Comments on ECJ C-360/25: Austrian VAT exemption for banking services constitutes State aid

State aid confirmed: The Court of Justice held that Austria’s VAT exemption for services supplied between entities mainly engaged in banking, insurance, or pension fund activities constitutes State aid. The exemption provides an economic advantage to eligible undertakings by reducing irrecoverable VAT costs and therefore confers a benefit not available under ordinary VAT rules.
Selective advantage identified: The Court found that the exemption satisfies the selectivity criterion, a key element of State aid analysis. By benefiting only a specific category of financial-sector businesses rather than all taxable persons in a comparable legal and factual situation, the measure departs from the normal tax system and grants preferential treatment.
No limitation of effects: The Court rejected requests to restrict the temporal effects of its judgment. As a result, the ruling applies without limitation, potentially affecting past and future application of the Austrian exemption. The judgment reinforces that sector-specific VAT advantages may fall within EU State aid rules even when embedded in tax legislation.

ECJ State Aid C-360/25 (X) – Judgment – National VAT Exemption Without Directive Basis Constitutes Unlawful State Aid – VATupdate

On 9 July 2026, the Court of Justice delivered its judgment in Case C-360/25 (Schoger II), on an Austrian VAT exemption for otherwise non-exempt services supplied between undertakings mainly active in the banking, insurance or pension-fund sectors. Following a referral from the Austrian Federal Finance Court, the Court held that such an exemption constitutes State aid within the meaning of Article 107(1) TFEU, because it went beyond what the EU VAT rules required. [claytonsegura.com], [vatupdate.com]
The Court found the measure imputable to Austria—not the EU—because it did not merely reproduce a clear, precise obligation in the VAT Directive (Article 135). All Article 107(1) conditions were met: a loss of State resources through foregone tax revenue, a selective and unjustified advantage to certain financial-sector undertakings, and a measure liable to distort competition and affect trade between Member States. Austria itself repealed the exemption with effect from 1 January 2025. [claytonsegura.com], [vatupdate.com]
Critically, the Court refused to limit the judgment’s temporal effects, meaning Austrian banks, insurers and pension funds may face VAT reassessments for any tax periods not yet definitively closed under national law. The ruling has wider significance: it confirms that national VAT exemptions going beyond the harmonised VAT Directive framework and conferring a selective advantage can fall within EU State aid rules—an important warning for sector-specific exemptions across Member States. [vatabout.com], [claytonsegura.com]