2 March 2021 • 4 minute read

Country-specific updates

The UK government has published a call for input in relation to its review of the UK’s tax and regulatory regimes for funds. The aim of the review is to enhance the UK’s attractiveness as a location for funds and includes a commitment to review the VAT treatment of fund management fees. The UK government acknowledges that the UK approach on the VAT liability of fund management services can act as a disincentive for funds to be established in the UK and recognises that leaving the EU allows it more scope to vary its approach. The government is currently conducting research and taking initial view and may publish a separate formal consultation later this year.

DLA Piper comment: Whilst a member of the EU, the UK’s interpretation implementation of Article 135(1)(g) of Council Directive 2006/112/EC (which requires EU member states to treat the management of ‘special investment funds’ as exempt from VAT) was markedly narrower than some other EU member states such as Luxembourg. Following the UK’s departure from the EU, the UK government may be able to change its approach and remove the irrecoverable VAT cost for fund investors in a greater range of cases.

On 29 January 2021, the Dutch Supreme Court issued an important judgement as to the application of the so called ‘transfer of going concern’ rule (TOGC) with respect to the sale and lease back of Dutch immovable property. The Dutch Supreme Court ruled that the sale and transfer of the apartment building by the housing corporation to the purchaser constitutes a supply of goods for VAT purposes. Furthermore, the Supreme Court decided that the TOGC rule does not apply to the transfer of the apartment building, as the lease of immovable property was not continued by purchaser. In this regard, the Supreme Court refers to the fact that (i) the housing corporation would no longer operate the apartment building in its capacity as owner/lessor but as a lessee/sub-lessor and (ii) purchaser pays a remuneration to the housing corporation for managing the apartment building which is a different business than the sole lease of the apartment building to lessees.

DLA Piper comment: This Supreme Court judgment may limit the possibilities to apply the TOGC rule in sale and leaseback transactions and significantly impact the VAT position of businesses that consider the sale and lease back of real estate in the Netherlands. Therefore, real estate investors are recommended to assess their VAT position if they engage in a sale and leaseback transactions.

Italian Tax Authority, ruling No. 100 of 11 February 2021
The zero VAT rate regime provided for by Article 124 of the Law Decree No. 34/2020 for the supply of COVID-19 diagnostic equipment and the supply of services strictly related to this equipment, applies only to assets expressly named by the same provision, or by the list attached to the EU Commission Decision 2020/491.

DLA Piper comment: The list of assets eligible for this zero VAT rate regime is to be understood as exhaustive and not merely illustrative (see Italian Tax Authority Circular Letter No. 26/2020, Italian Customs and Monopolies Authority Circular Letter No. 12/2020 and Assonime Circular Letter No. 32/2020). The services related to these assets which benefit from the same VAT regime are those provided for by Article 16 of Presidential Decree No. 633/72 (i.e., contracting, leasing and rental services related to these assets). According to the Budget Law 2021 (see Article 1, c. 452, Law No. 178/2020) this zero rate VAT regime until 31 December 2022.

Italian Tax Authority, ruling No. 85 of 4 February 2021
The VAT exemption provided for educational services, as well as for educational training activities is not applicable whether the service is carried out outside the regional framework.

DLA Piper comment: The application of this VAT exemption regime is subject to the fulfilment of two requirements, one objective and the other subjective (see Italian Tax Authority Circular Letter No. 22/E of 18 March 2008, in line with the provisions of Article 132 of VAT Directive). In particular, the educational training activities must be recognised as such by territorial public administrations. Each region adopts different recognition criteria. Therefore, if the educational training activity is to be carried out elsewhere, a new recognition application must be submitted, once again, to the region where the training activity is to be carried out.