EU court: free tooling is no deemed VAT supply if parts used only by carmaker

A road-vehicle manufacturer that lends tooling and matrices free of charge to an automotive-component maker does not make a deemed onerous supply where the components are used exclusively by the vehicle manufacturer, even if they are not invoiced directly to it but sold through an intermediary.Europa The General Court, Second Chamber sitting with five judges, so ruledEuropa on 4 November 2026Europa in case T-680/25Europa, on a reference from the Curtea de Apel BucurestiEuropa in proceedings between Mercedes-Benz AG and the Romanian tax authorities.

The reference, transmitted to the General Court on 3 October 2025 under Article 50ter of the Statute, concerned Mercedes-Benz, registered for value added tax in Romania where it manufactures road vehicles. It had acquired the disputed equipment in 2020 and says it lent it free of charge to Romanian makers to produce automotive parts intended for it. After an audit the authority assessed additional tax of 12,174,729 Romanian leiEuropa, about 2,398,932 euro, by notice of 3 April 2023, including the free provisionEuropa, appeal rejected on 15 November 2023.

The authority treated the loans as deemed onerous supplies under Article 26(1)Europa because Mercedes-Benz had not documented the makers or proved exclusive use. In one example, tooling was used for goods invoiced not to Mercedes-Benz but to the equipment supplier, which in the authority's view broke the direct link to Mercedes-Benz's own business.

The referring court asked whether free provision by the matrix owner to a supplier that passes it to subcontractors which make parts for the owner but sell them to the supplier, which resells them to the owner, is a deemed onerous supplyEuropa, and whether national case-law that avoids that treatment only where the maker delivers directly to the owner, requiring direct invoicing, is compatible with Article 26Europa.

The General Court declared the reference admissibleEuropa. Union-law questions enjoy a presumption of relevance; the court had described intermediary sales, the two questions are not contradictory, and the no-direct-invoicing situation is not manifestly unrelated.

On the substance, Article 26(1) treats as deemed onerous the use of business assets for private or staff needs or, more generally, for purposes unrelated to the business, where deduction was obtained, and free services for such purposes.Europa Its purpose is equal treatment between a taxable person taking goods or services for unrelated purposes after deducting input tax and a final consumer buying the same type of supply. A transaction serving the sound functioning and profitability of the business, carried out for its needs and in its interest, is not for unrelated purposes.Europa

The fact that the provision is free does not by itself prevent it being subject to taxEuropa; it may be treated as a deemed onerous supply under Article 26(1) only where made for purposes unrelated to the businessEuropa. The referring court must verify whether the loans effectively served Mercedes-Benz's economic activityEuropa, in particular whether the resulting components were used exclusively by itEuropa. Where that holds, provision to third-party makers is not for unrelated purposes.Europa Tooling is ordinarily important in vehicle production; the equipment makes parts for Mercedes-Benz's vehicles to its specifications, and it retains ownership, lends it to minimise financial risk while keeping control.

The absence of a direct invoicing relationship between the component maker and the vehicle maker is not determinative for Article 26(1)Europa, nor is a different national interpretationEuropa, because the Directive rests on uniform definitions of taxable transactions.

The legal basis is Article 26(1) of Council Directive 2006/112/EC, Articles 2 and 24(1) of that Directive, Article 267 of the Treaty on the Functioning of the European Union and Article 50ter of the Statute of the Court of Justice.