ECJ C-535/24 (Svilosa) – Judgment – Acts by a creditor to recover debt without debtor’s mandate aren’t classified as ‘supply of services’

On October 2, 2025, the ECJ issued the judgment in the case C-535/24 (Svilosa) (not yet available in English)

Context: Reference for a preliminary ruling — Taxation — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 2(1)(c) — Supply of services for consideration — Article 24(1) — Supply of services — Article 26(1)(b) — Supply of services free of charge equivalent to the supply of services for consideration — Recovery of debt — Recovery of debts from other

Summary

Background: Svilosa AD, a Bulgarian company, faced a tax adjustment for allegedly providing services free of charge while recovering debts related to a loan to the “Mir za teb, mir za men” foundation.
Legal Question: The court sought clarification on whether debt recovery actions by a creditor without the debtor’s mandate constitute a “supply of services for consideration” under EU VAT law.
Court Decision: The Court ruled that such recovery actions do not qualify as a “supply of services for consideration” since there was no reciprocal legal relationship or mandate from the debtor.
Justification: The Court emphasized the necessity of a direct link between services provided and consideration received, which was absent in this case, thus aligning with the uniform application of VAT principles across the EU.
Implications: This ruling affirms that actions taken by creditors to recover debts, lacking a mandate from debtors, do not fall under the VAT taxable service category, ensuring clarity in VAT law interpretation.

Article in the EU VAT Directive

Articles 24(1) and 26(1)(b) of the EU VAT Directive 2006/112/EC.

Article 24
1. ‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.

Article 26
1. Each of the following transactions shall be treated as a supply of services for consideration:
(b) the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.

Facts

Svilosa, a Bulgarian holding company, underwent a tax audit covering VAT periods from December 2016 to December 2020. The audit revealed that Svilosa had claimed input VAT for legal services from U.S. law firms related to recovering costs from a loan made to the “Mir za teb, mir za men” Foundation, intended for a concert for war-affected children. However, the loan was not directly transferred to the Foundation but instead to others organizing the concert, which ultimately did not occur.

Following the audit, the Bulgarian National Revenue Agency issued a tax assessment requiring Svilosa to pay approximately BGN 517,976 (around EUR 260,000) in VAT, asserting that Svilosa provided services to the Foundation without compensation. Svilosa contested this decision in the Veliko Tarnovo Administrative Court, which noted that the Foundation had appointed a personal representative, not Svilosa, and that Svilosa had paid the law firms directly.

The court acknowledged that while the legal services benefited both the Foundation and Svilosa, it questioned whether Svilosa’s actions constituted a supply of services. It highlighted two interpretations under Bulgarian law: one as an indirect claim by a creditor to recover debts, and the other as managing a third party’s affairs for its own interest. The court expressed uncertainty about the application of VAT Directive concepts in this context, particularly regarding the necessary declarations of intent for a supply of services to exist.

Questions

Does the concept of “service” within the meaning of Article 24(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value-added tax, or the expression “the supply of services for no consideration” within the meaning of Article 26(b) of the Directive, include legal acts or factual actions performed without an assignment or authorization by a person registered for the purposes of the common VAT system, which are directly aimed at the collection of a claim in favor of a third party and indirectly at the satisfaction of the receivable of the acting registered person from the person in whose direct interest the relevant actions are performed?

AG Opinion

None

Decision

Article 2(1)(c) and Article 26(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as meaning that actions taken by a creditor to recover a debt where those actions were taken without authority or mandate from the debtor may not be classified as a ‘supply of services for consideration’ and are not to be treated in the same way as that concept for the purposes of those provisions.

Source

Curia

ECJ Cases referred to

C-35/20: A (Franchissement de frontières) — This case addresses the proportionality of Finnish fines imposed for crossing borders without valid travel documents. The Court found the fines disproportionate to the minor offense, setting EU principles of proportionality in sanctions under criminal and administrative law.
C-249/22: GIS — This case clarifies that a supply of services for consideration under VAT law requires a direct link between the service rendered and the payment received.
C-607/20: GE Aircraft Engine Services — Deals with VAT treatment of free-of-charge services to ensure equal treatment of private use services and consumer services.
C-653/11: Newey — Provides guidance on the definition of taxable transactions under the VAT Directive, emphasizing EU-wide uniform interpretation independent of national civil law variations.