Executive summary 

The decision in the Stellantis case confirms that the VAT treatment of TP adjustments must be assessed by reference to the existence of an identifiable supply made in return for consideration. The Court avoids both the automatic exclusion of TP adjustments from the scope of VAT or their automatic reclassification as taxable supplies. 

 

The Stellantis case

In Stellantis Portugal (C-603/24, judgment of 13 May 2026), the Court of Justice of the European Union once again addresses the relationship between transfer pricing (“TP”) and VAT, clarifying the circumstances in which intra-group adjustments may become relevant for VAT purposes. The issue is particularly significant for multinational groups, since the qualification of such flows may give rise to invoicing obligations, the application of the reverse charge mechanism, effects on the right to deduct VAT and on the determination of the taxable amount, as well as the need to ensure consistency between TP documentation, intra-group agreements, invoices and financial flows.

The dispute concerns transfer pricing adjustments within the group, at the time belonging to General Motors, related to the costs incurred by Stellantis Portugal in connection with warranty repairs and roadside assistance in the context of its vehicle distribution activity.

Portuguese dealers, which independently resold the vehicles purchased from Stellantis Portugal, initially provided assistance relating to warranty repairs to final customers and subsequently recharged those costs, including VAT, to Stellantis Portugal. The latter, pursuant to an agreement on the transfer pricing of vehicles within the group concluded in 2004, included those costs, together with its own operating expenses, among the relevant parameters of the intra-group pricing mechanism. That mechanism was intended to ensure that the National Sales Companies / National Sales Organisations (“NSC/NSO”) achieved a certain pre-agreed profit margin. Depending on the margins achieved, the adjustments were implemented through the issuance of credit notes or debit notes. In this factual context, the Portuguese tax authorities argued that those adjustments constituted consideration for taxable supplies of services, with the consequent recovery of VAT on the corresponding amounts.

The Court rejects the approach adopted by the tax authorities and clarifies that an ex post price adjustment, carried out within the framework of a transfer pricing mechanism, does not automatically imply the existence of a taxable supply of services. According to the Court, the mere fact that certain costs are reallocated within a group or affect the transfer price is not sufficient to constitute a taxable supply of services, in the absence of a direct link between the payment made and an identifiable service supplied to the counterparty. Based on the documentation made available to it, the Court therefore excluded that the reimbursement granted to the distributor could be classified as consideration for a service supplied to the manufacturer, since it was rather an element considered in the price adjustment mechanism. Moreover, the Court observes that qualifying such adjustments as consideration for services would have blurred the distinction between a price adjustment mechanism and remuneration for an independent taxable service. This conclusion is reinforced by the fact that the underlying agreement did not contain any clause showing that the manufacturers would bear the costs incurred by Stellantis Portugal in exchange for a specific consideration. 

The judgment therefore confirms the conceptual distinction between transfer pricing and VAT already outlined in the Court’s previous case law, including, in particular, Arcomet Towercranes (C-726/23): adjustments made exclusively to realign profits do not automatically produce VAT effects. Instead, it is necessary to verify, on a case-by-case basis, whether there is an actual supply of services for consideration or merely an accounting and economic adjustment of intra-group profitability, in accordance with the arm’s length principle.

In this context, it is possible to distinguish  three scenarios: genuine intra-group supplies of services, which are taxable when remunerated by actual consideration resulting from an express agreement and attributable to identifiable services; intra-group adjustments to the transfer prices of goods, aimed at ensuring predetermined margins among the group members, which generally do not have autonomous relevance for VAT purposes when they are not linked to a specific supply; and TP adjustments made unilaterally by the tax authorities exclusively for profit allocation purposes, which generally remain irrelevant for VAT purposes.

This much-awaited decision does not give a clear and definitive view on whether TP adjustments constitute consideration for a VATable supply. It however highlights the necessity of analysing these transactions on a case by case basis, in the light of the relevant agreements and reciprocal obligations of the parties involved. A review of the TP policies must therefore be considered in the light of VAT to address the financial impacts (notably in the case of companies not benefiting of full input VAT deduction right) and meet the VAT compliance requirements such as the need to issue invoices/credit notes and the relevant reporting in VAT returns.