The German Federal Ministry of Finance has changed their administrative view and issued a circular on 2 December 2015 (available here). The main topic of the circular is a revised view of the German Federal Ministry of Finance on how to deal with VAT in relation to non-performing loan deals in Germany.

In the past there were discussions and uncertainties about whether the purchaser of a non-performing loan portfolio would be subject to VAT. The risk was that the difference between the nominal value of the purchased loan portfolio and the actual purchase price would be subject to VAT if the difference could be interpreted as a consideration for a service provided by the purchaser to collect the outstanding claims.

Following the decisions of the European Court of Justice dated 27 October 2011 (EuGH, C-93/10, available here) and the German Federal High Court of Finance dated 26 January 2012 (BFH, V R 18/08, German version available here) and 4 July 2013 (BFH, V R 8/10, German version available here) the German Federal Ministry of Finance has now decided that the sale of a claim that is in default (zahlungsgestört) is not subject to VAT.

In Para I. 3. of the circular default is defined as: “a claim (consisting of a repayment and an interest claim) as a whole is in default, if it is due and in the last 90 days it has either not been repaid in total or only an insignificant part of it has been repaid. The claim is also at default, if it has been terminated or if the conditions for a termination are given.”

Finally, the German Federal Ministry of Finance stipulates that the collection of the acquired loan receivables does not fall within the scope of a VAT-able activity. The purchaser is therefore not entitled to a refund of VAT paid from invoices for the acquisition of the receivables or for their collection.


It appears that the purchase of a non-performing loan portfolio in the future is not subject to VAT. There are further provisions in the circular covering purchases that lie in the past. In this case, it is important to review the tax clauses of the Loan Sale and Purchase Agreements in order to assess if and to what extent the new rules may apply.