All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Ireland: Irish Revenue Commissioners issue guidance on the VAT treatment of portfolio management services in wake of Deutsche Bank



Greg Lockhart

Matthew Broadstock

On September 4 2015, the Irish Revenue Commissioners (Revenue) issued updated guidance to confirm their position on the VAT treatment of discretionary portfolio management services after the European Court of Justice (ECJ) decision in Finamzamt Frankfurt am Main v Höchst Deutsche Bank (C-44/11). This guidance does not affect the VAT treatment of portfolio management services provided to funds. These services should continue to be exempt from Irish VAT as management services provided to specified special investment funds.

However, discretionary portfolio management services provided to other entities or individuals may no longer be separated from their composite parts as advisory services which are subject to VAT and execution services, which are exempt from VAT. Both services should now be treated as a single economic supply which is subject to VAT whereever the fact pattern in the Deutsche Bank case is replicated.

VAT treatment pre-Deutsche Bank

Before the Deutsche Bank decision, Revenue had treated portfolio management services as being comprised of several separate elements. Accordingly, where separately identifiable services were provided by a portfolio manager, each service could be treated separately for VAT purposes provided:

  • there was a legal management services agreement in place;

  • the separate elements were clearly identifiable in the services agreement;

  • the basis for apportionment of the fee was realistic; and

  • the activities in question were actually undertaken.

This effectively allowed portfolio managers to treat a portion of their total fee as VAT exempt (the portion which related to the buying and selling of securities) on the basis of the exemption for transactions in shares and other securities provided in article 135(f) of Directive 2006/112 (the VAT Directive).

The Deutsche Bank decision

The ECJ, in Deutsche Bank, was asked to consider:

  • whether the bundle of advisory and execution services provided to client investors constituted a single supply; and

  • if so, whether that portfolio management service should be VAT-exempt as a dealing in securities.

The ECJ held that Deutsche Bank's execution and advisory elements were each essential elements in carrying out the portfolio management service as a whole. Taken together, they were held to be so closely linked that, objectively, they formed a single, inseparable economic supply which it would be artificial to split.

The ECJ then considered whether such single economic supply should be exempt or not. The ECJ noted that the exemption for dealings in shares covers transactions to "create, alter or extinguish" parties' rights and obligations in respect of securities. The Court considered this as only part of the overall service, and held that given the requirement to strictly interpret the scope of EU VAT exemptions, Deutsche Bank's portfolio management services must be taxable.

Change in position

Revenue has now confirmed that following the decision in Deutsche Bank, it will no longer accept the splitting of portfolio management service fees between exempt and non-exempt elements for VAT purposes. Rather, the supply of portfolio management services to client investors will be treated as a single supply consisting of (i) analysing and monitoring the assets of client invested; and (ii) purchasing and selling securities. That supply will be subject to VAT at the standard rate.

However, Revenue has stated that where fees are charged strictly for the purchase or sale of shares or securities, the exemption will continue to apply where:

  • the contractual arrangements reflect that fees are being charged on a transaction-by-transaction basis; and

  • the arrangements are correctly reflected on the invoices.

Revenue has confirmed that it will not seek to apply the Deutsche Bank decision retroactively.

Greg Lockhart ( and Matthew Broadstock (


Tel: +353 1 232 2032 and +353 1 232 2543


more across site & bottom lb ros

More from across our site

The European Parliament raises concerns over unanimity in voting on pillar two, while protests break out over tax reform in Colombia.
Ramesh Khaitan speaks to reporter Siqalane Taho about tax morality, transfer pricing regulations, Indian tax developments, and the OECD’s two-pillar solution.
Join ITR and KPMG China at 10am BST on October 19 as they discuss the personal, employment, and corporate tax-related implications of employees working from overseas.
Tricentis and Boehringer Ingelheim, along with a European Commission TP specialist, criticised the complexity of pillar one rules and their scope at an ITR event.
Speakers at ITR’s Managing Tax Disputes Summit said taxpayers can still face lengthy TP audits, despite strong documentation preparation
Gig economy companies in New Zealand will need to fully account and become liable for the goods and services tax of underlying suppliers on their platforms, under new proposals.
Join ITR and Thomson Reuters at 2pm (UAE) / 11am (UK) on October 13 as they discuss how businesses can prepare for Tax Administration 3.0 and future-proof against changes such as e-invoicing and increasing digitisation.
ITR has partnered with global TP leaders from Deloitte to discuss transfer pricing controversy around the globe, and to share advice on how to navigate an increasingly uncertain and risky TP landscape.
Sources say they are not satisfied with pillar one protections in the marketing and distribution safe harbour, even though it was designed to give businesses greater tax certainty.
Political support for qualified majority voting is at a peak as unanimity rules continue to block the European Council from passing a directive on pillar two.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree