Judgment summary
This is a request for a preliminary ruling under Article 267 TFEU from the Bundesfinanzgericht (Federal Finance Court, Austria), made by decision of 30 May 2025 and received at the Court on 30 May 2025 [1]. The request concerns the interpretation of Article 107 TFEU [1].
The proceedings are between ***X***, an Austrian company, and the Finanzamt für Großbetriebe, concerning VAT notices of assessment received by ***X*** for the period from 2013 to 2017 [2].
The Court held that Article 107(1) TFEU must be interpreted as meaning that an exemption from VAT of services, which are not otherwise exempt, provided between undertakings primarily carrying out transactions relating to the banking, insurance or pension fund sector, constitutes State aid within the meaning of that provision [61].
The Court also declined to limit the temporal effects of its judgment [69].
Background
***X*** is an Austrian bank, which is also the parent company of an Austrian fiscal unit for VAT purposes (a VAT group) [12].
Following a field audit which gave rise to a report dated 1 December 2021, the tax authority found that certain cross-border services provided by a contracting partner of ***X*** relating to automatic teller machines did not fall within the exemption provided for in Paragraph 6(1)(8)(e) of the UStG. That authority amended, on the basis of a transfer of the tax debt, the VAT notices of assessment of ***X*** relating to the tax period at issue [13].
The tax authority did not accede to the complaint of ***X*** lodged on 20 December 2021 against those tax notices. By application of 13 July 2022, ***X*** requested that that complaint be brought before the Bundesfinanzgericht, the referring court [14].
In its VAT returns which gave rise to the disputed notices of assessment, ***X*** applied the VAT exemption provided for in the second sentence of Paragraph 6(1)(28) of the UStG, described as the exemption at issue [16]. That exemption was repealed with effect from 1 January 2025, but was in force during the tax period at issue [34].
The present request follows a first request for a preliminary ruling, made on 28 June 2024 and declared manifestly inadmissible by order of 5 May 2025, Schoger (C‑460/24), on the ground that it did not meet the requirements laid down in Article 94(a) and (c) of the Rules of Procedure [20]. The referring court provided additional information in the present request [22].
Core dispute
The referring court asked whether Article 107(1) TFEU must be interpreted as meaning that the exemption at issue constitutes State aid within the meaning of that provision [31].
The referring court took the view that the exemption at issue lacked a legal basis in EU law, in particular in the light of the VAT Directive, and that it was not in a position to interpret national law in conformity with that directive, which would be contra legem, or to directly apply the directive against the taxable person [17].
The referring court considered that the exemption satisfied the conditions to be classified as State aid, since it could be regarded as an intervention by the State involving the forgoing of resources, it benefited ***X*** and the recipients of its services who are in direct competition with other European banks, and it was selective [18].
***X*** and the Austrian Government disputed the admissibility of the request [25]. The Austrian Government and ***X*** cast doubt on the existence of an advantage conferred by the application of the exemption, an argument the Court treated as part of the substantive assessment rather than admissibility [29].
Court findings
The Court first held the reference admissible [30]. It noted that the national court defines the legislative context under its responsibility and it is not for the Court to determine the accuracy thereof [25]. The Court also stated that national courts are fully empowered to interpret the concept of State aid, with the possibility of referring to the Court in the event of doubt, while the assessment of compatibility with the internal market is reserved to the Commission [27].
The Court identified the scope of the exemption, noting that in practice the undertakings to which it applied were understood broadly and also included undertakings without a banking licence, and that the Austrian tax authorities commonly exempted all services provided between the undertakings concerned which were not already exempt under another provision, including IT services, consultancy services, restaurant or childcare services [35].
The Court set out the four cumulative conditions for classification as State aid: intervention by the State or through State resources, a selective advantage, distortion or threat of distortion of competition, and effect on trade between Member States [37].
On State origin, the Court found the exemption did not fall within any exemption exhaustively provided for by the VAT Directive, and was therefore imputable to the Austrian State [38, 39]. On State resources, the Court held that a tax exemption placing recipients in a more favourable financial position amounts to State aid, and that the relevant question was whether tax revenue of the State was decreasing, taking account of the potential to reduce revenue [40, 43]. The absence of any right of deduction attached to the exemption did not call this into question [41, 42]. The Court noted that the Austrian legislature had itself highlighted the additional VAT revenue resulting from the repeal from 1 January 2025 [44].
On advantage and selectivity, the Court held that the exemption was capable of procuring an advantage for the undertakings providing the exempt services over undertakings required to charge VAT [45, 47]. It held that, at the stage of classifying an aid scheme, it was not necessary to ascertain in each specific case the effect of the inability to deduct input VAT [48, 49]. The Court identified the reference framework as the general system of charging VAT [52], and found that the exemption derogated from it by exempting services supplied between a particular category of undertakings while the same services were taxed when supplied by other undertakings [53]. The Court found that the preservation of fiscal neutrality, prevention of overlapping taxes and administrative simplification did not appear capable of justifying the differentiation, subject to verification by the referring court [56]. It concluded the selectivity condition was satisfied [57].
On distortion of competition, the Court held it was sufficient to examine whether the measure was liable to distort competition, and that the exempt undertakings and their corporate customers operated in a liberalised sector [58]. On effect on trade between Member States, the Court held the exemption strengthened the position of exempt undertakings compared with competitors, and that the fact it also benefited taxable persons in other Member States did not change this [59, 60].
Outcome
The Court ruled that Article 107(1) TFEU must be interpreted as meaning that an exemption from value added tax of services, which are not otherwise exempt, provided between undertakings primarily carrying out transactions relating to the banking, insurance or pension fund sector, constitutes State aid within the meaning of that provision [61].
The Court declined the Austrian Government's request to limit the temporal effects of the judgment [69]. It found that the Austrian Government merely referred to significant consequences without producing figures showing the risk of serious economic repercussions [65, 66]. It stated that tax periods definitively closed should not be reopened in national court proceedings following the judgment [67], and held that the criterion relating to the risk of serious difficulties was not fulfilled, so it was not necessary to examine the criterion relating to good faith [68].
The decision on costs is a matter for the referring court [70].
Major issues / areas of contention
- Whether the request for a preliminary ruling was admissible, following an earlier request declared manifestly inadmissible.
- Whether an Austrian VAT exemption for services provided between undertakings in the banking, insurance or pension fund sector constitutes State aid under Article 107(1) TFEU.
- Whether the exemption is imputable to the Austrian State given the absence of a basis in the VAT Directive.
- Whether the exemption is granted through State resources, given the linked exclusion of the right to deduct input VAT.
- Whether the exemption confers a selective advantage on its beneficiaries measured against the general VAT system as reference framework.
- Whether the differentiation could be justified by fiscal neutrality, prevention of overlapping taxes or administrative simplification.
- Whether the measure was liable to distort competition and to affect trade between Member States.
- Whether the temporal effects of the judgment should be limited.