Executive summary

On 17 June 2026, the General Court of the European Union (EGC) ruled in Case T-184/25: Veronsaajien oikeudenvalvontayksikkö v. A Oy (A Oy) that loan servicing arrangements fall outside the scope of the credit management exemption and should be subject to value-added tax (VAT). The ECG examined whether the VAT exemption for "management of credit" applied when a provider continues to service a loan it has sold. Following the earlier Advocate General's Opinion, the EGC confirmed that the exemption is not available in these circumstances.

Background

A Oy is a Finnish bank that provides loans and mortgages. It sells a large proportion of its loans immediately post-issue to B Oy, a group company, which uses the loans as security for its issue of bonds to investors. Although the sale results in all rights and obligations passing to B Oy, A Oy continues to manage those loans and associated securities, acting as a representative of B Oy. In return for its services, A Oy charges B Oy a separate fee.

The questions that the Finish Supreme Administrative Court referred to the EGC centered on whether A Oy's services could benefit from the VAT exemption for the "management of credit by the person granting it" (Principal VAT Directive (PVD) Art 135(1)(b)). Alternatively, the EGC was asked to consider whether those services could be exempt as dealing in credit guarantees or as a transaction concerning debts or payments (PVD Art 135(1)(c) and (d)).

Judgment

The EGC began its analysis by considering versions of the PVD in different languages. It noted that some referred to the person who "granted"the loan while others refer to the person "granting" it. Given a linguistic analysis could not provide a clear answer on the scope of the VAT exemption, the EGC moved on to consider the PVD's purpose, holding that:

• The PVD's provisions link the grant of the loan and its ongoing management, suggesting that the exemption should tie back only to charges within the original lender-borrower relationship.
• The VAT exemption for the management of credit was introduced to avoid difficulties in determining the tax base when a lender grants a VAT-exempt loan and charges fees connected with it but there is no such difficulty when standalone service fees are provided to a third party.
• The principle of fiscal neutrality should ensure that transactions provided by different taxpayers are not treated differently. An outsourced servicing arrangement would carry VAT and, accordingly, there should be no difference in VAT treatment because that service was provided by the original lender.

The EGC concluded that loan servicing arrangements fall outside the scope of the credit management exemption and should be subject to VAT. The EGC then briefly addressed the exemptions for credit guarantees and transactions involving debts, concluding that these exemptions are narrow and cannot cover services involving the management of credit.

Implications

Assuming European Tax Authorities implement this judgment in full, securitization companies and other special-purpose vehicles (SPVs) that acquire loans could face significant irrecoverable VAT costs.

The impact of this would need to be considered on a case-by-case basis, noting that the VAT treatment of loan services may depend on a number of commercial and legal factors (e.g., the status of the parties, their location and the precise nature of the underlying supplies as set out in underlying agreements). For example, an SPV may constitute a "special investment fund." in which case the management is VAT exempt. Alternatively, those loan services may be better viewed as part of a syndicated loan or something similar.

In the context of the United Kingdom (UK), it is not clear whether this will directly impact UK-only arrangements because His Majesty's Revenue and Customs (HMRC) is not required to follow European judgments as it did pre-Brexit. Under its current guidance, HMRC distinguishes between assignments and the outright sale of debt and has historically taken the view that the servicing can be exempt if the provider retains legal title to the loans post-assignment of the beneficial title.

It will be important to monitor how — and if — UK and European Tax Authorities respond to this development, which comes quickly after other loan-related cases (e.g., C-232/24(Kosmiro) that held debt-financing arrangements should be treated as taxable debt collection). In the meantime, businesses should consider reviewing their current arrangements to assess the potential impact should changes be introduced as a result of these cases.