Money (including transfer of money) and related services: securities for money, credit guarantees and related services: what is a credit guarantee?
A credit guarantee is a security for money whereby the guarantor continues the repayments of a particular debt in the event that a third party is unable to do so because of a specified cause. For example, a financial institution may issue a credit guarantee to an exporter of goods or services against non-payment by the importer.
The ECJ case Velvet & Steel Immobilien und Handels GmbH (C-455/05) held that Article 135 1(c) of the EC Directive 2006/112 must be interpreted as meaning that the concept of assumption of obligations excludes from the scope of that provision obligations which are non-pecuniary, such as the obligation to renovate a property.
Velvet & Steel contracted to assume responsibility for the vendors’ obligation to renovate buildings as well as for rent guarantee in return for part of the purchase price of the buildings. The judgment stated that the transactions set out in Article 135 1(a) to (g) relate as a whole, to the sphere of financial transactions. It concluded that the assumption of the obligation to renovate property was not a financial service that fell within this sphere so the exemption in Article 135 1(c) could not apply.