Comments on T-184/25: Transfers of credit portfolios and VAT: AG puts credit management exemption under pressure

Opinion on VAT Exemption: Advocate General Maja Brkan concluded that the exemption for “the management of credit by the person granting it” under Article 135(1)(b) of the VAT Directive does not apply to banks servicing credit after its transfer. The original bank, no longer acting as the lender, provides a taxable service to the new lender instead.
Arguments for the Conclusion: Two main arguments support this stance: first, the principle of fiscal neutrality, which prevents VAT discrimination between different service providers; and second, the need to prevent abuse of the exemption by allowing historical credit grantors to circumvent VAT obligations. Additionally, other exemptions related to guarantees and claims were deemed inapplicable.
Implications for Financial Sector: This opinion may impact administrative practices in some Member States, particularly Belgium, where the original lenders often apply exemptions post-transfer. If the Court aligns with the Advocate General, it could impose VAT on servicing fees, increasing costs for financial institutions and affecting their profitability, highlighting the need for a VAT framework that better reflects modern financial market realities.

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VAT Exemption Not Applicable to Credit Management After Sale of Credits

The AG General Court concluded that VAT exemptions for financial services do not extend to the management of credits by a company (A Oy) that has sold those credits and continues to manage them for a fee, as determined by Advocate General Brkan.
A Oy, a Finnish bank, sold loans to its subsidiary (B Oy) but retained responsibility for managing those loans, receiving market-based remuneration for its management services.
The court found that VAT exemptions under Article 135(1)(b), (c), and (d) of the VAT Directive only apply when the taxpayer is both a lender and a credit manager, indicating that since A Oy is no longer the lender, the exemptions do not apply to its credit management services.