VAT exempt management of pension funds

As is well known, the VAT treatment of pension funds has regularly been considered by the courts. The Court of Justice of the European Union (CJEU) has considered this issue in a number of cases, including ATP (Case C-462/12) of 13 March 2014, Wheels (Case C-424/11) of 7 March 2013, and Fiscal Unity X (Case C-595/13) of 9 December 2015. In these cases, the CJEU clarified under what circumstances a pension fund can be deemed to be a collective investment fund for the purposes of Article 135(1)(g) of the Principal VAT Directive. In particular, according to the Court, it is essential that the investment risk directly affects the participants in the pension fund.

In the Netherlands, the Dutch Supreme Court has held in its judgment of 9 December 2016 (ECLI:NL:HR:2016:2786) – departing from the (Dutch) Advocate General’s conclusion – that this is not the case if the participants in the pension fund only run the risk of non-indexation of their pension benefit, or the risk of a reduction in their pension benefit due to insufficient funding.

Most recently, in its ruling of 5 October 2022 (ECLI:NL:RBGEL:2022:5652) the Gelderland District Court has decided that more clarity is needed on the VAT position of pension funds and has therefore decided to refer preliminary questions to the CJEU. In essence, the court has asked the CJEU to clarify, from the perspective of determining if members of a pension fund should be regarded as running an investment risk, the following issues:

• whether participants must run an individual investment risk, or is it sufficient that the participants as a collective, and no one else, bear the consequences of the results of the investments?
• what is the extent of the collective or individual risk necessary?
• to what extent the amount of the pension benefit partly depends on the non-indexation risk, or the risk of insufficient funding relative to other factors, such as the number of years of pension accrual, the level of the salary and the calculation interest?

The question arises as to what pension funds should/could do pending the judgment of the CJEU. If a pension fund can be regarded as a collective investment scheme, this would mean that the management services rendered to the pension fund are exempt from VAT. Since these services are often purchased from outside the Netherlands and the pension fund itself has to pay the relevant VAT on its VAT return via the reverse charge, it is therefore up to the pension fund to decide what VAT treatment it will adopt pending the outcome of the case. Where the pension fund decides to account for VAT, it will need to decide whether it should lodge an appeal against its own VAT return in this regard. In order not to forfeit any rights, it may indeed be advisable to file a declaration and appeal the VAT return.