CJEU clarifies that intragroup transfer pricing adjustments require at least a contractual basis to be treated as a supply of services

On 13 May 2026, the Court of Justice of the European Union (CJEU) issued its decision in the Stellantis Portugal case (C-603/24) regarding the VAT classification of transfer pricing adjustments.

Background and facts of the case

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

The third party dealers are responsible for performing specific repairs, the cost of which they charge to Stellantis Portugal.

Stellantis Portugal purchases the cars from the OEMs at a price based on the external sales price minus the budgeted distribution costs and an arm’s length distribution margin, as defined in an intercompany agreement. Notably, the budgeted distribution costs include, among other costs, the budgeted costs for the specific repairs performed by the third party dealers.

Transfer pricing adjustments occur between Stellantis Portugal and the OEMs to ensure that the final profit realised by Stellantis Portugal results in an arm’s length distribution margin.

To assess the need for these transfer pricing adjustments, Stellantis Portugal reports its actual distribution expenses to the OEMs (including actual salaries, marketing costs, repair costs, etc.).

The price adjustments are documented through debit or credit notes issued by the OEMs to Stellantis Portugal and considered adjustments to the original purchase price of the vehicles.

The Portuguese tax authorities disagreed with this approach and considered that the amounts represented a remuneration for taxable services provided by Stellantis Portugal to the OEMs, as the OEMs are responsible for dealing with the consequences of production defaults requiring these repairs.

Questions referred to the CJEU

Advocate General Kokott, in her opinion, intentionally rephrased the preliminary question to clarify the core issue and to provide a principle response regarding the VAT classification of transfer pricing adjustments. The CJEU, however, provided an answer to the initial referred question, which was whether article 2 of the sixth EU VAT directive must be interpreted to mean that the concept of a supply of services made for consideration includes an adjustment to the sale price of vehicles that is properly stipulated and agreed upon in a contract between the parties to secure a minimum profit margin and evidenced by a credit or debit note.

CJEU considerations

The CJEU confirmed that, for a taxable supply, there should be a direct link between the supply of services, on the one hand, and the consideration actually received by the taxable person, on the other. Such direct link is established if there is (i) a legal relationship between the provider of the service and its recipient pursuant to which there is reciprocal performance and (ii) remuneration received by the provider of those services constituting actual consideration for an identifiable service supplied to the recipient.

No reciprocal commitments

The CJEU noted that:

• The legal relationship between Stellantis Portugal and the OEMs concerned arises from a 2004 agreement.

• The objective of this agreement was to establish the transfer prices of the vehicles sold by those OEMs to Stellantis Portugal. The adjustments of those prices, provided for in that agreement, were intended to guarantee that Stellantis Portugal obtained a specifically determined profit margin.

• None of the clauses of the 2004 agreement states that there was a legal obligation between Stellantis Portugal and the OEMs, to which Stellantis Portugal was to provide a service to the OEMs (such as repairs), in return for remuneration.

No direct link

According to the CJEU, there is only an indirect link between the costs of the repairs and the transfer pricing adjustments:

• The transfer pricing adjustments were calculated based on multiple elements, of which the difference between the budgeted and the actual repair costs was only one factor.

• Various costs incurred by Stellantis Portugal were already considered in the initial pricing to ensure that the profit margin to be obtained, was achieved. Once this margin was achieved, there was no certainty for Stellantis Portugal that all repair costs were reimbursed by the OEMs.

Price adjustment?

The CJEU only indicates that, in the case at hand and based on the information made available, there is no service for consideration. The CJEU does not confirm that the transfer pricing adjustment is to be considered as a price adjustment for the sale of goods and refers that question back to the referring court.

Significance of the decision

The Stellantis case is the last case in a number of VAT and transfer pricing CJEU cases. The judgments, together with opinions of the advocates general, have shed some light on the interaction between VAT and transfer pricing, but many of those interactions still remain unclear. 

The judgment highlights the importance of carefully considering contractual relationships between related parties. Legal contracts should consider potential VAT and transfer pricing implications. Understanding the root causes of transfer pricing adjustments has become even more important. Reevaluating whether intercompany agreements, calculations of transfer pricing adjustments (including operational transfer pricing tools where relevant), and documentation are still appropriate in view of recent CJEU cases is advisable. It can in this respect be observed that meeting certain transfer pricing (best) practices could lead to unexpected outcomes from a VAT perspective.