5 July 2012, in case C 259/11, DTZ Zadelhoff vof.
The aim was to determine whether or not, for VAT purposes, intermediation services in the sale of shares of a real estate company are re-qualified as intermediation services in the sale of the property itself. No need to say that this has an important impact on the VAT treatment of these services.
The EUCJ decided that the VAT exemption is applicable to transactions which are designed to transfer shares in a company, whose transfer results indirectly in a transfer of immovable property. However, this exemption does not apply if the Member State applied the possibility of considering shares (and interests equivalent to shares), giving the holder thereof de jure or de facto rights of ownership or possession over immovable property, to be tangible property.
The EUCJ confirms with this judgment that the services performed by intermediaries in such transactions can be covered by this VAT exemption, unless if the Member State where the service takes place applied the above possibility.
VAT impact of AIMFD implementation
While existing investment vehicles remain eligible for the VAT exemption for “management services”, the draft law dated 24 August 2012 would expand the scope of eligible vehicles to similar investment vehicles located in another EU member state, as well as to an AIF as defined in the draft law. The existing vehicles already include UCITS, SIFs, SICARs, ASSEPs, SEPCAVs, pension funds defined by the law dated 6 December 1991 and securitization vehicles as defined by the law dated 22 March 2004.
By extending the scope of the VAT exemption to similar investment vehicles in other EU member states, the draft law aims to prevent any distortion of competition between the management of investment vehicles registered in Luxembourg and those registered in another member state. A Luxembourg-based management company involved in both domestic and cross-border management of (eligible) investment vehicles would be able to monitor its services from Luxembourg for VAT purposes, regardless of where the investment vehicles are located.
A Luxembourg management company should then be able to delegate part of its management functions to a third party provider (established in Luxembourg or abroad) and continue to benefit from the VAT exemption on management services if all of the VAT conditions are satisfied (regardless of whether the relevant investment vehicle is registered in Luxembourg or another member state).
As a result of the EU place of supply rules (i.e. the B2B and B2C rules) and to the extent the investment vehicle established in another member state qualifies as a VAT taxable person in its own country, it still would be necessary to determine whether management services rendered from Luxembourg could benefit from a VAT exemption in the country in which the investment vehicle is registered. In practice, it appears that the scope of management services for funds is not consistently defined in each EU member state (despite the theoretical harmonization of EU VAT), potentially leading to a local VAT liability for the investment vehicle.
The draft law also would allow management services invoiced by an AIFM to an AIF to be VAT-exempt (e.g. management services rendered to the new SCSp acting as an AIF).
Finally, granting a VAT exemption to the management of an AIF, combined with the extension of “cross-border” management to (eligible) EU investment vehicles, clearly could impact the corresponding right of the managers to deduct input VAT, necessitating close monitoring of the management companies’ VAT deduction rights and their new VAT reporting obligations.
Modification of the Luxembourg VAT regime for independent groups of persons (IGP) due to European Commission’s inquiry
Further to the European Commission’s formal request of 26 January 2012 (please refer to Input volume 12, issue 2 – Special edition 2012), Luxembourg has modified its VAT rules for independent groups of persons (Grand-ducal Decree of 7 August 2012).
Under the amended Luxembourg VAT regime, the independent groups of persons that supply, to one or more of its members, services used principally to perform taxable and non-exempt activities, do not benefit from the VAT exemption.
Therefore, the existing and new independent group of persons should review their group agreements/contracts to make sure they meet all the mandatory conditions to continue to benefit from the VAT exemption.
This criteria will also be a critical item to be checked regularly at the level of the members.
Should you wish any further information in this respect, please contact your usual Deloitte contact.
Electronic submission of periodic VAT returns will become mandatory as of 1 January 2013 - Reminder
The Luxembourg VAT authorities recently informed taxpayers that the electronic submission of monthly and quarterly VAT returns will become mandatory as of 1 January 2013.
Deloitte’s VAT team has a great deal of experience with the online VAT reporting system and associated procedures and will be happy to place its knowledge at your disposal in order to assist you in this process.