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An overview by Borenius, Taxand Finland
Borenius, Taxand Finland, successfully represented a Finnish factoring company before the European Court of Justice (ECJ) in a landmark case which clarifies the VAT treatment of factoring fees across the EU.
In the judgment, the ECJ ruled that fees for both trade factoring and invoice factoring constitute consideration for a single, indivisible debt collection service – fully subject to VAT, not a VAT-exempt financial service.
The Court confirmed that factoring companies supply taxable services when they assume debt recovery and default risk, and that these fees cannot be split into separate taxable and exempt parts. It also held that the VAT Directive’s provisions on debt collection have direct effect, meaning they can override conflicting national law. The decision brings long-awaited clarity to the VAT treatment of factoring services across the EU. Finland’s Supreme Administrative Court will now apply the ruling in a pending appeal, further shaping how factoring activities are treated under Finnish law.
Henna Jovio and Jussi Pikkujämsä from Borenius have analysed the ruling and its implications in an article which can be read here.
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