VAT treatment of loan management services 

The General Court of the European Union (“General Court”) has now rendered its judgment in the much anticipated case T‑184/25, addressing the VAT treatment of loan management services in securitisation structures. In its decision of 17 June 2026, the General Court confirmed the interpretation proposed by Advocate General Brkan and held that loan servicing performed by the originating lender, following the transfer of the underlying credit portfolio, does not qualify for VAT exemption.

1. Facts of the case

A Oy, a Finnish bank, grants residential mortgage loans and then sells most of these loans to its wholly owned subsidiary B Oy. All rights and obligations associated with the loans are transferred to B Oy, which uses them as collateral for its bond issuances. Despite the transfer, A Oy continues to manage the loans on B Oy’s behalf and receives market-based remuneration for this service.

The Finnish Central Tax Board held that both the sale of the loans and the loan management services provided by A Oy were exempt from VAT. The Board considered A Oy to remain “the person granting the credit,” except in relation to debt collection services, which remain taxable. Finland’s Tax Recipients’ Legal Services Unit challenged this view and argued that VAT exemption applies only where the same entity is both lender and loan manager, which was not the case after the sale of the loans.

2. The questions referred to the CJEU

The Supreme Administrative Court of Finland referred the matter to the Court of Justice of the European Union (“CJEU”). The CJEU was requested to clarify whether loan management services performed by the former lender fall within the scope of:

• Article 135(1)(b), which concerns the management of credit by the person granting it;
• Article 135(1)(c), which concerns dealings in credit guarantees or other securities; and
• Article 135(1)(d), which concerns transactions related to debts.

3. Opinion of AG Brkan

The opinion of Advocate General Brkan (“AG Opinion”) delivered on 25 February 2026 concluded that loan management services provided by an original lender after the sale of the underlying credit are not exempt from VAT under Article 135(1)(b), nor under points (c) or (d). This means that such services fall outside all relevant financial services exemptions when performed for consideration by a former, rather than the current, lender.

4. Judgement of the General Court

The General Court ultimately reached the same conclusion as the AG Opinion but did so on a notably narrower and more formalistic basis. While the AG Opinion relied extensively on legislative history and anti‑avoidance considerations, the General Court confined its reasoning to two core elements: the disappearance of the original lender‑borrower relationship following the transfer of the loans and the fact that loan management services are separately remunerated, thereby removing any justification for VAT exemption.

In particular, the General Court did not engage with the Advocate General’s broader policy arguments or with her justification for limiting the exemption to the current lender. Instead, it focused on the wording of Article 135(1)(b), interpreting “management of credit by the person granting it” as covering only services performed within an existing credit relationship. Once that relationship is terminated through an outright transfer, any continued servicing is treated as a distinct taxable supply to the assignee.

On that basis, the General Court held that loan management services provided by the originating lender after the sale of the underlying loans do not fall within the VAT exemption under Article 135(1)(b), nor can they qualify under Article 135(1)(c) or (d). As a result, such servicing activities are, in principle, subject to VAT when supplied for consideration to the acquirer of the loans.

Overall, while the outcome aligns with the AG Opinion, the judgment leaves certain conceptual and practical questions open, in particular where the underlying legal relationship with the borrower is not fully transferred.

5. What does the ruling mean for businesses?

In light of the General Court’s judgment, it is now clear that loan management services performed by an originating lender after the transfer of the underlying credit portfolios do not qualify for VAT exemption under any limb of Article 135(1) of the VAT Directive. As a result, businesses relying on servicing fee models within securitisation or intra‑group financing structures may face increased VAT exposure, with servicing fees potentially becoming a real cost where input VAT is not recoverable.

Against this background, companies may wish to proactively assess the implications for their existing structures, revisit contractual arrangements and consider alternative operating models. The Wolf Theiss tax team stands ready to assist by analysing the impact on current frameworks, advising on risk mitigation strategies and supporting the development of VAT‑efficient solutions in light of the evolving case law.