C-381/09 Curia

Order · Court of Justice · Italy · 7 July 2010

VAT treatment of unlawful lending at exorbitant rates

What is the case?

An Italian case concerning money lending at exorbitant rates of interest, an activity constituting a criminal offence (usury) under the Italian criminal code. The Italian authorities sought to charge VAT on the lending activity, on the basis that its unlawful character took it outside the exemption available to ordinary credit transactions. The case reached the Court by way of a reference and was disposed of by reasoned order.

What is the Court asked?

Whether lending at exorbitant, criminally unlawful rates falls within the substantive scope of the Sixth Directive at all, and, if so, whether Article 13B(d)(1) precludes a Member State from imposing VAT on that lending where the equivalent lawful lending at non-excessive rates of interest is exempt.

The Court’s decision

The Court held that exorbitant lending falls within the scope of the Sixth Directive notwithstanding its illegality under national criminal law. Article 13B(d)(1) must be interpreted as meaning that a Member State cannot impose VAT on that activity where the corresponding lawful activity, money lending at rates of interest that are not excessive, is itself exempt from VAT. Confirms that criminal illegality under domestic law does not, by itself, take a supply outside the VAT system, nor does it disapply an exemption where a lawful equivalent transaction exists and is exempt. Relevant to advisers handling assessments raised alongside criminal proceedings, and to lenders and informal finance providers facing VAT demands on interest.

AI-generated and factual. Not an official document: verify against the text below.

Legislation interpreted

Article 13 of Sixth Directive 77/388/EEC Exemptions

Subject matter

Sixth VAT Directive · Scope · VAT exemptions · Article 13B(d)(1) · Grant, negotiation and management of credit · Exorbitant lending activities · Activity unlawful under national law

Topics

Supply of services · Granting and negotiation of credit · Exemptions · Grant, negotiation and management of credit · Exorbitant lending activities · Activity unlawful under national law

Record

Court: Court of Justice
Case number: C-381/09
ECLI: ECLI:EU:C:2010:406
Official texts: Order of 7 July 2010 (62009CO0381)
Cite as: Order of 7 July 2010, Curia, C-381/09, EU:C:2010:406

Order of 7 July 2010

Text as published by the Court on EUR-Lex, CELEX 62009CO0381.

Order of the Court (Seventh Chamber) of 7 July 2010 – Gennaro Curia v Ministero dell’Economia e delle Finanze and Agenzia delle Entrate

(Case C-381/09)

Article 104(3), first subparagraph, of the Rules of Procedure – Sixth VAT Directive – Scope – VAT exemptions – Article 13B(d)(1) – Grant, negotiation and management of credit – Exorbitant lending activities – Activity unlawful under national law

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Substantive scope (Council Directive 77/388) (see paras 18-20, operative part)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for in the Sixth Directive – Exemption for transactions involving the granting of credit (Council Directive 77/388, Art. 13B(d), para. 1) (see paras 18-20, operative part)

Re:

Operative part

Although exorbitant lending is a criminal offence under the national criminal code it falls, its illegality notwithstanding, within the scope of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment. Article 13B(d)(1) of that directive must be interpreted as meaning that a Member State cannot impose value added tax on that activity when the corresponding lawful activity of money lending at rates of interest that are not excessive is exempt from VAT.