Case at hand

The product in these proceedings offered individual investors the opportunity to invest according to five fixed investment profiles, all of which corresponded to a model investment portfolio. The investors entered into an agreement with the product provider and deposited their funds in a securities account held by a foundation, which had been set up by the provider specifically for the product. The deposit was in fact managed by the product provider, who used it to build model portfolios corresponding to the investment profiles chosen by the investors. Each model portfolio was built up from the total deposits of all investors who had chosen the corresponding investment profile. The product provider was licensed by the Dutch regulator (AFM) for individual asset management (MiFID) and held the view that the product fell within the scope of the VAT exemption for fund management.

The VAT exemption for fund management applies to UCITS and similar funds or similar products. The tax authorities claimed that the product in question was not comparable to a UCITS because the legal structure of the product is too different from traditional fund products such as UCITS and AIFs. The product was also subject to the supervision regime for individual asset management, which, according to the tax authorities, by definition did not allow for the state supervision that is required for the application of the exemption. The Dutch Supreme Court found that the way in which funds were pooled in the securities account and the financial instruments were held by the foundation reflected the essential characteristics of a UCITS, with the funds pooled and invested per investment profile being considered as "sub-funds". The Dutch Supreme Court also found that the supervisory regime for individual asset management was not inferior, in terms of requirements and safeguards, to the supervisory regime applicable to UCITS, and thus concluded that the product could benefit from the VAT exemption for fund management.


The Dutch Supreme Court applies a 'substance over form' approach to test whether the product is sufficiently similar to a UCITS and therefore qualifies for the VAT exemption for fund management. In our opinion, this is a positive development which offers opportunities to apply the VAT exemption to products other than traditional funds. In a decree of 2019, the State Secretary for Finance explicitly took the position that products covered by the supervisory regime for individual asset management cannot share in the VAT exemption. With this judgment of the Dutch Supreme Court, the position of the State Secretary has in any case become obsolete on this point. This is good news for – among others – (managers of) securitisation SPVs, because the tax authorities – in part due to the decree of the State Secretary – have taken the position that they can no longer share in the VAT exemption for fund management.