The interaction between value-added tax (VAT) and transfer pricing (TP) remains a key area of tension in EU tax law. In the Stellantis Portugal Case (C-603/24), the CJEU clarifies that transfer pricing adjustments aimed at achieving a target margin are not consideration for services and, depending on the circumstances, may be regarded as adjustments to the price of the underlying transaction. This case once again illustrates that the VAT treatment of transfer pricing adjustments always depends on the underlying facts and must therefore be assessed on a case-by-case basis.
Stellantis Portugal (Stellantis) acted as a distributor of vehicles within the group, purchasing vehicles from related manufacturing entities and reselling them to independent Portuguese dealers. When recalls, warranty issues, or roadside assistance cases arose, the dealers carried out the repairs and then invoiced Stellantis for the related costs, including VAT.
Under an intragroup agreement, Stellantis periodically reported its costs, including repair costs and other exploitation expenses, such as personnel, electricity, and marketing costs, to the manufacturing entities. At the end of each period, the parties adjusted the purchase price of the vehicles so that Stellantis achieved a predetermined target operating margin. That margin was determined by comparing the external vehicle sales prices with Stellantis’s distribution costs, with the difference representing the operating margin. These adjustments were implemented through credit or debit notes issued by the manufacturing entities.
The Portuguese tax administration took the position that these adjustments constituted consideration for repair services for motor vehicles allegedly provided by Stellantis to the manufacturing entities and therefore assesses VAT (at that time, pre VAT package implementation, such service was subject to local Portuguese VAT).
The central issue was whether a transfer pricing adjustment can constitute consideration for a VAT-taxable service. The CJEU answered this clearly: adjustments aimed at ensuring a target operating margin are not consideration for services.
The decisive criterion is whether there is a direct link between an identifiable service and a payment made within a reciprocal legal relationship. In this case, no such link existed. The repair activities formed part of the overall distribution and sales agreement and did not constitute a separate supply by Stellantis to the manufacturing entities.
In addition, the adjustment was based on multiple cost components and could result in either a credit note or a debit note, confirming that any link between the alleged services and the payment was merely indirect.
As a result, the Court concluded that the adjustment did not constitute consideration for a service. While the judgment suggests that the adjustment may be viewed as an ex-post price adjustment of the original supply of goods, the Court did not explicitly take a position on this qualification.
That said, the Court also made clear that VAT may arise where a transfer pricing adjustment reflects the actual remuneration for a clearly identifiable service within a distinct contractual relationship. The judgment therefore confirms that TP adjustments do not automatically trigger VAT and that the analysis hinges on the contractual framework and the existence of a direct link.
The judgment confirms that transfer pricing adjustments do not automatically give rise to VAT. Where an adjustment merely aligns the distributor’s margin and forms part of the pricing of the original supply, it is more likely to be treated as a price adjustment rather than remuneration for a separate service. This provides useful guidance for groups implementing such adjustments in practice.
It is important to carefully review your intercompany agreements and supporting documentation. The contractual wording, transfer pricing policy, calculation methodology and VAT treatment should be aligned, as inconsistencies may increase the risk of recharacterisation and audit exposure. In practice, this requires a clear articulation of whether an adjustment is intended to correct pricing, remunerate a specific service, or align overall profitability within the group.
The judgment also highlights that not all adjustments are alike. In particular, large or aggregated year-end adjustments may be more difficult to link to specific underlying transactions and could therefore attract increased scrutiny from tax authorities. Businesses may wish to reassess whether their current TP model, contractual framework and VAT treatment remain robust in light of this decision, and whether enhanced documentation or a more granular approach would be appropriate.
While the CJEU provides useful guidance, the VAT treatment of TP adjustments ultimately remains a case‑by‑case assessment, depending on the specific facts, contractual framework and economic rationale.
Finally, not all scenarios have yet been addressed by the European Court. Can it, for instance, be concluded that a TP adjustment falls outside the scope of VAT where there is no link whatsoever to a supply of services, nor does it constitute an adjustment to the price of earlier supplies of goods or services?
Authors: Tine Slaedts, Stijn Vastmans & Stefanie Van der Straeten