CJEU rules


CJEU rules that investment management services supplied for an occupational pension scheme cannot classify and be VAT exempt as ‘insurance transactions’ for VAT purposes

12 October 2020

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On 8 October 2020, the Court of Justice of the European Union (CJEU) ruled in the “United Biscuits” (C-235/19) case that investment management services supplied for an occupational pension scheme cannot be classified as ‘insurance transactions’ under the EU VAT directive despite these services being included in the EU insurance directives. Therefore, these services do not benefit from the exemption laid down by the EU VAT directive in favor of insurance transactions. Beyond the specific case at hand, this decision reminds us that any VAT exemption must be interpreted strictly and that there is no necessary and intrinsic link between the EU VAT directive and other EU directives. Concerned businesses should (re)examine current and future contractual arrangements in the light of this jurisprudence to ensure that they are correctly treated for VAT purposes.

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United Biscuits Pension Fund is a UK defined benefit pension scheme. It receives investment management services from different managers, some regulated under the Insurance Companies Act and some authorized by financial regulators.

The managers invoice their services with VAT.  The trustees have challenged the application of the VAT on these services claiming that they should be VAT exempt.  The case was brought before the UK tribunals.  In the frame of the trial, the Court of Appeal decided to refer the following question to the CJEU for a preliminary ruling:

Are supplies of pension fund management services as are provided to the applicants by (a) insurers and/or (b) non-insurers “insurance transactions” within the meaning of Article 135(1)(a) of Directive 2006/112 (formerly Article 13B(a) of the Sixth Directive)?

The trustees argue that the annexes of the EU insurance directives include fund management services and that a harmonized interpretation of the concept of insurance between the EU insurance directives and the EU VAT directive implies that these services should be VAT exempt as insurance services pursuant article 135 (1) (a) of the EU VAT directive.

The Court refuses this argumentation relying on its previous jurisprudence.  This jurisprudence defines the insurance service as the fact that an “(…) insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialization of the risk covered (…)”.  The Court notes the services contractually provided consisted of fund management solely, to the exclusion of any indemnity from risk.

The Court also states that it does not “(…) intend to establish the necessary and intrinsic link between the latter [the EU VAT directive] and possible legal categories which appear in the directives on insurance.”.  In other words, the sole fact that a service or a transaction is included in an EU insurance directive is not sufficient to qualify it as an exempt insurance service or transaction under the EU VAT directive. 

In summary, the EU VAT directive necessitates an interpretation based on the specific criteria laid down by the CJEU.  Consequently, the services at hand do not qualify for the insurance VAT exemption.

Once again, the CJEU very clearly and firmly  reminds us of some interpretation principles. On the one hand, VAT exemptions must be interpreted strictly.  On the other hand, there is no necessary and intrinsic link between the EU VAT directive and other EU directives. The principles of interpretation used by the Court in this decision are also applicable to other exempt transactions and services such as banking and fund ones.  Concerned businesses must be aware of these principles when contracting with their service providers or clients and should take the opportunity of this decision to review existing agreements. 

The Deloitte Luxembourg indirect tax team remains at your disposal to discuss the potential impacts of these questions for your organization. 

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