On June 17, 2026, the European General Court (EGC) issued the judgment in the case T-184/25 (Veronsaajien oikeudenvalvontayksikkö).
Context: Reference for a preliminary ruling — Taxation — Common system of VAT — Exemptions — Article 135(1)(b) to (d) of Directive 2006/112/EC — Management of credits by the person who granted them — Assumption of commitments, guarantees and other securities and guarantees — Transactions, including negotiation, concerning deposits of funds, current accounts, payments, transfers, Debts, cheques and other negotiable instruments, with the exception of debt collection – Assignment of credits – Management services invoiced by the transferor to the assignee’
Facts & Background
- Facts: A bank (A Oy) sold mortgage loans to its subsidiary (B Oy) but continued to manage these loans for B Oy for a fee.
- Issue: The central question was whether these credit management services, provided by the original lender to the loan assignee, are exempt from VAT under EU law.
- Decision: The General Court ruled that these credit management services are not exempt from VAT.
- Argumentation (1): Strict Interpretation & Context: VAT exemptions are interpreted strictly. The exemption for “management of loans by the grantor” applies to the original lender-borrower relationship, not to services provided to a third-party assignee after the loans have been sold.
- Argumentation (2): Fiscal Neutrality & Objectives: Extending the exemption would violate fiscal neutrality, as similar services by other providers would be taxed. The objectives of VAT exemptions (like avoiding difficulties in determining taxable amounts) are not relevant when management services are separately invoiced between the transferor and transferee.
Articles in the EU VAT Directive 2006/112/EC
Articles 135(1)(b) and 135(1)(d) 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;
(d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;
Questions
- If a financial institution sells the credits it has granted to a customer to another financial institution and continues to manage those credits itself for a fee after they have been sold, must Article 135(1)(b) of the VAT Directive, which provides for the exemption of the management of credits by the person who granted them, be interpreted as also applying to a situation in which the first-mentioned undertaking continues to manage the credits it has granted and sold to that other financial institution?
- If the first question is answered in the negative and the management of credits by the first undertaking relates to credits serving as collateral for a bond issued by another financial institution, must Article 135(1)(c) of the VAT Directive, which provides for the exemption from entering into sureties and other security and guarantee obligations, be interpreted as also applying to a situation in which the first-mentioned undertaking manages credits serving as collateral for a bond issued by another financial institution?
- If the second question is answered in the negative, must Article 135(1)(d) of the VAT Directive, which provides for the exemption of transactions concerning debts, be interpreted as also applying to a situation in which the first-mentioned undertaking manages debts transferred to another financial institution?
AG Opinion
- (1) Article 135(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 the management of credit by an undertaking which sold that credit after having itself granted it and which continues to manage it for consideration for the purchaser is not covered by the exemption laid down in that provision.
- (2) Article 135(1)(c) of Directive 2006/112 must be interpreted as meaning that the management of credit by an undertaking which sold it and which continues to manage it for consideration for the purchaser, who has issued a bond secured by that credit, is not covered by the exemption laid down in that provision.
- (3) Article 135(1)(d) of Directive 2006/112 must be interpreted as meaning that the management of credit by an undertaking which sold that credit after having itself granted it and which continues to manage it for consideration for the purchaser is not covered by the exemption laid down in that provision.
Decision
(1) Article 135(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:
The exemption provided for in the Act for the servicing of credits does not apply to credit servicing services provided by the person who granted the loans, subsequently disposed of them and continues to manage them for consideration by the transferee.
(2) Article 135(1)(c) of Directive 2006/112
must be interpreted as meaning that:
The exemption provided for in the Act for the assumption of commitments, guarantees or other securities and guarantees shall not apply to credit servicing services provided by the person who granted such loans and relating to loans used as collateral for a bond issued by another financial institution, to which those loans have been assigned.
(3) Article 135(1)(d) of Directive 2006/112
must be interpreted as meaning that:
The exemption provided for in the Debt Transaction Act does not apply to credit servicing services provided by the person who granted the credit and relating to credit transferred to another financial institution.
Source
Recent case law cited
- C-491/13, Ben Alaya (Judgment of 10 September 2014): Cited for the general principle that in interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part. [1] [2] [3] [4]
- C-801/19, Franck (Judgment of 17 December 2020): Referenced to support the strict interpretation of VAT exemptions, as they constitute derogations from the general principle that VAT is to be levied on each supply of services. [5] [6] [7] [8]
- C-455/05, Velvet & Steel Immobilien (Judgment of 19 April 2007): Used to explain the purpose of the exemption for financial transactions, which is to overcome difficulties in determining the taxable amount and avoiding an increase in consumer credit costs. [9] [10] [11] [12] [13]
- C-540/09, Skandinaviska Enskilda Banken (Judgment of 10 March 2011): Also cited for the purpose of the financial transaction exemption, specifically regarding avoiding an increase in consumer credit costs. [14] [15] [16] [17] [18]
- C-5/17, DPAS (Judgment of 25 July 2018): This case is mentioned in relation to the objectives of the financial transaction exemptions. [19] [20] [21] [22] [23] [24]
- C-607/14, Bookit (Judgment of 26 May 2016): Cited to confirm that case-law relating to the Sixth VAT Directive remains relevant for interpreting equivalent provisions of the current VAT Directive. It also appears in the Advocate General’s opinion regarding the interpretation of Article 135(1)(d) concerning payments and transfers. [25] [26] [27] [28] [29] [30]
- C-419/14, WebMindLicenses (Judgment of 17 December 2015): Referenced for the principle of fiscal neutrality, stating that economic operators performing the same operations should not be treated differently for VAT purposes. [31] [32] [33] [34] [35]
- C-546/14, Degano Trasporti (Judgment of 7 April 2016): Also cited for the principle of fiscal neutrality. [36] [37] [38] [39] [40]
- C-427/23, Határ Diszkont (Judgment of 1 August 2025): This recent case is used to define the criteria for distinguishing an exempt transaction involving the transfer of funds from a non-exempt one, specifically whether it transfers ownership of funds or fulfills the essential functions of such a transfer. [41] [42] [43] [44] [45]
Other
- Roadtrip through ECJ Cases – Focus on ”Exemption – Financial transactions – Credits and transfer of Credits” (Art. 135(1)(b))
- Roadtrip through ECJ Cases – Focus on ”Exemption – Financial transactions – deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments” (Art. 135(1)(d))
- Join the Linkedin Group on ECJ/CJEU/General Court VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
Executive Summary
This briefing summarizes the General Court’s preliminary ruling concerning the Value Added Tax (VAT) treatment of credit management services provided by an original lender (grantor) to an assignee (purchaser) after the loans have been sold. The Court ruled that such services are not eligible for VAT exemption under any of the relevant provisions of Article 135(1)(b), (c), or (d) of Directive 2006/112/EC (the VAT Directive).
The judgment clarifies that the exemption for “management of loans by the grantor” (Art. 135(1)(b)) applies only to services within the original legal relationship between the lender and borrower, not to services provided by the original lender to a third-party assignee. This interpretation is grounded in the strict application of VAT exemptions, the context and objectives of the Directive, and the principle of fiscal neutrality, which precludes favoring outsourcing of management services to the original grantor over other third-party providers.
Background of the Case
The request for a preliminary ruling originated from the Supreme Administrative Court of Finland (Korkein hallinto-oikeus) in a dispute between the Finnish tax authorities and A Oy.
- Parties:A Oy: A financial institution (principal place of business of Bank X and representative of Group Y’s VAT group in Finland) that grants mortgage loans.
- B: A wholly-owned subsidiary of A Oy, but not part of the same VAT group. B does not originate loans but buys them from A Oy.
- Veronsaajien oikeudenvalvontayksikkö (Office for the Protection of the Rights of Recipients of Tax Revenue): Finnish tax authority.
- Business Model: A Oy grants mortgage loans and then sells a large portion of them to B at market price. All rights and obligations relating to these loans are transferred to B.
- Credit Management Services: Despite transferring the loans, A Oy remains responsible for their management. A provides comprehensive management services to B, including customer service, invoicing (drafts, interest, commissions), handling changes to credits, collection services, and making decisions (e.g., loan renewals). The content of these services is the same as A would provide if it retained the credits.
- Remuneration: A Oy invoices B for these services based on actual costs incurred plus an agreed profit margin.
- Initial Tax Ruling (Finland): A Finnish tax ruling stated that the sales of credits from A to B were VAT-exempt financial services. Crucially, it also found that the credit and guarantee servicing services provided by A to B were VAT-exempt as “management of credit by the creditor” or “by the person who granted them.” Collection services were deemed taxable.
- Dispute: The Finnish tax authorities challenged the exemption of the management services provided by A to B.
- Questions Referred to the General Court: The Finnish Supreme Administrative Court posed three questions to the General Court to clarify the interpretation of VAT exemptions under Article 135(1)(b), (c), and (d) of the VAT Directive in this specific scenario.
Legal Framework (Key Provisions of VAT Directive 2006/112/EC)
- Article 2(1)(c): Transactions subject to VAT include “the supply of services for consideration in the territory of a Member State by a taxable person acting as such.”
- Article 135(1): Exempts certain transactions.
- (b): “the granting and negotiation of loans and the management of loans by the grantor.”
- (c): “the negotiation and assumption of commitments, guarantees and other securities and guarantees and the management of credit guarantees by the person who granted the loans.”
- (d): “transactions, including negotiation, concerning deposits of funds, current accounts, payments, transfers, receivables, cheques and other negotiable instruments, with the exception of the recovery of debts.”
Court’s Analysis and Rationale
The Court meticulously analyzed each question, considering the wording of the Directive, its context, objectives, and the principle of fiscal neutrality.
1. First Question: Interpretation of Article 135(1)(b) – Management “by the grantor”
- The Question: Does the exemption for “the management of loans by the grantor” apply when the original grantor (A) sells the loans to an assignee (B) but continues to manage them for the assignee?
- Wording Ambiguity: The Court noted disparities in language versions of “by the person who granted them.” Some versions use past tense (e.g., French, Greek), suggesting the original lender. Others use present participle/indicative (e.g., English, Croatian), which could imply the current lender.
- Strict Interpretation of Exemptions: VAT exemptions are derogations from the general principle of VAT taxation and must be interpreted strictly, “provided that that interpretation does not deprive those exemptions of their effects, that it is consistent with the objectives pursued by those exemptions and that it complies with the requirements of the principle of fiscal neutrality” (Para 31).
- Context and Objective: The Court emphasized that Article 135(1)(b) links the exemption for management to the granting of credits. “This articulation indicates that the exemption provided for by this provision concerns the management of credits linked to the granting of these credits.” (Para 32). This implies the exemption applies to the “relationship between the credit grantor and the borrower and that it does not cover services provided outside that relationship.” (Para 32).
- Disappearance of Link: Once the initial lender assigns the credits to a third party, the management of these credits “is no longer part of the initial legal relationship that would entitle them to the benefit of the exemption, even though that management is materially carried out by the initial lender itself.” (Para 33). This activity becomes a service provided for consideration directly to the third-party assignee.
- No Favorable Treatment for Outsourcing: The EU legislature did not intend to “favour fiscally the outsourcing of such management to a third party.” (Para 34).
- Objectives of Financial Exemptions:Avoiding difficulties in determining taxable amount/deductible VAT: This objective is not relevant here, as A invoices B for a separate, clearly defined service based on actual costs and a profit margin, making determination straightforward. “In a situation such as that at issue in the main proceedings, in which the management of appropriations is the subject of a separate service invoiced by A to B on the basis of actual costs and an agreed profit margin, there are no such difficulties.” (Para 39).
- Avoiding an increase in the cost of consumer credit: A’s services are rendered to B, not directly to the borrowers. While indirect impact on borrowers’ costs cannot be ruled out, it’s not an automatic pass-through of VAT and depends on market factors. (Para 41-42).
- Fiscal Neutrality: To maintain fiscal neutrality, there should be no difference in VAT treatment for credit management services sold to an assignee, regardless of whether the provider is the original grantor or another third party. Since management by any other third party would be taxed, taxing the original grantor’s services to the assignee ensures neutrality.
- Conclusion (Q1): The exemption under Article 135(1)(b) does not apply to credit management services provided by the person who granted the loans, subsequently sold them, and continues to manage them for the transferee.
2. Second Question: Interpretation of Article 135(1)(c) – Assumption/Management of Guarantees
- The Question: If Q1 is negative, does the exemption for “the assumption of commitments, guarantees or other securities and guarantees” apply if A’s management services relate to loans serving as collateral for bonds issued by B?
- Nature of Services: The Court clarified that A’s credit management services for B are not an “assumption of commitments, guarantees or other securities and guarantees.” Managing credits that serve as collateral is distinct from assuming such guarantees.
- Preserving Article 135(1)(b)’s Scope: Applying Article 135(1)(c) to credit management would render the specific restriction of Article 135(1)(b) (management by the grantor) meaningless. “An application of Article 135(1)(c)… to credit management would deprive the restriction of the scope of the VAT exemption for credit management… of any practical effect.” (Para 51).
- Conclusion (Q2): The exemption under Article 135(1)(c) does not apply to credit management services provided by the person who granted the loans, even when those loans serve as collateral for bonds issued by the assignee.
3. Third Question: Interpretation of Article 135(1)(d) – Transactions Concerning Receivables
- The Question: If Q2 is negative, does the exemption for “transactions… concerning receivables” apply to A’s management of transferred receivables for B?
- Scope of Article 135(1)(d): Previous case law indicates that transactions under 135(1)(d) relate to financial transactions involving a “transfer of money” or having “the effect of fulfilling the specific and essential functions of such a transfer” (e.g., payment instruments).
- Nature of Services: A’s management services do not involve “a transfer of ownership of funds or have the effect of fulfilling the specific and essential functions of such a transfer.” (Para 57).
- Preserving Article 135(1)(b)’s Scope: As with Q2, applying Article 135(1)(d) to general credit management would undermine the specific limitations set out in Article 135(1)(b).
- Conclusion (Q3):
The exemption under Article 135(1)(d) does not apply to credit management services provided by the person who granted the loans and relating to loans transferred to another financial institution.
Ruling of the General Court
The General Court, therefore, ruled that:
- Article 135(1)(b) of Directive 2006/112/EC must be interpreted as meaning that the exemption it provides for the servicing of credits does not apply to credit servicing services provided by the person who granted the loans, subsequently disposed of them, and continues to manage them for consideration by the transferee.
- Article 135(1)(c) of Directive 2006/112/EC must be interpreted as meaning that the exemption it provides for the assumption of commitments, guarantees or other securities and guarantees does not apply to credit servicing services provided by the person who granted such loans and relating to loans used as collateral for a bond issued by another financial institution, to which those loans have been assigned.
- Article 135(1)(d) of Directive 2006/112/EC must be interpreted as meaning that the exemption it provides for transactions concerning receivables does not apply to credit servicing services provided by the person who granted the credit and relating to credit transferred to another financial institution.
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