The EU Court of Justice clarifies VAT treatment of transfer pricing adjustments

The Court of Justice of the European Union (CJEU) has delivered their judgment in the case Stellantis Portugal, C-603/24, which addresses the VAT treatment of transfer pricing adjustments made to achieve arm’s length pricing within a group. 

According to the CJEU, an adjustment of the transfer price of motor vehicles previously sold by a manufacturing company within a group to a distribution company does not constitute consideration for a supply of services by the distribution company. In order for that to be the case, this requires a legal relationship under which the distribution company provides an identifiable service in return for consideration. Since the agreement between the group companies did not provide for the supply of services, but only the sale of motor vehicles, the CJEU held that such a legal relationship did not exist. The ruling highlights the importance of the design of intra-group agreements from a VAT perspective. 

Stellantis Portugal S.A. ("Stellantis") is active within the General Motors Group, which manufactures and markets vehicles, spare parts and accessories. Stellantis had purchased vehicles from the group's manufacturing company and then sold on to independent dealers, who in turn sold the vehicles to the final customers. Under an agreement between the manufacturing company and Stellantis, Stellantis was guaranteed a certain profit margin for the vehicles acquired and resold. Pursuant to this this agreement, the manufacturing companies adjusted the transfer prices based on the costs incurred by Stellantis, including the cost of acquiring the vehicles, repair costs, marketing and operating costs, and issued credit and debit notes to Stellantis ("TP adjustment"). In the present case, the question arose as to whether the adjustment made could constitute consideration for the provision of vehicle repair services.

The CJEU found that the purpose of the agreement was to establish a transfer price for the vehicles sold, which would ensure that Stellantis received a pre-determined profit margin. Neither the agreement nor the available evidence indicated that Stellantis was obliged to provide repair services to the manufacturing companies in return for remuneration. 

However, the CJEU stated that it is for the national court to assess whether, on the basis of information not submitted to the CJEU along with the agreement, there is a legal relationship under which the adjustments constitute the consideration for identifiable repair services, and recalled that, if there is uncertainty as to the existence of consideration, it may break the necessary direct link.

The adjustments made considered not only the repair costs invoiced by the dealers to Stellantis, but also the operating costs of the company. The CJEU noted that there was no guarantee for Stellantis to be separately compensated for the costs in the event that the profit margin was reached. The CJEU therefore considered that any link between any repair services and the transfer pricing adjustments was merely indirect. Nor could it be considered from the documents presented in the case that Stellantis acted on behalf of the manufacturing companies in relation to the repair services. 

Finally, the CJEU held that, as the Advocate General stated in her Opinion, it is for the national authorities, if they should consider that the adjustment is a subsequent adjustment of the price of vehicles sold, to assess the impact it has on the determination of the taxable amount of the supply of goods.

A fundamental VAT principle is that a supply of services requires a direct link between an identifiable service and consideration, within a legal relationship. In the present case, the CJEU concluded that the evidence presented did not demonstrate the existence of such a relationship. Consequently, the TP adjustment could not be regarded as consideration for services rendered.

In line with the Advocate General’s Opinion, the CJEU emphasised that it is for the referring court to assess whether the transfer pricing adjustment, on the basis of information not submitted to that court, together with the agreement, may establish a legal relationship under which the adjustment may constitute consideration for repair services. Furthermore, the CJEU clarified that, if such relationship is not at hand, but the adjustment is instead considered to be a subsequent price adjustment to the supply of vehicles, it is for the competent national authorities to determine how that should affect the taxable amount for those supplies.

From a VAT perspective, it should be noted that, under certain conditions, it may be possible to regulate whether a price reduction made retrospectively should affect the taxable amount. If it can be concluded that there is no separate supply of services and if there are no other transactions between the parties, it is likely from a transfer pricing perspective that the TP adjustment at issue is intended to adjust the price of the vehicles. TP adjustments are not made in a vacuum, but such adjustments are intended to adjust the price of an underlying transaction between the parties in order to achieve arm’s length pricing. For VAT purposes, there can only be an adjustment of a previous consideration relating to the supply of the vehicles if there is a direct link between an adjustment made and a previous supply.

When the Advocate General presented her Opinion, she also addressed the question of whether certain TP adjustments can be considered to fall outside the scope of VAT. Unfortunately, the CJEU does not address this question in its ruling, so the answer to that question is still uncertain.

In summary, it is the economic reality, where the agreement between the parties is an important factor, which determines whether a TP adjustment has consequences for VAT purposes. Groups should therefore review the design of their intra-group agreements and other documentation, both to ensure arm’s length pricing of their intra-group transactions and to analyse how the transactions should be assessed from a VAT perspective.

There have recently been several rulings from the CJEU about the link between transfer pricing and VAT. You are welcome to contact us for a discussion about how these affect your pricing and tax base in intra-group transactions.

Read more:

• The article in Swedish
  
  
• Judgment of the Court of Justice of the European Union of May 13 2026 in Stellantis Portugal, S.A. v Autoridade Tributária e Aduaneira (C-603/24)
  
  
• TaxNews no 1, 2026: Transfer pricing adjustment can affect the taxable amount for VAT ("Stellantis") in Swedish
  
  
• TaxNews no 30, 2025 Transfer pricing adjustment constitutes VAT consideration for services ("Arcomet") in Swedish
  
  
• TaxNews no 28, 2025 The European Court of Justice rejects the Tax Agency's application of the revalution rules ("Högkullen") in Swedish
  
  
• TaxNews no 29, 2024 EU judgment: Right to deduct purchases of intra-group services ("Weatherford") in Swedish