Services to managers of real estate investment funds
The services rendered to the management company of a real estate investment fund, relating to the identification of the acquisition / sale opportunities for real estate, are financial in nature and are therefore territorially relevant in the country where the management company is established . On the other hand, services attributable to the effective administration of the properties in the portfolio are real estate , so that they are considered taxable at the place where the properties are located.
it is the answer to the interpello n. 65 of 20 February 2019 , with which the Inland Revenue examined the VAT processing, from a territorial point of view , of services rendered in favor of a “closed” real estate fund managed by a company established in another EU country, with identification for VAT purposes in Italy.
These services, concerning buildings located in the national territory , consist in providing assistance to the management company:
- with reference to the acquisition / sale opportunities for real estate;
- in the drafting and implementation of the business plan ;
- in the litigation and in the pre-litigation ;
- coordinating the periodic evaluation of the real estate portfolio;
- in relation to the current management of the real estate portfolio.
The Inland Revenue was asked whether the services referred to above:
- they are generically referable to properties that, being located in Italy, take on tax importance in Italy pursuant to Article 7- quater , paragraph 1, lett. a), Presidential Decree 633/1972 ; or
- are strictly connected to the management of a real estate portfolio managed by a person established in another EU country and, as such, excluded from VAT in Italy pursuant to article 7- ter , paragraph 1, lett. a), Presidential Decree 633/1972 .
Article 31 bis , para. 1, EU Regulation 282/2011 establishes that services relating to immovable property, territorially relevant for VAT purposes at the place of location of the property, according to Article 47 Directive 2006/112 / EC , ” include only services that present a sufficiently direct link with these assets “.
The next par. 2 of the same article 31- bis EU Regulation 282/2011 , in identifying, by way of example, the services that are considered as relating to real estate, refers to the letter. o) ” property management other than the management of the real estate investment portfolio referred to in paragraph 3 (g), consisting of the management of commercial, industrial or residential real estate from or on behalf of the owner (…)”. Specularly, pursuant to the following par. 3, lett. g), the management of the real estate investment portfolio (…) is not included in the services relating to real estate .
To fully understand the notion of “management of the real estate investment portfolio” are useful indications provided by the European Commission in the Explanatory Notes of 26 October 2015, according to which, ” unlike real estate management services , focused on the regular operation and operation of the asset real estate, portfolio management services deal with the recipient’s financial interests and primarily aim to increase the value of their portfolio. The portfolio manager will therefore not deal with the day-to-day management of the asset , but rather focuses on analyzing and monitoring the market and the assets of his client, buying and selling real estate, adding value and seeking new investment opportunities for his asset. customer, as well as developing relationships with other investors “(paragraph 232).
The aforementioned Commission document also states that ” the main difference between property management and portfolio management lies in the use that is made of the real estate in question. Real estate can be an asset of investment (…) . Whenever an immovable property is purchased or sold for investment purposes, the management services associated with this transaction (including the asset management services provided during the period of ownership) are to be considered as portfolio management and as such do not constitute services relating to immovable property “(paragraph 233).
In the response of the Revenue Agency, the solution proposed by the instant is rejected , according to which the services rendered to the real estate fund management company should be considered as non-territorially relevant for VAT purposes in Italy as the “financial” function prevails of portfolio management of real estate investments.
The indications of the European Commission must, in fact, be coordinated with the position of the jurisprudence of the Court of Justice , which with regard to the notion of ” management of mutual investment funds “, for the purposes of applying the exemption referred to in Article 135 , par. 1, lett. g), Directive 2006/112 / EC, stated that “in addition to the portfolio management functions “, also ” the administrative and accounting management services of funds provided by an external manager ” are included in the notion that – Union judges – must form ” a distinct, globally assessed whole that has the effect of fulfilling the specific and essential functions of fund management ” (judgment of 4 May 2006, case C-169/04 ).
More recently, moreover, the Court has specified that ” the specific activity of a mutual fund consists in the collective investment of the collected capitals. Therefore, since the assets of such a fund consist of real estate, its specific activity includes, on the one hand, activities relating to the selection, acquisition and sale of immovable property and, secondly, to administrative and administrative tasks. accounting (…) . On the other hand, the effective administration of real estate does not specifically concern the administration of a mutual fund, as it goes beyond the various activities linked to the collective investment of the capital collected. Since the effective administration of real estate aims to preserve and increase invested assets, its objective does not specifically relate to the activity of a mutual fund, but concerns every type of investment “(sent December 9, 2015, Case C-595/13 ).
In the light of the case-law referred to, in this case, not all services provided to the management company materialize the specific and essential functions of the management of the unit trust .
According to the Agency, they fall under the notion of “management of the real estate investment portfolio” – and are therefore excluded from VAT in Italy pursuant to Article 7- ter , paragraph 1, lett. a), Presidential Decree 633/1972 – assistance services relating to the identification of acquisition / sale opportunities for real estate .
On the other hand, the remaining services listed above appear to be independent from the management of the real estate investment portfolio , pursuing an objective different from that specifically related to the activity of a mutual fund. Therefore, since they are attributable to the effective administration of the properties in the portfolio , they must be considered territorially relevant in Italy on the basis of the criterion of article 7- quater , paragraph 1, lett. a), Presidential Decree 633/1972 .