ECJ tightens the scope of the VAT exemption for credit management

On 17 June 2026, the European Court of Justice released its decision in a Finnish referral (T-184/25 - Veronsaajien oikeudenvalvontayksikkö). The case relates to the loan servicing provided by the original lender to the party which purchases those loans.
 

The case in brief

Company A granted property loans to customers and subsequently sold those loans to its subsidiary, B.  Post-transfer all rights and obligations relating to the loans are transferred with the loans to B. Although ownership of the loans was transferred, A continued to provide management services in respect of those loans for B, including customer service, calculating interest, making amendments, and in some cases debt collection. These services were invoiced by A to B based on costs plus a margin. 

The core issue was whether the continued management of credit by the original lender after transferring the loans qualifies for the VAT exemption as “management of credit by the person granting it” under Article 135(1)(b) VAT Directive (article 44, §3, 5° of the Belgian VAT Code). The questions for the Court also sought clarification on whether the services could fall under the VAT exemption for dealing in credit guarantees or other security for money under Article 135(1)(c) or under the VAT exemption for transactions concerning debts under Article 135(1)(d).

In its judgment, the Court focused on the intention and purpose of the legislation, holding that: 

• The language of the VAT Directive links the grant of the loan and its ongoing management, suggesting that the exemption is tied back to charges within the lender-borrower relationship only; 
• The VAT exemption for the management of credit was introduced to avoid difficulties in determining the tax base where a lender grants a VAT exempt loan and also charges services connected with it: no such difficulty arises where standalone service fees are provided to a third party; and 
• The principle of fiscal neutrality should ensure that transactions provided by different taxpayers are not treated differently. If the management had been outsourced to a third party, VAT would have been due and, accordingly, there should be no difference in VAT treatment because the management service was provided by the original lender. 

The Court rejected the application of the VAT exemptions laid down in Article 135(1)(c) and Article 135(1)(d).  These are narrow exemptions which are only relevant where they directly relate to specific guarantees or a transfer of debt.  They do not, therefore, apply to a broader service characterized as the management of underlying loans. Accordingly, the Court ruled that none of the exemptions under Article 135(1)(b), (c), or (d) apply to services consisting of the management of a credit provided by the original lender after the credit has been transferred to another entity. These services are therefore subject to VAT.
 

Impact of the judgement

The latest decision reinforces the strict interpretation of VAT exemptions and the principle of fiscal neutrality, confirming that the exemption for credit management services cannot be extended beyond its intended limits.  This judgment could have a significant impact for securitisations and other alternative asset-based lending arrangements although it also leaves certain questions open. In the case, all rights and obligations relating to the loans were transferred. It could be questioned whether the outcome would have been the same if this would not have been the case. It could also be questioned whether the VAT exemption would remain applicable if not only the loan itself but also the management of the loan would have been transferred to the same party.
 

Current Belgian position

In a Circular Letter of 2018, the Belgian VAT authorities have explicitly confirmed that the VAT exemption can be applied on credit management carried out by the initial lender, even if the loan has in the meantime been transferred to another party. Credit management outsourced to a third party that did not grant the loan is not VAT exempt. The current Belgian position thus applies a broader interpretation of the VAT exemption than the position taken by the European Court of Justice. So far, the Belgian authorities have not yet commented whether they will revisit their current view as a result of this European judgment.
 

Recommended actions

It is recommended to review your lending arrangements and to assess whether this recent case may impact on the VAT treatment that is currently being applied.

Our experts remain available to assist with this review and to assess the related VAT consequences, potential risks and actions to be taken.