Belgium applies VAT exemption for management of alternative collective investment funds

1. Previous uncertainty about the scope of the VAT exemption for management of collective investment funds

As a reminder, the scope of the Belgian VAT exemption for management of investment funds has been under scrutiny in recent years. This VAT exemption does not apply to the management of all types of investment fund as it only applies to qualifying “collective investment funds” (as defined under VAT law). Various financial law reforms, combined with the VAT exemption’s rather obscure wording, had created uncertainty concerning the VAT exemption’s scope. This outcome has mainly resulted from the adoption of the “alternative investment funds management” Directive into Belgian financial law in 2014.

On a strict interpretation, the Belgian VAT exemption only applied to the management of UCITS (Act of 3 August 2012), special vehicles for the investment in receivables, OFP and B-REIT. All other types of funds not qualifying as UCITS, such as institutional Sicavs, Pricaf Privée and other regulated investment funds, would no longer be covered by the VAT exemption. In theory, this VAT exemption change applied from the date that the new VAT and financial rules came into effect (meaning from as early as 16 July 2014).

In an official decision of 30 March 2015, the Belgian VAT authorities, however, accepted that the VAT exemption continues to apply for the management of all investment funds that have been regulated by the previous version of the Act of 3 August 2012 (before this law was changed by the AIFM-Act and before the Belgian VAT Code was changed by the Act of 12 May 2014 on B-REITS). This decision made it clear that the VAT exemption continues to apply to all institutional Sicavs, Pricaf Privée and other funds that were previously regulated by the Act of 3 August 2012.

2. Recent change of the VAT exemption for management of collective investment funds

This official decision noted that a legislative initiative would be required to correctly adapt the Belgian VAT exemption’s current wording. This change has now been introduced by a recent Program Law of 3 Augustus 2016. Although the change is linked to the introduction of the new Belgian B-REIT, it now explicitly provides for a VAT exemption of the management of:

- Collective investment undertakings as meant in the Act of 3 August (UCITS) and special vehicles for the investment in receivables.
- Collective investment undertakings as meant in the Act of 19 April 2014 on alternative investment funds and their manager.
- B-REITS as meant in the Act of 12 May 2014.
- Pension funds as meant in the Act of 27 October 2006.

This change should apply from 26 August 2016 (10 days after publication in Belgium’s Official Gazette).

3. No status-quo - broader scope of the VAT exemption? 

The preparatory documents of this law explain that this reform is only intended (i) to extend the VAT exemption for the management of the new type of B-REITS and (ii) to restore the former scope of the VAT exemption for collective investment funds before the change of the law of 3 August 2012. However, with reference to the wording of the new VAT exemption, it is very like that the VAT exemption’s scope has now become much broader.

Indeed, by referring to the AIFM Act, the VAT exemption should apply to the management of all “alternative collective investment funds”. The Belgian AIFM Act, transposing the AIFM Directive, defines collective investment as: “undertakings, including investment compartments thereof, which raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and do not require authorisation pursuant to Article 5 of Directive 2009/65/EC (UCITS Directive).”

The link between the VAT exemption and the definition of collective investment fund in the AIFM Act and Directive should in our view be in line with the Court of Justice of the European Union’s case law, which already applies a broad definition of collective investment funds for the VAT exemption (see cases ATP Pension Fund and Fiscale Eenheid X). The essential characteristic of a special investment fund is the pooling of funds of several beneficiaries, enabling the risk borne by those beneficiaries to be spread over a range of securities or other assets (like immovable property). The management of such investment funds can qualify under the VAT exemption provided that the Member State concerned has made those companies subject to specific State supervision (such as the applicable AIFM rules).

Following the recent Belgian VAT provision change and with reference to the EU case law, we conclude that it is sufficient that an investment fund qualifies under the AIFM Act to benefit from the VAT exemption. Under the old definition, the VAT exemption only applied to collective investment funds that were set out exhaustively in the old version of the Act of 3 August 2012 and to the other undertakings that were specified in the VAT provision. The AIFM definition’s scope is, in our view, broader and could include, amongst other, certain type of private equity funds that could not benefit from the VAT exemption in the past.

However, several questions remain open. It is not clear if the VAT authorities will indeed accept such a broad concept of investment fund for the VAT exemption, especially with the legislative preparatory works only referring to the previous status quo. In our view, businesses should be able to rely on the text of the law. Also, it is not clear whether falling under the AIFM Act is sufficient for the VAT exemption, if the specific investment fund should not comply with all the obligations (such as because the threshold has not been exceeded). This will require, in our view, detailed guidelines from the VAT authorities.

4. Conclusion

This recent VAT change could open a perspective for certain funds to reduce their VAT costs.

Funds that currently cannot benefit from the VAT exemption (certain type of private equity funds, venture capital funds,…) should therefore review in detail the current VAT treatment of the fees paid to their managers.


If you would like more information about this issue then please contact:
Stijn Vastmans - Partner (stijn.vastmans@tiberghien.com)
Stein De Maeijer - Associate (stein.demaeijer@tiberghien.com)
Gert Vranckx - Associate (gert.vranckx@tiberghien.com)
Loulou Geboers - Associate (loulou.geboers@tiberghien.com)