Summary
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The European Commission has opened infringement case INFR(2026)4020 against Germany, alleging that German VAT legislation does not correctly implement the exemptions for credit management by the lender and credit-guarantee management by the credit grantor under Article 135(1)(b) and (c) of the VAT Directive.
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The Commission considers that the restricted scope of the German exemption results in VAT being charged on services that EU law requires to be exempt. The stated concern particularly affects services supplied by syndicate leaders in open syndicated loan arrangements, potentially influencing pricing, VAT recovery and contractual allocation.
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Germany has two months to respond to the letter of formal notice and remedy the alleged shortcomings. This is the initial formal stage of the EU infringement process. The Commission may subsequently issue a reasoned opinion, but the action does not itself amend German law or determine taxpayer claims.
Article
The European Commission has opened infringement proceedings against Germany concerning the VAT treatment of credit management and credit-guarantee management services. In case INFR(2026)4020, the Commission alleges that German VAT law does not fully transpose or apply the exemptions required by Article 135(1)(b) and (c) of Council Directive 2006/112/EC.
Article 135 forms part of the VAT Directive’s exemptions for financial transactions. Article 135(1)(b) covers the granting and negotiation of credit and the management of credit by the person granting it. Article 135(1)(c) covers the negotiation of credit guarantees or other security for money and the management of credit guarantees by the person granting the credit. The current consolidated VAT Directive remains the controlling EU legislative source for assessing the scope of these exemptions. [eur-lex.europa.eu]
The Commission considers that the corresponding German provisions do not exempt all services falling within these categories. According to the infringement notice, one consequence is that certain services provided by syndicate leaders in open syndicated loans are subjected to German VAT even though, in the Commission’s view, EU law requires them to be exempt.
The issue may be commercially important for banks, financial institutions, corporate lenders and borrowers participating in syndicated lending structures. If fees currently treated as taxable fall within the exemption, the VAT cost for borrowers without full input tax recovery could change. Conversely, exemption may restrict the lender’s recovery of input VAT attributable to the relevant services. The ultimate financial effect therefore depends on the contractual arrangements, the parties’ recovery position and how the services are characterised.
Businesses should not assume that the letter of formal notice automatically changes the German VAT treatment. An infringement procedure concerns Germany’s compliance with EU law and does not, at this stage, constitute a judgment of the Court of Justice. Germany has two months to respond and may amend its legislation or administrative practice, challenge the Commission’s interpretation, or provide further justification.
Affected businesses should identify relevant credit-management and guarantee-management fees, review contractual descriptions against the services actually performed, and consider whether open assessments or protective claims may need attention. Any action should take account of national procedural rules and limitation periods.
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