VAT due on Aladdin services, BlackRock VAT case released – A new challenge for fund asset managers!


The VAT exemption applicable to the management of Special Investment Funds (Article 135(1)(g) of the VAT Directive) raises several issues. Those issues are related to both the concept of “management” and the “type” of funds that benefit from the exemption. The VAT Committee responded to some questions in 2017 but these concepts are certainly not harmonized between EU Member States.

The BlackRock case is likely to add an additional layer of complexity for the asset managers (CJEU, C‑231/19, 2 July 2020).

In brief

BlackRock US is providing portfolio management software services (Aladdin platform) to BlackRock UK. BlackRock UK is using the platform for the management of both Special Investment Funds (SIFs in scope of the VAT exemption) and other portfolio of funds (not in scope of the VAT exemption).

BlackRock UK performed an apportionment based on the Assets Under Management volume and paid the UK VAT only on the part related to the assets not in scope of the VAT exemption.

The CJEU analyzed that situation considering the VAT technical concepts of distinct/single supplies, neutrality of the VAT system and application of the VAT exemptions. They concluded that the Aladdin platform services form a single supply which cannot benefit from the exemption (also not for the proportion related to the SIFs).

Comments and practical implications

  • The situation is well-known to asset managers having both SIFs and other funds/portfolio under management. Both types require very similar services especially for the “investment management” function. In other words, many services in scope of the VAT exemption of management of Special Investment Funds seem not to be specific to these funds. Therefore, it is somewhat disappointing that the CJEU said that “the exemption provided for in Article 135(1)(g) of the VAT Directive is defined exclusively in relation to the nature of the supply in question”. In our view, the complexity of that specific VAT exemption is that it is defined by both the nature of the supply and by the destination of the services, i.e. a fund in scope of the exemption.
  • Those services are often invoiced globally by a third-party supplier or by a group company to the asset manager. Following the position of the CJEU, it would not be possible anymore to apply the VAT exemption on part of the services which will generate a VAT cost for the asset manager. In its opinion, the Advocate General nevertheless opened the door to a pragmatic solution, as he mentioned that if the supplier can provide data allowing to precisely and objectively identify the services provided specifically for the SIFs, then the VAT exemption could be applicable.

The BlackRock case will hit asset managers and other service providers as it complicates the VAT treatment of outsourced services and implies additional VAT costs.

However, working on the contractual framework, services description, invoicing details and, where applicable, transfer pricing documentation should allow to build a solid case to defend the VAT exemption.

We would be pleased to assist you in reviewing the impact of the case on your business and to consider the actions to take.

Your Contact Persons

Lionel Wielemans, ITX FS Director – +32 477 69 84 79 –

Inge Stuyver, ITX FS Senior Manager – +32 473 91 02 44 –

Jean-Baptiste Sanchez, ITX FS Senior Associate – +32 470 47 22 50 –