VAT, GST and Cross-Border Investment: The Indirect Tax Most Investors Ignore
Most investors think about income and capital gains tax but ignore VAT. In cross-border real assets and operating businesses, indirect tax can quietly eat returns.
Where VAT shows up in private deals
VAT (or GST) hits the supply of goods and services, not investment returns directly — but private deals are full of services: management fees, advisory fees, transaction costs, property management, leasing services. Standard rates of 15–25% on these costs are a real drag on net returns.
Real estate is the classic trap. VAT treatment of commercial property varies by jurisdiction, and a deal that ignores the VAT angle can find itself either unable to recover input VAT or unexpectedly liable on rents.
Fund management — usually exempt, sometimes not
The management of regulated investment funds is typically VAT-exempt across the EU, the UAE and most major jurisdictions. The exemption is narrow, however. Services that look like fund management but fall outside the technical definition can be fully taxable, and the difference between 0% and 21% on management fees compounds significantly over a fund's life.
On any deal involving operating services, check how VAT is treated in the financial model and whether input VAT recovery has been assumed correctly.
Practical checks for investors
Is the SPV VAT-registered? On what basis is input VAT recoverable? Are management and advisory fees billed with or without VAT? In real estate, has the property been opted to tax? These questions are unglamorous, but they routinely affect IRR by 50–150 bps.
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