The European Court of Justice (ECJ) has said discretionary portfolio management should not be exempt from VAT.
An Advocate General (AG), giving an opinion today on a case involving Deutsche Bank, said portfolio management should be liable for VAT - rejecting the German bank's argument that such services should be exempt.
The AG concluded portfolio management services constitute a single supply chain for VAT purposes.
However, the she said she understood the "logic" of Deutsche Bank which argued that, because management of joint funds and direct investment are not subject to VAT, portfolio management should also be exempt.
The bank said a difference in VAT treatment could lead investors to choose the service not taxed, thereby "distorting" competition between different services.
"It is possible that a future amendment will settle the matter clearly in favour of exemption, but that is a matter for the Council, within which the Commission's proposals are still currently under discussion," she said.
A spokesman for the European Court of Justice said the AG's conclusions are not a judgement on the Deutsche Bank case but merely an opinion which judges are not bound to follow.
The final judgement in the case is not expected until September or October.
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