Case C‑44/11

Finanzamt Frankfurt am Main V-Höchst

v

Deutsche Bank AG

(Reference for a preliminary ruling
from the Bundesfinanzhof)

(Directive 2006/112/EC — Article 56(1)(e) — Article 135(1)(f) and (g) — Exemption for transactions relating to the management of securities-based assets (portfolio management))

Summary of the Judgment

1.        Harmonisation of tax legislation — Common system of value added tax — Supplies of services — Transactions consisting of a number of elements — Transaction which must be regarded as a single supply — Management of securities-based assets

2.        Harmonisation of tax legislation — Common system of value added tax — Exemptions — Transactions relating to securities — Management of special investment funds — Concepts — Management of securities-based assets — Not included

(Council Directive 2006/112, Art. 135(1)(f) and (g))

3.        Tax provisions — Harmonisation of laws — Turnover taxes — Common system of value added tax — Supplies of services — Determination of the place of supply for tax purposes — Banking, financial and insurance transactions including reinsurance –Concept — Management of securities-based assets — Included

(Council Directive 2006/112, Art. 56(1)(e))

1.        A securities-based assets management service, namely where a taxable person for remuneration and on the basis of his own discretion takes decisions on the purchase and sale of securities and implements those decisions by buying and selling the securities, consists of two elements which are so closely linked that they form, objectively, a single economic supply.

(see para. 29, operative part 1)

2.        Article 135(1)(f) or (g) of Council Directive 2006/112 on the common system of value added tax must be interpreted as meaning that securities-based asset management is not exempt from value added tax under that provision.

The transactions covered by the exemption provided for in Article 135(1)(g) of Directive 2006/112 are those which are specific to the business of undertakings for collective investment. In specific terms, what are involved are joint funds, in which many investments are pooled and spread over a range of securities which can be managed effectively in order to optimise results, and in which individual investments may be relatively modest. Such funds manage their investments in their own name and on their own behalf, while each investor owns a share of the fund but not the fund’s investments as such. By contrast, a securities-based assets management service concerns generally the assets of a single person, which must be of relatively high overall value in order to be dealt with profitably in such a way. The portfolio manager buys and sells investments in the name and on behalf of the client investor, who retains ownership of the individual securities throughout, and on termination of, the contract.

As regards the scope of Article 135(1)(f) of Directive 2006/112, transactions in shares and other securities are transactions on the market in marketable securities and trade in securities involves acts which alter the legal and financial situation as between the parties. The words ‘transactions in securities’ within the meaning of that provision refer, therefore, to transactions which are liable to create, alter or extinguish parties’ rights and obligations in respect of securities. A securities-based assets management service, by contrast, consists basically of two elements, namely, on the one hand, of a service of analysing and monitoring the assets of client investors, and, on the other hand, of a service of actually purchasing and selling securities. Services of analysing and monitoring assets do not necessarily involve transactions which are liable to create, alter or extinguish parties’ rights and obligations in respect of securities. Since that service may be taken into account for value added tax purposes only as a whole, it cannot be covered by Article 135(1)(f) of Directive 2006/112.

(see paras 31, 33, 34, 36-39, 43-46, operative part 2)

3.        Article 56(1)(e) of Directive 2006/112 on the common system of value added tax must be interpreted as covering not only the services referred to in Article 135(1)(a) to (g) of Directive 2006/112, but also securities-based assets management services.

(see para. 55, operative part 3)