EU: VAT treatment of transfer pricing adjustments (CJEU referral from Romania)

Questions raised will clarify VAT obligations and documentation requirements for multinational companies operating within the EU

CJEU referral

The Bucharest Court of Appeals in November 2023 requested a preliminary ruling from the Court of Justice of the European Union (CJEU) regarding whether transfer pricing adjustments, in accordance with the OECD Guidelines, fall within the scope of value added tax (VAT).

The case identifying information is C-726/23.


The case involves a Romanian company that is part of an international crane rental group. The company, within the group, purchases or rents cranes, which it then sells or rents to customers. The group's parent company, a Belgian company, seeks suppliers and negotiates contractual terms.

In 2010, a transfer pricing study assessed the financial result that associated entities should record, between -0.71% and 2.74%, in line with transfer pricing rules. The company recorded a surplus profit for 2011, 2012, and 2013, and received three equalization invoices from the Belgian company without VAT. The company partially attributed these invoices to intra-EU purchases of services and self-assessed VAT on them under the reverse charge mechanism.

However, tax inspectors concluded, following a tax inspection, that the equalization invoices pertained to management services acquired by the company from the Belgian company. They denied the right to deduct the self-assessed VAT relating to those invoices, but retained the VAT collected, stating that the provision of services and the necessity to perform them for taxable transactions had not been justified. 

Questions referred to the CJEU

The Bucharest Court of Appeals has asked the CJEU to clarify:

  • Whether the amount invoiced by a company (the principal company) to an associated company (the operating company), which equals the amount necessary to align the operating company’s profit with the activities performed and the risks assumed, constitutes a payment for a service that falls within the scope of VAT as per Article 2(1)(c) of the Directive.
  • If the answer to the first question is affirmative, the case seeks to interpret Articles 168 and 178 of the Directive. It questions whether tax authorities can require, in addition to the invoice, documents (for example, activity reports, [works] progress reports, and so forth) justifying the use of the services purchased for the purposes of the taxpayer’s taxable transactions, or if the analysis of the right to deduct VAT must be based solely on the direct link between purchase and provision or the taxpayer’s economic activity as a whole. 

KPMG observation

The questions raised are significant as they will clarify VAT obligations and documentation requirements for multinational companies operating within the European Union (EU). As highlighted in the referral, the VAT treatment applicable to transfer pricing adjustments has not yet been clarified by the CJEU and EU member states have so far only issued sporadic guidance, if any. At an EU level, the EU VAT Expert Group issued in 2017 a Working Paper [PDF 566 KB] on the VAT implications of transfer pricing adjustments, which, so far, has not resulted in any guidelines or legislative measures.

The question relating to the documentary evidence is also important in the context of spreading e-invoicing requirements. If transfer pricing adjustments are considered transactions in scope of VAT, taxpayers will be required to issue VAT invoices through the government approved e-invoicing systems if such mandate applies to cross-border transactions also.


For more information, contact a KPMG tax professional.

Philippe Stephanny |



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