EU VAT: Loan servicing exemption narrowed in securitizations

Why should I read this?

On 17 June 2026, the General Court of the European Union (“General Court”) rendered its judgment in case T-184/25 (A Oy). The General Court has clarified that credit management services provided by an originating lender after loans are transferred to its wholly owned subsidiary are not VAT exempt. The exemption for credit management is strictly linked to the ongoing lender-borrower relationship and does not extend to services performed for an acquirer. Although the case concerns a Finnish situation, the ruling has effect in all EU Member States, including the Netherlands. In particular this ruling could have an impact on securitization structures, where servicing fees have commonly been treated as VAT exempt. The decision may result in irrecoverable VAT costs and requires financial institutions to reassess their VAT position and the structuring of servicing arrangements.

What should I do?

Financial institutions involved in loan servicing or securitization structures should consider the following actions:

• Review VAT treatment of servicing fees - assess whether current treatment as VAT exempt remains appropriate in light of the decision.

• Evaluate exposure to irrecoverable VAT - consider the potential cost impact, particularly where securitization vehicles cannot recover input VAT.

• Identify alternative structuring positions - as the ruling relates to a full transfer of the lender-borrower relationship, it should be considered whether an argument for exemption may still be available where the originator retains the contractual relationship with the borrower.

• Monitor further developments - the judgment leaves open questions for certain structures, and further clarification is likely through future cases or guidance.

What else do I need to know about loan servicing VAT?

The Court’s reasoning focuses on the functional link between credit management and the lender-borrower relationship. Once that relationship is broken through a transfer of loans, servicing becomes a separate, taxable supply.

The Court also confirmed that alternative VAT exemptions for entering into guarantees or sureties and for transactions concerning debts are not applicable.

We would be pleased to assist you in assessing the potential impact of this ruling on your structure.