On 7 November 2013, the Luxembourg VAT authorities published a Circular specifying the scope of VAT exemption applicable to the management of investment funds.
It has been confirmed that services of risk management are part of fund management services as stated in Article 44, 1, d) of the Luxembourg VAT Law (VATL). Therefore, the risk management services provided by the management company should, in principle, be VAT exempt. This should apply equally in the case of management of alternative investment funds.
The Circular also confirms that in the case of management services provided by a third party (outsourced services), these services should, viewed broadly, form a distinct whole, be specific to and essential for the management of funds in order to be VAT exempt. The exemption does not apply to purely material or technical services. Furthermore, a single isolated type of service ("un seul type isolé de services") supplied by a third party cannot benefit from the VAT exemption under article 44, 1, d) VATL.
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