EU Tribunal rules that VAT exemption for credit management by those who granted it does not apply after credit assignment

In Case T-184/25, the EU Tribunal (Second Chamber) delivered a preliminary ruling on the interpretation of Article 135(1)(b) to (d) of the VAT Directive 2006/112/EC. A Finnish bank (A) granted mortgage credits and subsequently sold them to its wholly-owned subsidiary (B), while continuing to manage the credits on behalf of B for a fee based on actual costs plus a profit margin. The Finnish tax authority challenged the VAT-exempt treatment of these management services. The Tribunal held that: (1) the VAT exemption for credit management under Article 135(1)(b) applies only within the creditor-borrower relationship and does not extend to management services provided to a third-party assignee after credit assignment; (2) such services do not qualify as “taking on commitments, guarantees or other securities” under Article 135(1)(c), even where the credits serve as collateral for bonds; and (3) the services do not constitute operations concerning debts under Article 135(1)(d), as they do not involve the transfer of ownership of funds. The ruling emphasises that the EU legislature did not intend to grant a fiscal advantage to the outsourcing of credit management.

Key takeaway / recommendation

Financial institutions that assign credits but retain management functions should review their VAT position. Post-assignment credit management services are now clearly taxable. Groups using intra-group credit transfers (e.g. for securitisation or covered bond structures) should assess the VAT cost of servicing arrangements and consider whether these costs can be mitigated through VAT grouping, other structuring options or available exemptions.

Reference

• EU Tribunal, Case T-184/25, ECLI:EU:T:2026:399, 17 June 2026