ECJ State Aid C-360/25 (X) – Questions – Legal Validity of the Bank-to-Bank VAT Exemption

The ECJ released the Request for a preliminary ruling in the case C-360/25 (X)

Article in the EU VAT Directive

Article 135(1)(d) of the VAT Directive 2066/112/EC.

1. Member States shall exempt the following transactions:
(d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;

Summary

Preliminary Ruling Request: The Bundesfinanzgericht (Federal Finance Court) of Austria has referred a question to the Court of Justice of the European Union (CJEU) regarding whether a VAT exemption for services provided by banks constitutes State aid under Article 107(1) TFEU.
Background of the Case: The applicant, an Austrian bank (X), is appealing against VAT assessments for the years 2013 to 2017, specifically challenging the classification of certain cross-border services related to ATMs and the application of the bank-to-bank exemption.
Key Legal Issues: The court examines whether the bank-to-bank exemption, which allows VAT exemption for services between banking entities, has a legal basis in EU law, as it may result in State aid by favoring certain undertakings and affecting competition.
State Aid Criteria: The court outlines that the exemption must be assessed for four criteria: state intervention, effect on trade between Member States, advantage to the recipient, and potential distortion of competition.
Prioritization of the Ruling: The Federal Finance Court believes that the request for a preliminary ruling should be prioritized, as there are no new substantive developments compared to previous proceedings, and a prompt ruling could prevent the time-barring of any claims by the European Commission.

Facts

Parties Involved: The applicant is X, an Austrian bank, which is also the controlling company of an Austrian VAT group. The defendant authority is the Finanzamt für Großbetriebe (Tax authority for large traders) in Austria.
Context of the Case: The case arises from a VAT assessment concerning the years 2013 to 2017. Following a field audit, the Finanzamt für Großbetriebe issued tax assessment notices based on an audit report that found certain cross-border services related to ATMs did not qualify for the VAT exemption under Paragraph 6(1)(8)(e) of the Umsatzsteuergesetz 1994 (UStG 1994).
VAT Exemption Dispute: X had applied the bank-to-bank exemption for exempt transactions as stipulated in the last sentence of Paragraph 6(1)(28) of the UStG 1994. This exemption allows for VAT-free services rendered between undertakings involved in banking, insurance, or pension fund transactions, provided those services are directly used to conduct exempt transactions.
Audit Findings: The tax authority assessed VAT on certain services, asserting that they did not meet the criteria for the bank-to-bank exemption. Consequently, X challenged the classification of these services as taxable within Austria.
Legal Basis of the Exemption: The Federal Finance Court must determine whether the bank-to-bank exemption, which has no clear basis in EU law, constitutes State aid under Article 107(1) TFEU. The exemption has been a subject of recent legislative amendments, indicating concerns about its compatibility with EU regulations.
Implications for Compliance: The Federal Finance Court is required to examine the legality of the application of this exemption, even if it is not disputed between the parties, to ensure alignment with EU law and the VAT Directive.

Question

State Aid Classification: Does the VAT exemption provided under the last sentence of Paragraph 6(1)(28) of the Umsatzsteuergesetz 1994 (UStG 1994) constitute State aid within the meaning of Article 107(1) TFEU?
Legal Basis for Exemption: Is the bank-to-bank exemption, which allows for VAT-exempt services between banking entities, legally valid under EU law, given that it has no explicit basis in the VAT Directive?
Impact on Trade and Competition: Does the application of the bank-to-bank exemption affect trade between Member States and potentially distort competition, as required for defining State aid under Article 107(1) TFEU?
Implications of Legislative Amendments: How do recent legislative changes regarding the VAT exemption impact its application for the years in question (2013 to 2017), and does the absence of a retroactive effect of these amendments influence the current dispute?
Scope of Review by the National Court: What is the extent of the Federal Finance Court’s obligation to scrutinize the bank-to-bank exemption, even if its applicability is not contested by the parties involved in the proceedings?

Source Curia