By: Aiki Kuldkepp
24 Jun 20267 min read
The CJEU states that the adjustment may nonetheless affect the VAT due on the original supply of vehicles, insofar as it may constitute a modification of the taxable amount.
As a result, internationally operating groups must carefully consider the VAT consequences of intragroup transactions and TP adjustments to prevent assessments, penalties, non-deductible VAT, and operational risks.
This article provides an overview of the latest CJEU decision in the VAT treatment of intragroup transactions and TP adjustments.
Intragroup transactions continue to attract increasing attention from tax authorities, particularly regarding the VAT impact of TP adjustments. Because the EU does not provide specific and uniform rules for the VAT treatment of such adjustments, questions often arise in practice. Several matters have reached the Court of Justice of the European Union (CJEU), resulting in important judgments. Most recently, the CJEU clarified the VAT treatment of transfer pricing adjustments in its judgment in the Stellantis case (C603/24).
Stellantis Portugal operated as a domestic distribution company, purchasing vehicles from manufacturers and selling them to independent dealers, who in turn sold them to end customers.
Under the group’s TP policy, Stellantis Portugal was required to achieve a specific operating margin for its distribution activities. The margin was determined using a resale minus approach based on external sales prices and distribution costs. Preliminary vehicle prices were set, after which adjustments to the transfer prices of the vehicles ensured that Stellantis achieved the agreed margin.
Where manufacturing defects arose, final customers had repairs performed by dealers. Dealers invoiced Stellantis for the repairs, plus VAT. Stellantis bore all aftersales and other distribution costs and reported them to the manufacturers, who then adjusted the sale price of vehicles to reflect the costs borne by Stellantis. These adjustments were documented via credit or debit notes.
The Portuguese tax authorities argued that Stellantis provided VAT taxable services to the manufacturers by recharging repair costs, which led to VAT assessments exceeding EUR 1.5 million.
The CJEU was asked whether TP adjustments of the sale price of vehicles, intended to ensure a minimum profit margin and documented through debit and credit notes, fall within the VAT scope as a supply of services.
The Advocate General Kokott delivered her opinion in the Stellantis case on 15 January 2026. The Advocate General (AG) considered that payments calculated under TP rules may fall within the scope of VAT, depending on how the underlying arrangements are structured.
The AG outlined the possible VAT consequences of TP adjustments:
The AG concluded that no VAT correction should apply in Stellantis, because there was no contract that could justify a supply of services by Stellantis to the manufacturers. However, a price adjustment may still affect the taxable amount of the original transaction.
On 13 May 2026, the CJEU rendered its judgment. The Court reaffirmed its earlier case law by stating that TP adjustments can only qualify as consideration for a service where a direct link exists between the TP adjustment and an identifiable service. Such a direct link is established where there is a legal relationship between the provider of the service and its recipient, pursuant to which there is reciprocal performance. In such cases, the remuneration received by the provider constitutes actual consideration for an identifiable service supplied to the recipient.
The Court found no basis for treating the TP adjustments as consideration for repair services. The decision was based on the following:
The Court noted that the outcome could have been different if the contractual framework had imposed reciprocal obligations, where specific and identifiable services were provided in return for the adjustments. In such a scenario, similar to the structure examined in the earlier Arcomet case, those services might have constituted a separate taxable supply.
The CJEU stated that if the TP adjustments are viewed as a price modification of the original vehicle supply, the impact on the taxable amount must be assessed. The Court held that if the TP adjustment affects the VAT due on the original supply of vehicles, a corresponding VAT adjustment is required to reflect the revised taxable amount.
TP adjustments may change the taxable amount and require a VAT adjustment if there is a sufficiently direct link between any payments resulting from an adjustment and specific supplies. When a TP adjustment cannot be clearly linked to a specific transaction that modifies the taxable amount of a supply, it must be assessed whether the adjustment constitutes consideration for a supply of services. If so, this could trigger VAT consequences for both the supplier and the recipient.
Consequently, transfer pricing adjustments may:
Where an adjustment can be linked to a specific transaction, either as a price correction or as payment for a separate service, it may have VAT implications for both the supplier and the recipient.
Practical impact
Where a direct link to a prior transaction exists, or where adjustments result in remuneration for goods or services, businesses must ensure proper VAT compliance. This may include:
These steps can increase administrative and system workloads, such as applying the correct tax codes in ERP systems.
Proper documentation, including intercompany agreements, invoices, credit notes, and evidence demonstrating the link between services and consideration, is essential to substantiate the VAT position. Inadequate handling may result in assessments, penalties, and interest. Financial institutions and other exempt entities should pay particular attention, as they may face unrecoverable VAT.
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Intragroup transactions continue to attract increasing attention from tax authorities, particularly regarding the VAT impact of transfer pricing (TP) adjustments. Because the EU does not provide specific and uniform rules for the VAT treatment of such adjustments, questions often arise in practice.