In a decision of 23 July 2009, the BFH clarified and partly amended its view on the VAT treatment of transactions relating to the granting of securities as collateral for a financial liability and the realization of such collateral.
According to the court, the mere transfer of security collateral from the person granting the security to the secured party does not lead to a taxable supply from the grantor to the secured party. A taxable supply takes place only at the time the security collateral is realized, regardless of whether that realization by the secured party is via a sale to a third party that is initiated by the secured party in its own name and for its own account (i.e. supply from the security grantor to the secured party and from the latter to the third party equals two supplies) or by the grantor of the security in its own name but for the account of the secured party (i.e. supply from the security grantor to the secured party, a supply from the secured party back to the security grantor and from the latter to the third party equals three supplies).
As a change to jurisprudence, such a double or triple supply will arise only if, according to a specific securing agreement between the grantor of the security and the secured party, the maturity for a realization of the security collateral has been reached. Otherwise (i.e. before maturity), there will be a simple supply from the grantor immediately to the third party upon the sale of the collateral to the third party even where the grantor of the security passes on the proceeds of the sale to the secured party.
