The European Court of Justice has ruled that managers of open-ended funds are exempt from the value added tax, a decision that could save some fund manager millions of dollars. The court ruled that member states of the European Union must allow an exemption of the VAT for management of investment funds, according to the EU’s sixth VAT directive. In addition, the court decided that fund managers may file for overpayment of the VAT retroactively. The ruling does not cover depository services, and could be costly to financial centers like France, Ireland and Luxembourg, which benefit from the collection of the tax.

“A serious fiscal obstacle to efficient outsourcing will be removed and this will further open Europe as a market for the funds industry,” said Peter Mason of CMS Cameron McKenna, the law firm that advised Abbey National, the defendant in the case brought by the U.K. government, in a Financial Times interview.