AG opines certain TP adjustments on intragroup supplies made for income tax via agreed variable sales prices are adjustments of taxable base for VAT

On 15 January 2026, Advocate-General (AG) Kokott of the Court of Justice of the European Union (CJEU) issued her opinion in the Stellantis Portugal case (C-603/24).

This is the final case in a series of CJEU cases on intragroup transactions (Weatherford Atlas Gip ( C-527/23), Arcomet Towercranes (C-726/23), and Högkullen (C-808/23)).

Facts of the case

Stellantis Portugal is engaged in the sale of cars in Portugal by purchasing vehicles from manufacturers (original equipment manufacturers (OEMs)), which are group companies, and selling them to local third party dealers, who resell them to end customers.

Stellantis Portugal bears the cost of certain repairs, which were initially incurred by the dealers, and invoiced to Stellantis Portugal including VAT. Information on the amount of costs incurred for repairs, as well as other costs related to the distribution of cars, is provided by Stellantis Portugal to the OEM.

Transfer pricing (TP) adjustments occur between Stellantis Portugal and the OEMs to ensure that the final pricing results in an arm’s length margin, as stipulated in the intercompany contract, where these adjustments are considered adjustments to the original car prices. The adjustments are based on the profit actually achieved by Stellantis Portugal, as well as the aforementioned costs incurred. The price adjustments are documented through debit or credit notes.

The Portuguese tax authorities disagreed with this approach and considered the amounts represented remuneration for taxable services provided by Stellantis Portugal to the OEMs, as the OEMs are responsible for repairs.

AG’s analysis

AG Kokott disagreed with the position of the Portuguese tax authorities. She considered that adjustments to the sale price of goods, contractually agreed to reflect actual costs (such as warranty costs or operating expenses)—whether increases or reimbursements—do not amount to a separate supply of services from the purchaser to the seller. A supply of services in return for a negative consideration is not contemplated by VAT law and has no VAT consequences.

She further opined that the adjustment of profits for the purpose of income tax law is in principle alien to VAT law and therefore does not constitute consideration for a supply of services, regardless of the supplier.

The relevance of a TP adjustment from a VAT perspective depends on the reason for the adjustment and how it is made:

• If consideration has been agreed for a supply of services, there is a supply for VAT irrespective of whether a corresponding positive result is achieved.

• If, for income tax reasons, the tax authority unilaterally requires adjustments to the TP (usually as a result of a tax audit) which increase or decrease the profits, no corresponding adjustments would be made in the other jurisdiction and the amount of VAT owed or paid does not change.

• If a TP adjustment is made by an agreed variation to the sales price of a specific supply of goods (as in the case of Stellantis Portugal), this is either a decrease or an increase in the taxable amount of that supply. Such an adjustment does not constitute a supply of services for consideration by the purchaser of the goods.

Relevance of the opinion

The AG has taken the position that profit adjustments related to intragroup supplies of goods—made for income tax or TP purposes through agreed variable or determinable sales prices—should not be treated as a supply of services in an arrangement such as that used by Stellantis. 

The AG intentionally rephrased the preliminary question to clarify the core issue and provide a principled response regarding the VAT implications of TP adjustments made.

It remains to be seen whether the CJEU will follow this route of adjustment of taxable base and whether it will address also possible VAT treatments (e.g., out of scope treatment of the adjustment).

As highlighted in our previous alert concerning the Arocomet judgment (please refer to our Tax Alert dated 5 September 2025), it remains important to recognise the differences between VAT and TP—not only in legal terms but also in concepts, terminology, and documentation requirements. Understanding these distinctions and being prepared to support the positions taken will become increasingly important, especially as these issues are now often considered together following recent CJEU rulings.

The CJEU’s decision is expected in the coming months.