A bank grants mortgage loans and shortly afterwards sells them to another group company, while continuing to handle the day-to-day management of those loans for a fee. Does that management remain VAT-exempt because it is still performed by the bank that originally granted the credit? 

On 17 June 2026, the General Court answered that question in Case T-184/25, Veronsaajien oikeudenvalvontayksikkö v A Oy, on the credit-management exemption in Article 135(1)(b) of the VAT Directive. The judgment follows the Opinion delivered by Advocate General Maja Brkan on 25  February 2026 and reaches the same conclusion on all three questions. 

Facts and circumstances 

A Oy ("A") is the Finnish head establishment of a bank and the representative member of a VAT  group whose activities are primarily VAT-exempt financial and insurance services. B Oy ("B") is a wholly owned subsidiary of A, but the two are not part of the same VAT group.

A grants mortgage loans and sells a large proportion of them to B at market value, generally on the day the loan is drawn down, before any interest has accrued, so the price corresponds to the loan's nominal value. Upon transfer, all rights and obligations pass to B without any involvement of the borrower. B does not originate loans itself and plays no role in customer acquisition,  customer service, or managing the acquired loans. 

Despite the transfer, A continues to manage the loans throughout their term: it handles the relationship with borrowers on B's behalf, invoices repayments, interest and fees, processes amendments, and decides on refinancing or extending a loan's term, much as it would if the loans had remained on its own books. Most transferred loans, at some point, serve as security for covered bonds issued by B. For its management services, A charges B a separate fee based on actual monthly costs plus an agreed profit margin. A asked the Finnish Central Tax Board for an advance ruling on the VAT treatment of the loan sales and the related management services. 

The dispute and the questions referred 

The Central Tax Board ruled that the sale of the loans to B was a VAT-exempt financial service, that  debt-collection services were taxable, and that the management services for the transferred  loans and related security were exempt because they were still performed by "the person who  granted the credit." The Finnish tax authority challenged that last finding, arguing the exemption requires the taxable person to be both lender and manager, since A was no longer the lender once the loans had been sold. 

Uncertain how Article 135(1)(b) should be read here, the Finnish Supreme Administrative Court referred three questions, in the alternative: does the exemption for management "by the person granting" the credit still apply where the original lender sells the loans but keeps managing them for the purchaser, for a fee? If not, can the same services instead fall under Article 135(1)(c), given that the managed loans serve as security for bonds issued by the purchaser? If not, can they qualify as exempt transactions concerning debts under Article 135(1)(d)? 

Legal framework 

Article 2(1)(c) of the VAT Directive lays down the general rule that services supplied for consideration within a Member State by a taxable person acting as such are subject to VAT. Article  135(1) then carves out a series of exemptions for financial transactions, three of which are relevant here. Article 135(1)(b) exempts "the granting and the negotiation of credit and the management of credit  by the person granting it." Article 135(1)(c) exempts, among other things, dealings in guarantees and other security for money, together with the management of credit guarantees by the person granting the credit. Article 135(1)(d) exempts certain transactions concerning deposits, current accounts, payments, transfers, debts, cheques and other negotiable instruments, but expressly excludes debt collection. 

These exemptions date back essentially unchanged to the Sixth VAT Directive of 1977, so the  Court's earlier case law under that instrument remains relevant. As exceptions to the general rule that services are taxable, their terms must be interpreted strictly, though not so strictly as to deprive them of their intended effect, and always consistently with their objectives and with fiscal neutrality, under which comparable operators should not be treated differently for VAT purposes merely because of who they are.

The financial-transaction exemptions are generally understood to serve two purposes: avoiding the practical difficulty of isolating the taxable amount within transactions that are often bundled together, and preventing VAT from inflating the cost of credit for borrowers. Both matter here,  because the wording of Article 135(1)(b), exempting management "by the person granting" the credit, does not say whether it still applies once the original lender has sold the loan on. That gap is what the General Court had to resolve. 

The judgment of the General Court 

The wording alone did not settle the matter. Comparing language versions, the Court found a genuine split: the Dutch, French and Greek texts use a past-tense construction pointing to the original lender, while others, including the English "the person granting it", can equally be read as referring to whoever presently holds lender status. The German and Finnish versions could bear either meaning, so the Court turned to context and purpose. 

Structurally, Article 135(1)(b) exempts both the granting of credit and its management "by the person granting it" in the same breath, which, in the Court's reading, ties the management exemption to the granting relationship, covering services performed within the relationship between lender and borrower, not outside it. Once the original lender transfers its claims to a third party, subsequent management no longer forms part of that original relationship, even where performed in the same way as before. After the transfer, A was managing the loans for B,  against separate remuneration: a service supplied directly to the purchaser, not a continuation of the original lender-borrower relationship that gave rise to the exemption. 

The Court checked this reading against the exemption's underlying objectives and found nothing to displace it. On easing the difficulty of isolating the taxable amount, there was none here: A invoiced B separately for management, on actual costs plus a margin, unlike the lender–borrower relationship where consideration for credit and its management can be hard to disentangle. On avoiding higher credit costs for consumers, A supplied its services to B, not the borrowers, so any  VAT cost would at most reach borrowers indirectly, depending on loan terms, commercial strategy and competition, not automatically. 

Fiscal neutrality reinforced the same conclusion. Had B engaged an unrelated third party to manage the acquired loans, those services would plainly be taxable. The Court saw no reason why the outcome should differ merely because B kept the servicing with A, the entity that had originated the loans: making VAT treatment turn on the servicer's history, rather than the substance of the service, would treat identical management services differently depending on 

who provides them, precisely what neutrality is meant to prevent. Article 135(1)(b) therefore did not apply. 

No shelter under Articles 135(1)(c) or (d) 

The Court closed off the two alternative routes on similarly structural grounds. Managing loans that happen to serve as security for bonds is not the same as entering into a guarantee or security obligation, and reading Article 135(1)(c) to cover credit management too would strip the narrower wording of Article 135(1)(b) of its effect. Article 135(1)(d) fared no better: drawing on Határ Diszkont (C-427/23), the Court reiterated that transactions falling within that provision are characterised by an actual or potential transfer of ownership of funds, or by performing the functions characteristic and essential to such a transfer, and nothing indicated A's activities did either. In both cases, allowing the broader provision to cover credit management would circumvent the limits Article 135(1)(b) deliberately imposes. 

On all three questions, the General Court ruled against the exemption. None of Article 135(1)(b),  (c) or (d) covers loan-management services provided by the original lender to the purchaser once the underlying credit has been transferred. A's continued management of the transferred loans is therefore a separate, taxable service supplied to B. 

What this means in practice 

The judgment matters most for securitisation and similar loan-transfer structures, where the originator commonly keeps servicing the portfolio after selling it on. Operationally, very little changes at the point of transfer: the same institution keeps dealing with borrowers, collecting repayments and handling amendments. For VAT purposes, however, the transfer can change everything: activities that were part of an exempt lender–borrower relationship before the sale can become a separate, taxable B2B servicing arrangement afterwards. 

That shift carries a real cost. An acquiring entity in a securitisation structure typically carries out exempt financial transactions itself and often has little or no right to deduct input VAT, so VAT  charged on the servicing fee tends to become an irrecoverable cost for the group.

The judgment is also a reminder that the financial-services exemptions cannot be read by reference to a service's subject matter alone: that a service relates to a loan, a debt, or an asset pledged as security does not by itself bring it within an exemption; the wording and structure of the relevant provision remain decisive.

Perhaps the clearest takeaway is the Court's emphasis on the underlying credit relationship rather than the servicer's history: the historical fact that the servicer originally granted the loan is not sufficient once the loan has been transferred to another creditor. What matters afterwards is for whom, and within which legal relationship, the management is performed.

Banks structuring loan transfers would do well to examine the VAT treatment of any servicing arrangement separately from the transfer itself: a fee that looks, commercially, like a continuation of the original exempt lending relationship may, after the sale, be consideration for a new, fully taxable service.