VAT impact of transfer pricing adjustments

At a glance

The CJEU’s long-awaited “Stellantis Portugal S.A.” ruling highlights the need for businesses to anticipate the implications of intragroup activities.

A closer look

On 13 May, the Court of Justice of the European Union (“CJEU” or “the Court”) issued its decision in the “Stellantis Portugal, S.A.” case (C-603/24)^[1]
 

Background

This case concerns the VAT treatment of transfer pricing adjustment in intragroup transactions. The Court previously addressed this issue in the “Arcomet” case ^[2]. However, the factual background differs significantly. Importantly, both the CJEU in the “Arcomet” case and the European Commission, in several  working papers before^[3] and after^[4] that judgment, emphasized that there is no “one-size-fits-all” solution and that a case-by-case assessment is required. Against this background, the potential impact of the present case deserves careful consideration.
 

Facts

Stellantis Portugal, S.A. is part of the Stellantis group and acts, in the group’s terminology, as a “national sales company.” It purchases vehicles from the original equipment manufacturers (“manufacturers”) and resells them to independent dealers in Portugal.  

Stellantis Portugal S.A. reimburses those independent dealers for the costs incurred in connection with vehicle warranties granted to customers.  The dealers invoice these costs to Stellantis Portugal S.A. with VAT. The company then passes the costs on to the manufacturers, as documented through by credit or debit notes issued by the latter.

The Portuguese VAT authorities took the position that these payments constituted remuneration for services supplied by manufacturers to Stellantis Portugal S.A. and were therefore subject to Portuguese VAT.  The company disagreed, and the dispute was ultimately brought before the Portuguese Supreme Administrative Court (“Supremo Tribunal Administrativo”). That court referred a preliminary question to the CJEU, asking whether the concept of a “supply of services effected for consideration” includes a contractual adjustment of the vehicle sale price intended to achieve a minimum profit margin.
 

Advocate General conclusions

It is worth remembering the opinion of the Advocate delivered on 15 January^[5].

After extensive analysis, the Advocate General has concluded that the VAT treatment of profit adjustments made for income tax purposes depends on their nature and manner in which they are implemented. With that in mind, the Advocate General distinguished between several scenarios^[6]:

• Separate services: “Where the adjustment of profits is made by means of separate supplies of services (…) for consideration (creation of input and output) and there are not only fictitious supplies of services, those separate supplies of services for consideration constitute taxable transactions (…)”,
• Unilateral tax authority adjustments: “Where the adjustment of profits is made unilaterally and subsequently by the tax authority solely for the purposes of an appropriate allocation of profits between two tax-levying States, that is not, in principle, relevant for the purposes of VAT law.”
• Contractual price adjustments: “On the other hand, where, as in the present case, the adjustment of profits is made by means of a sale price which has been provided for precisely for that purpose and agreed to be variable and which relates to a specific supply of goods, that constitutes a reduction in the taxable amount (…) or a further part of the taxable amount (…). Since the change in the taxable amount of a supply relates solely to the consideration, it cannot itself constitute a ‘supply of services for consideration’ (…)”.
   

Decision of the Court

The Court first noted that the only legal relationship between Stellantis Portugal S.A. and the manufacturers was the 2004 agreement relating to the sale of cars, as described above. It emphasized that the purpose of the agreement was to determine the sale price of the vehicles and that any price adjustments were intended to secure a predetermined profit margin  to Stellantis Portugal S.A..  The Court also observed that none of the agreement’s clauses established an obligation for Stellantis Portugal S.A. to provide vehicle repair services to the manufacturers in exchange for remuneration.Accordingly, the Court held that the transfer pricing adjustment at issue did not constitute consideration for a supply of services and therefore fell outside the scope of VAT. It noted, however, that the outcome could differ where a legal relationship exists under which services are supplied for agreed remuneration.
 

Comments

The Court adopted a more direct and fact-specific approach than the Advocate General, whose Opinion nevertheless remains an important reference point. The judgment focuses closely on the contractual arrangements and the circumstances of the case, ultimately rejecting the existence of a taxable supply of services between the parties.

The decision once again underlines the importance of robust documentation and confirms that no “one-size-fits-all” approach applies in this area. Instead, each situation must be assessed on a case-by-case basis.

The Deloitte Luxembourg Indirect Tax Team remains available to discuss the potential implications for your organization.

^[1] C-0603-24-00000000RP-01-P-01_ARRET_320716-EN-1

^[2] SC Arcomet Towercranes STL, C-726/23, 4 September 2025 (see our newsletter : CJEU ruling on the VAT valuation of intragroup services | Deloitte Luxembourg | Input VAT | News).

^[3] WP 923, 28 February 2017,  Possible implications of transfer pricing

^[4] WP 1114, 10 October 2025,  WP-1114-Commission-Case-law-C-726-23-Arcomet-Towercranes-Transfer-pricing.pdf

^[5] Cases - InfoCuria - Court of Justice of the European Union.  (see our newsletter : https://www.deloitte.com/lu/en/services/tax/perspectives/vat-impact-transfer-pricing-adjustments.html).

^[6] We underline.