ECJ C-692/17 (Paulo Nascimento Consulting – Judgment – Exemption for transactions relating to the granting, negotiation and management of credit – assignment of a position held in enforcement proceedings for recovery of a debt recognised by a judgment

On 17 October 2019, the European Court of Justice gave its judment in case C-692/17 (Paulo Nascimento Consulting — Mediação Imobiliária Lda). This case deals with the VAT exemption for financial activities.

Facts (simplified):

Paulo Nascimento Consulting (hereafter: ‘PNC’) agreed, in the context of its activity as a property agency, to provide its agency services on an exclusive basis for a sale of agricultural land. An offer of sale was proposed by PNC but rejected by its principal, the owner of the land, who refused to pay it for the service provided.

PNC then brought an action before the Tribunal de Família e Menores e de Comarca de Portimão (Family, Juvenile and District Court, Portimão, Portugal), seeking an order that its principal pay it an amount of EUR 125 000 in respect of the property agency fee payable, plus VAT and default interest until the date of full payment. That court granted PNC’s application by a judgment which became final.

Since the debtor failed to pay the amount thus owed by her, PNC brought before the same court an enforcement action seeking to recover the debt owed to it as recognised by that judgment, which amounted to EUR 170 859.62 in total.

The immovable property belonging to the debtor was made subject to attachment in order to secure payment of the amount due. The attached property was subsequently awarded to PNC for the amount of EUR 606 200, a sum which represented approximately 70% of that property’s market value. The property was awarded in exchange for the obligation on the part of PNC to pay to the enforcement agency the surplus — that is to say, the difference between the amount of the award and the value of the debt owed to PNC — plus enforcement costs, amounting to EUR 417 937.12 in total.

PNC transferred to Starplant — Unipessoal Lda (‘Starplant’) all the rights and obligations deriving from its position in the ongoing enforcement proceedings, in exchange for a payment by Starplant in the amount of EUR 351 619.90.

PNC entered in its accounts the amount of EUR 125 000 received in exchange for the services provided to the abovementioned principal and paid the amount of EUR 26 250, corresponding to the VAT payable in that regard. Secondly, it entered in its accounts an amount of EUR 200 369.90, recorded as ‘other unspecified income’, which corresponded to the remainder of the price paid by Starplant, an amount on which it paid no VAT.

The Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) issued VAT assessments to PNC in the total amount of EUR 83 647.77, after taking the view that the VAT return submitted by PNC for the period in question had not properly accounted for the assignment, for EUR 351 619.90, of the position held in the proceedings. In that regard, the Tax and Customs Authority took the view that that transaction was separate from that relating to the property agency fee and subject to VAT, since it constituted an assignment of a right for consideration by a taxable person acting as such, which fell within the concept of the supply of services and was not covered by any exemption provided for by the VAT Code.

The Supremo Tribunal Administrativo (Supreme Administrative Court) decided to refer the following questions to the Court of Justice for a preliminary ruling:

‘For the purposes of application of the exemption provided for in Article 135(1)(b) of [Directive 2006/112/EC], do the terms “granting”, “negotiation” and “management of credit” encompass the assignment for consideration to a third party of the positon held by a taxable person liable for VAT in enforcement proceedings for recovery of a debt, recognised by a judgment and resulting from the breach of a property agency agreement, plus VAT at the rate in force on the date of payment and the default interest already accrued or which may accrue until full payment?’


By its question, the referring court asks, in essence, whether Article 135(1)(b) of Directive 2006/112 must be interpreted as meaning that the exemption which it lays down for transactions concerning the granting, negotiation and management of credit applies to a transaction which, for the taxable person, consists in assigning, to a third party, for consideration its positon in enforcement proceedings for recovery of a debt.


The ECJ rules as follws:

The VAT exemption in respect of transactions concerning the granting, negotiation or management of credit does not apply to a transaction which, for the taxable person, consists in assigning, to a third party, for consideration all the rights and obligations deriving from the taxable person’s position in enforcement proceedings for recovery of a debt recognised by a judgment, a debt the payment of which was secured by a right over immovable property awarded to that taxable person and made the subject of attachment.


Deloitte article about this case (from a Dutch viewpoint) can be found here



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