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Flashback on ECJ Cases – C-453/05 (Ludwig) – Concept of “credit intermediation acts”

On June 21, 2007, the ECJ issued its decision in the case C-453/05 (Ludwig).

Context: Sixth Directive – VAT – Concept of transactions consisting in ‘the negotiation of credit’

Article in the EU VAT Directive

Article 13(B)(d)(1) of the Sixth VAT Directive (Article 135(1)(b) of the EU VAT Directive 2006/112/EC).

Article 135
1. Member States shall exempt the following transactions:
(b) the granting and the negotiation of credit and the management of credit by the person granting it;


  • The applicant in the main proceedings is by profession a self-employed financial adviser and acts on behalf of Deutsche Vermögensberatung AG (‘DVAG’) on the basis of a commercial agency agreement.
  • Through the intermediary of its subagent acting in the capacity of financial adviser, DVAG makes available to private persons a range of financial products, such as credit facilities, in respect of which the general conditions have been defined in advance with the lending financial institutions (‘the lenders’).
  • To that end, the financial adviser canvasses potential clients in the name of DVAG, in order to invite them to an interview, the purpose of which is to review their financial situation and to determine their possible investment needs.
  • Following an analysis of the financial situation of a person thus contacted, conducted with the assistance of a computer software programme provided by DVAG, the financial adviser proposes to that person those financial products appropriate to his needs.
  • If the person indicates that he is in favour of a credit, the adviser prepares a firm contractual offer which is sent, after signature by the client, to the DVAG, which checks that it meets the necessary legal conditions. DVAG sends the contractual offer to the lender which is free to accept or reject it, or to amend its terms.
  • If a contract is concluded, DVAG is rewarded by the lender with a commission. DVAG then pays to the financial adviser – in his capacity as subagent, and in return for his role in the conclusion of the contract – a commission, the amount of which depends on the terms of the commercial agency agreement. The client, for his part, does not pay any commission, either to DVAG or to the adviser.
  • The financial adviser is responsible for following up relations with his clients after the conclusion of each credit agreement.
  • Pursuant to those procedures, Mr Ludwig – in his capacity as subagent – received from DVAG a net commission in the amount of EUR 267, after contributing to the conclusion of a credit agreement during the first quarter of 2005. On the view that the transaction concluded by him, which also gave rise to payment of the commission, is exempt from VAT pursuant to Article 13B(d)(1) of the Sixth Directive, Mr Ludwig contests before the Finanzgericht des Landes Brandenburg (Finance Court of the Land of Brandenburg) the application of VAT at the rate of 16% by the German tax administration.


1.    Is there negotiation within the meaning of Article 13B(d)(1) 1 of Directive 77/388/EEC, when a taxable person, in some circumstances represented by a subagent, negotiates credit for clients canvassed by it from various providers, with which it has previously negotiated general terms and conditions for its clients and from which it receives a commission for the negotiation of a product, even if, in the process, it investigates and analyses the financial situation of clients and their personal and financial needs, or is that service a dependent service ancillary to the principal service, which is a financial service not covered by Article 13B(1)(d)?
2.    Is it a precondition of the turnover tax exemption in respect of negotiation of credit under Article 13B(d)(1) of Directive 77/388/EEC that
(a)    there is a direct contractual relationship between the negotiator, on the one hand, and the borrower and/or the lender on the other, and
(b)    the negotiator establishes contact not only with the borrower, but also with the lender, and himself negotiates the details of the contract with the latter,
or does the tax exemption also cover commission payments received by a taxable person from a main agent (for which he works as a subagent and in whose name he acts vis-à-vis its clients) in return for those clients entering into credit agreements with providers indicated by him, but without the subagent establishing contact with the lender?

AG Opinion



1. The fact that a taxable person analyses the financial situation of clients canvassed by him with a view to obtaining credit for them does not preclude recognition of the service supplied as being a negotiation of credit which is exempt under Article 13B(d)(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, if, in the light of the foregoing interpretative criteria, the negotiation of credit offered by that taxable person falls to be considered as the principal service to which the provision of financial advice is ancillary, in such a way that the latter shares the same tax treatment as the former. It is for the national court to determine whether that is the case in the proceedings before it.

2. The fact that the taxable person has no contractual link with any of the parties to a credit agreement to the conclusion of which he has contributed and that he does not establish direct contact with one of those parties does not preclude that taxable person from providing a service of negotiation of credit which is exempt under Article 13B(d)(1) of Sixth Directive 77/388.

Personal comments/VATupdate 

The fact that a taxpayer analyzes the financial situation of clients it has acquired in order to provide them with credit does not preclude recognition of an exempt credit intermediation service if, in the light of the foregoing explanation, the credit intermediation service offered by this taxpayer must be regarded as the main service, whereby the asset advice is an additional service, so that the latter service shares the tax fate of the main service.

The fact that a taxpayer does not have a contractual relationship with any of the parties to a credit agreement to which he has contributed and does not come into direct contact with one of those parties does not preclude that taxpayer from using an exempt credit intermediation service conducted.


Similar ECJ cases

Reference to the case the EU Member States (+ UK)


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