Comments on European Court T-184/25: Post-Securitisation Credit Management Is Taxable

Veronsaajien oikeudenvalvontayksikkö (T-184/25) – ECJ: Post-Transfer Credit Management Services Not Exempt from VAT

The European Court of Justice ruled that credit management services performed by the original lender after the underlying loans have been transferred to another entity do not qualify for the VAT exemption in Article 135(1)(b) of the VAT Directive. Once the lender transfers the credit portfolio, the original lender-borrower relationship ends for VAT purposes. Any subsequent loan administration services supplied to the purchaser of the loans constitute a separate taxable supply, even if the original lender continues to manage the loans and related securities.
The Court also rejected the argument that the services could benefit from VAT exemptions relating to credit guarantees, securities, or transactions concerning debts under Articles 135(1)(c) and 135(1)(d). The management of a credit portfolio is distinct from the negotiation or management of credit guarantees and does not involve carrying out transactions that transfer funds or perform the essential functions of payments, transfers, or dealings in debts as required by those provisions.
The judgment confirms a strict interpretation of VAT exemptions for financial services and narrows the scope of exempt credit management activities. Credit management qualifies for exemption only when carried out by the person currently granting the credit within the original lending relationship. Outsourced or post-transfer servicing arrangements, even within the same corporate group, remain subject to VAT, resulting in a loss for the taxpayer and providing important guidance for securitisation, mortgage funding, and loan servicing structures across the EU.

Source KPMG

The General Court held that where a lender transfers its loan portfolio to another entity but continues to service the loans for a fee, those servicing activities constitute a separate taxable supply to the new loan owner. The exemption for the management of credit under Article 135(1)(b) of the VAT Directive is limited to services provided within the direct lender–borrower relationship and does not extend to post-transfer servicing arrangements. The judgment is expected to have significant implications for securitisation transactions, covered bond programmes and outsourced loan servicing structures across the EU.

Once loans are transferred to another entity, the original lender’s servicing activities constitute a separate taxable supply.
The exemption under Article 135(1)(b) of the VAT Directive for the management of credit applies only within the direct lender–borrower relationship.
Other exemptions, such as those relating to guarantees or debt collection, cannot be relied upon to preserve the VAT exemption after the transfer of the loans.