ALFI is in favour of maintaining the current VAT exemption for financial services. Along to maintaining the VAT exemption for financial and insurance services, ALFI is in favour of improving and harmonising the relevant definitions for the application of the exemption across the EU.
ALFI welcomes the publication of the public consultation regarding the review of VAT rules for financial and insurance services and is pleased to hereby provide its views in this respect.
This ALFI position is based on the social and economic impacts the introduction of a taxation of financial services would have on the asset management and the investment industry as a whole but also, and more importantly, on retail investors as end-consumers.
Firstly, the Luxembourg fund industry mainly offers fee-based products and services and all its clients are ultimately individual investors. A taxation of those products and services would create an additional tax burden that would increase their costs. Ultimately, that VAT burden would be borne by those who could not recover VAT (through a cut into their return on investment), as it is in particular the case for individuals as retail investors.
ALFI would also like to emphasize the important social and economic roles played by the fund industry.
The social role of investment funds appears clearly for saving for retirement. Employees are encouraged to save for their retirement by investing in (pension) investment funds and most investors in pension funds are either private persons or institutional investors active in the pension sector that are generally not able to recover input VAT due to the fact that they do not provide taxable services or that they provide VAT exempt financial or insurance services. Applying VAT on management services for investment funds would increase the tax burden for retail investors and in particular for (retirement) savers regardless of whether they would invest directly in an investment fund or via a pension fund or an insurance product....
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ALFI
© ALFI - Association of the Luxembourg Fund Industry
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