The facts
Mercedes-Benz AG is established in Germany and manufactures vehicles in Romania, where it is registered for VAT purposes. In 2020, it purchased moulds and other production equipment. These are specialised tools used by suppliers to manufacture components in accordance with Mercedes-Benz's technical requirements.
Mercedes-Benz made this equipment available free of charge to Romanian suppliers and subcontractors. It retained ownership of and control over the equipment.
The subcontractors manufactured the components and sold them to an intermediary supplier, which in turn resold them to Mercedes-Benz. Mercedes-Benz therefore did not purchase the components directly from the manufacturers using its equipment.
Following a tax audit, the Romanian tax authorities issued an additional VAT assessment of RON 12.174.729 (approximately EUR 2,4 million), partly on account of the equipment being made available free of charge. According to the tax authorities, Mercedes-Benz had not demonstrated to which manufacturers it had made the equipment available, or that the equipment was used exclusively to produce components intended for Mercedes-Benz.
Mercedes-Benz's objection was rejected. The tax authorities pointed out that at least one manufacturer invoiced the components produced using the equipment to an intermediary supplier rather than to Mercedes-Benz. In the authorities' view, this broke the direct link between making the equipment available and Mercedes-Benz's own economic activity.
The question referred for a preliminary ruling
Mercedes-Benz then brought an appeal before the Curtea de Apel București, which had to determine whether making the equipment available free of charge should be treated as a taxable supply of services.
The Romanian court referred the question to the Court of Justice. It wished to know whether Article 26 of the VAT Directive applies where the components are not sold directly by the manufacturer to Mercedes-Benz but through an intermediary. More specifically, the question arose whether this meant that the equipment was used for purposes other than those of the business.
The Court of Justice transferred the case to the General Court on 3 October 2025. Since 1 October 2024, the General Court has dealt with requests for preliminary rulings in certain areas, including VAT (Article 50b of the Statute of the Court of Justice).
The General Court's ruling
Article 26(1) of the VAT Directive treats certain uses of business assets and services provided free of charge for private purposes or for purposes other than those of the business as supplies of services for consideration.
The General Court clarifies that the questions referred concern the concept of "purposes other than those of his business", which appears in both Article 26(1)(a) and Article 26(1)(b). It is not necessary to distinguish between those provisions in order to answer the questions (paragraph 22).
The General Court recalls that these rules are intended to prevent a taxable person or its staff from using goods or services for private purposes without VAT being charged, whereas a final consumer would have to pay VAT for them (paragraph 25).
However, the fact that a transaction is free of charge is not sufficient in itself for Article 26 to apply. A transaction that serves the proper functioning and profitability of a business is not carried out for purposes other than those of the business. The General Court refers in this respect to the judgments in GE Aircraft Engine Services (C-607/20) and Svilosa (C-535/24). Transactions carried out for the needs and in the interests of a business likewise cannot be regarded as transactions for purposes other than those of the business (paragraphs 26 and 27).
According to the General Court, tooling is in principle an important part of vehicle production. In Mercedes-Benz's case, the equipment was used to manufacture components in accordance with its technical specifications. By purchasing the equipment itself, Mercedes-Benz was also able to limit financial risks while retaining ownership and control. The General Court therefore expressly takes account of the business rationale for this arrangement (paragraph 30).
The absence of a direct invoicing relationship between Mercedes-Benz and the manufacturer using its equipment, because the components are sold through an intermediary, is not decisive in this regard (paragraph 31).
The General Court also emphasises that the concepts used in the VAT Directive must be interpreted uniformly. A different interpretation of national law cannot alter that (paragraph 32).
The General Court therefore concludes that making the equipment available free of charge must not be treated as a supply of services for consideration, provided that the components produced are used exclusively by Mercedes-Benz. It is for the Romanian court to verify this as a matter of fact.
Commentary
The judgment is, of course, particularly relevant to businesses that make moulds, machinery or other production equipment available free of charge to suppliers and subcontractors. The operative part of the judgment is framed in terms of a vehicle manufacturer and a component manufacturer, but the reasoning has broader implications. The General Court clarifies how the concept of use for purposes other than those of the business should be interpreted, including outside the specific context of production equipment.
It is a welcome confirmation that the VAT treatment should not depend solely on the way in which businesses organise their activities or structure their flows of goods. Following GE Aircraft Engine Services and Svilosa, the General Court rightly attaches importance to the actual economic purpose of the transaction. For the application of Article 26 of the VAT Directive, it is necessary to establish whether the transaction serves the taxable person's own business activity.
This reasoning is also relevant in Belgium for the application of Article 19(1) of the Belgian VAT Code, which, subject to certain conditions, treats the use of business assets for private purposes or purposes other than the economic activity as a taxable supply of services. That provision transposes Article 26(1)(a) of the VAT Directive. There is no general Belgian equivalent of Article 26(1)(b), only a provision for work on immovable property (Article 19(2), first paragraph, 2°, of the Belgian VAT Code).
For businesses, supporting evidence remains essential. They must be able to demonstrate business use. In this case, the General Court expressly makes the exclusive use of the components produced by Mercedes-Benz a condition. This does not mean that any other use is automatically subject to VAT, but it does mean that such cases require a separate assessment.