In a judgment dated 13 May 2026 (case C-603/24, Stellantis Portugal), the Court of Justice ruled that transfer pricing adjustments within an international group do not, in principle, constitute consideration for a separate service subject to VAT. The judgment further refines the approach previously adopted by the Court in Arcomet Towercranes (C-726/23) and provides multinational groups with greater clarity, while at the same time raising new practical points of attention.
The facts
Stellantis Portugal acted as the group’s national sales company in Portugal. It purchased vehicles from the OEM manufacturers within the group and resold them to independent Portuguese dealers. When vehicles were returned for repairs under the manufacturer’s warranty or due to manufacturing defects, the dealers carried out those repairs and invoiced the costs, including Portuguese VAT, to Stellantis Portugal.
An intra-group agreement concluded in 2004 provided for periodic adjustments to the transfer prices between the OEMs and Stellantis Portugal in order to guarantee Stellantis Portugal a predetermined profit margin. Those adjustments took into account not only repair costs, but also other operating expenses (staff, electricity, marketing). The adjustments were recorded through credit or debit notes issued by the OEMs.
The Portuguese VAT authorities argued that Stellantis Portugal was in fact supplying repair services to the OEMs and that the transfer pricing adjustments constituted the consideration for those services. The VAT reassessment amounted to approximately EUR 1.5 million. The case ultimately reached the Court of Justice through the Portuguese Supreme Administrative Court.
The Court’s decision
The Court confirms its settled case law: a service is supplied “for consideration”, and therefore subject to VAT, only where there is a direct link between that service and the remuneration actually received, within the framework of a legal relationship involving reciprocal performance and where the remuneration constitutes the value given in return for an identifiable service.
Applying these principles to the present case, the Court concluded that such a direct link was absent. A transfer pricing adjustment contractually intended to guarantee the purchaser a predetermined profit margin, implemented through a credit or debit note and taking into account, among other things, repair costs paid by the purchaser to third parties, does not constitute remuneration for a service supplied by that purchaser to the supplier, unless the legal relationship between the parties demonstrates that the purchaser committed itself to providing specific services to the supplier and that the adjustment specifically represents the consideration for those services.
The Court found no clause in the 2004 agreement indicating such a reciprocal obligation. The sole purpose of the agreement was to determine transfer prices, not to organise repair services. Moreover, repair costs represented only one parameter among others in the calculation, and the adjustment could result in either a credit note or a debit note. That uncertainty, being free of charge, arbitrary or difficult to quantify, breaks the direct link, a criterion already applied by the Court in Arcomet Towercranes.
The Court also rejected the argument of the Portuguese VAT authorities that Stellantis Portugal had intervened in a service supplied by the dealers to the OEMs. There was insufficient evidence to demonstrate that Stellantis Portugal had acted in its own name but on behalf of the OEMs.
The comparison with Arcomet Towercranes is particularly interesting. In that case, the Court held that the TP adjustment did constitute consideration for a VATable service because the contractual relationship clearly referred to specific management services supplied by the parent company to its subsidiary, combined with a clear reciprocal obligation. The principles therefore remain the same, namely the existence of a direct link, but the outcome depends on the factual and contractual structure within each individual group.
No service, but potentially a price adjustment
Referring to the Opinion of Advocate General Kokott, the Court added an important nuance. If the transfer pricing adjustment does not constitute consideration for a service, the national court must then assess whether it qualifies as a subsequent adjustment to the price of the original supplies of goods made by the OEMs to Stellantis Portugal. In that case, the taxable amount relating to those earlier supplies must be adjusted.
The VAT issue therefore shifts to the original supplies of goods, together with all the related VAT reporting consequences.
What does this mean for Belgian businesses?
For businesses implementing transfer pricing adjustments between related entities, the judgment raises several practical points of attention.
Map your transfer pricing adjustments. Identify which adjustments are periodically implemented within your group, what they are based on (profit margin adjustments, remuneration for specific services, price adjustments relating to previous supplies), and the contractual basis underlying them.
Review your intra-group agreements carefully. Do they refer, explicitly or implicitly, to specific services or do they merely aim to achieve a target margin? This will directly affect the VAT qualification.
Assess the practical implications. If an adjustment is qualified as a price adjustment relating to previous supplies of goods, you will need to issue credit notes or corrective invoices. This may become complex where different VAT treatments were applied to the original supplies.
Avoid the risk of non-deductible VAT. If VAT is incorrectly charged on a TP adjustment that does not qualify as a service, the recipient’s right to deduct VAT may be denied. Only VAT that is legally due is deductible. An incorrect qualification therefore affects both parties.
Conclusion
The Stellantis Portugal judgment confirms that a transfer pricing adjustment does not automatically give rise to a VATable service, but neither is it automatically “VAT-free”. The correct qualification depends on what the parties have contractually agreed and on the factual circumstances of the case. Multinational groups would therefore be well advised to reassess their transfer pricing architecture and consistently document the VAT implications.
Would you like one of our VAT specialists to review your transfer pricing adjustments? Moore’s VAT Expert Center will be happy to assist you.
