In its MKG decision dated 26 June 2003 (C-305/01) the European Court of Justice (“ECJ”) ruled that each kind of factoring – i.e. non-recourse and recourse factoring – qualifies as a service subject to value added tax (“VAT”). The Federal Ministry of Finance (“FMF”) interpreted this MKG-decision in a way that each purchase of receivables qualifies as VAT-able factoring provided that the purchaser assumes the collection of the purchased receivables.

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