Strict interpretation of the VAT exemption for credit management
24 June 2026
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At a glance
The General Court of the European Union has ruled that when the loans are sold to another party, the original lender’s management of this credit cannot be treated as VAT‑exempt. Lenders, borrowers, and financial, investment, and securitization structures should consider the potential impact of this decision.
A closer look
On 17 June, the General Court of the European Union (GCEU) issued its decision in the “A Oy” case (T-184/25)1. The case concerned whether the management of a loan by the original lender can be VAT-exempt after the loan has been transferred to another party.
Background
A is a Finnish bank that grants property loans. It sells these loans, with all related rights and obligations, to its subsidiary B. However, after the sale, A continues to manage the loans.
The services provided by A include monitoring and depositing of the transferred loans, calculating rates, interest and commissions, making changes to the loan terms, and, if necessary, carrying out debt collection. A also takes decisions such as renewing a loan or extending the loan period.
The scope of A’s management activities for B is the same as if A had kept the loans on its own books.
A requested a ruling from the Finnish Central Tax Board which confirmed that the management services could be VAT-exempt. This decision was challenged and brought before the Finnish Supreme Administrative Court, which decided to refer the case to the GCEU.
The key element of the question
The key reason for raising the question is that different language versions of the EU VAT Directive are not fully consistent. Some versions refer to the “management of credit by the person that granted the loan,” while others refer to the “management of credit by the person that “is granting the loan.”
The versions using the past tense, which refer to the original lender, allow for a broader interpretation than the versions using the present tense, which refer to the current lender.
The GCEU’s decision
The GCEU held that the services provided by the original lender after they have sold the loans are not VAT‑exempt because they do not qualify as “management of credit by the person granting it”, “management of credit guarantees by the person that is granting the loan,” or “transactions regarding debt” under Article 135.1.b), c), and d) of the EU VAT Directive.
The GCEU emphasized that VAT exemptions must be interpreted strictly and that exempting the management of the credit by the original lender would create a distortion in comparison with the same services provided by a third-party.
It also specifically highlighted that the VAT exemption for “management services of credit by the person who is granting the credit” is covering only the relationship between the current lender and the borrower. In the “A Oy” case, the services were provided in the relationship between the initial lender and the current lender, so this condition was not satisfied.
Potential impact in Luxembourg
There is currently no official guideline on how “management of credit” should be interpreted for VAT purposes in Luxembourg.
However, it is important to note that Article 44.1.c), first and second indent, of the Luxembourg VAT Law exempts from VAT the services of management of credit and management of credit guarantees by the person “who granted” the credit. This wording follows the Dutch and French versions of the EU VAT Directive. By contrast, the English and German versions of the Directive have a slightly different wording, using the terms “by the person granting the credit.”
As mentioned above, the GCEU has adopted a strict interpretation limiting the exemption to services provided by the current lender while the wording of the Luxembourg VAT Law appears to allow a broader interpretation.
We could thus expect a narrowing of the scope of the exemption for management services of credit and the management of credit guarantees when these services are provided by the original lender. It is worth noting that when not exempt, these services could benefit from the intermediate rate of 14%, instead of the standard 17% rate.
Such loan structures may therefore generate additional VAT costs. In this context, securitization structures might consider whether they can rely on the fund management exemption under Article 44.1.d) of the Luxembourg VAT Law to mitigate the VAT impact.
The Deloitte Luxembourg Indirect Tax Team remains at your disposal to discuss the potential impact on your organization.
