Investment management services are subject to VAT, but the majority of fund managers view transactions as being VAT-free.
A European ruling against Deutsche Bank last year, however, threatened discretionary managers across the region with the prospect of charging VAT on all services, including transaction costs.
Today’s ruling stated that transaction charges are different to those charged by Deutsche Bank, and they will therefore not be subject to VAT.
VAT will only be applied to those charges that take the form of “periodic fees charged on a flat-fee basis where there was no direct link to the transactions being executed.”
Revised VAT treatment, in which bundled transaction costs will be subject to VAT charges, will come into force on 1 December this year.
