Factoring, Receivables Financing and the Boundaries of ‘Debt Collection’ After Kosmiro

Abstract

Abstract

The Court of Justice of the European Union (CJEU or the Court)’s judgment in Kosmiro, delivered on 23 October 2025 (CJEU, 23 October 2025, Case C-232/24, A Oy [Kosmiro] v. Veronsaajien oikeudenvalvontayksikkö, EU:C:2025:820 (‘Kosmiro’)), represents the most significant decision on the VAT treatment of factoring and debt collection services over a decade. By holding that both trade factoring and invoice factoring constitute taxable supplies of ‘debt collection’ services – excluded from the VAT exemption under Article 135(1)(d) of the VAT Directive (Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJ L 347/1 (‘VAT Directive’)) – the Court has materially extended the reach of taxable activity within the financial services sector. This article offers an analysis of the concept of debt collection as it has evolved through the case law of the CJEU. The article argues that the clearest organizing criterion emerging from the case law is whether the arrangement is, in substance, aiming at the collection of debts, and deploys that criterion to reconcile the relationship between taxable debt collection, distressed debt purchases falling outside the scope of VAT, and exempt financing structures, including securitization arrangements, despite the CJEU’s often imprecise and occasionally inadequate reasoning.