In SKAS, the advocate general (AG) of the Court of Justice of the European Union (CJEU) held in his opinion dated May 2022 (“Opinion“) that the service provided by the sub-participant to the originator did not amount to credit, thereby leaving the door open for VAT to be applied.
If followed by the CJEU, this Opinion could result in the originator incurring VAT on the sub-participation, which is unlikely to be recoverable. Unless the cost can be passed on the borrower, the economic benefit of such arrangements for the originator may be called into question. It is critical for businesses active in the sub-participation market to review their documentation and ensure they can support the application of the credit VAT exemption and distinguish themselves from SKAS.
Source Baker & McKenzie
