AG CJEU: transfer pricing adjustments in this case qualify for VAT purposes as adjustments to the price of earlier sales
On January 15, 2026, the opinion of Advocate General Kokott (“AG”) at the Court of Justice of the European Union (“CJEU”) was published in the case Stellantis Portugal (C‑603/24, “Stellantis PT”). In this opinion, the AG presents her view on the VAT treatment of transfer pricing adjustments between the sales entity Stellantis PT and the manufacturers in the group in order to arrive at a fixed profit margin for Stellantis PT. The AG concludes that in this case, the transfer pricing adjustments for VAT purposes must be regarded as upwards or downwards adjustments to the original prices of earlier sales to Stellantis PT. Below, we discuss the AG’s opinion.
1. Facts and circumstances
Stellantis PT is part of an international group engaged in the development and sale of cars and car parts. Stellantis PT is a sales entity within the group and purchases cars from other European group companies (the manufacturers) and sells them onwards to Portuguese dealers. The Portuguese dealers then sell the cars to end consumers. Within the Stellantis group, a fixed profit margin for Stellantis PT has been agreed based on transfer pricing policy. Throughout the year, the manufacturers estimate the expected sales prices and costs of Stellantis PT and, on that basis, determine the (provisional) price that Stellantis PT pays for the purchase of the cars. During the year, Stellantis PT monitors its actual costs and sales revenues. Based on this, transfer pricing adjustments (both upwards or downwards ) take place every three months between the manufacturers and Stellantis PT to arrive at the agreed profit margin.
One of Stellantis PT’s cost items consists of the repair of cars. If something is wrong with a car (recall, defect during the warranty period, etc.), the dealers repair it. Under the agreements between Stellantis PT and the dealers, the dealers invoice Stellantis PT for these repair costs including Portuguese VAT. Stellantis PT reports these costs (and other costs) to the European manufacturers from whom it has purchased the cars. This report of revenues and costs leads to the transfer pricing adjustments mentioned.
Stellantis PT and the manufacturers took the position that these adjustments correct the original sales prices for the sales of cars from the manufacturers to Stellantis PT, and issued corrective invoices accordingly. However, the Portuguese Tax Authorities assume that the transfer pricing adjustments include an amount relating to the repair costs and take the position that this amount constitutes the consideration for a repair service provided by Stellantis PT to the manufacturers. At the time, Portuguese VAT would have been due in that case, and additional assessments were issued. The Portuguese court has asked the CJEU whether this is indeed the correct VAT treatment of the transfer pricing adjustments.
2. Opinion of the AG
The AG disagrees with the position of the Portuguese Tax Authorities that the transfer pricing adjustments must be regarded as consideration for a separate repair service provided by Stellantis PT to the manufacturers. The AG takes into account that the transfer pricing adjustments in practice may take place either upwards or downwards. She cannot reconcile this with the position that a repair service is performed for consideration. In such case, the manufacturers would always have to pay Stellantis PT.
Moreover, the AG observes that no repair services were agreed between the manufacturers and Stellantis PT. The mere fact that repair costs borne by Stellantis PT are taken into account in the pricing of the purchased cars does not mean that a separate service provided by Stellantis PT to the manufacturers can be assumed. The AG (logically) does not address the recharge of costs between the dealers and Stellantis PT. The question could be raised whether repair services were agreed in that relationship.
According to the AG, in this case the transfer pricing adjustments must be regarded as adjustments (upwards or downwards) to the original (estimated) prices for the supplies of cars by the manufacturers to Stellantis PT. This therefore changes the VAT taxable amount of the earlier supplies of cars and corrective invoices must be issued. This is exactly what the manufacturers and Stellantis PT have done.
The AG then discusses in more general terms the VAT treatment of transfer pricing adjustments. She notes that there is no unequivocal answer to the question of how transfer pricing adjustments should be treated for VAT purposes, because profit adjustments generally form an element that is inherently foreign to VAT. The outcome of such adjustments can therefore differ from case to case. She distinguishes three main categories:
- Transfer pricing adjustments unilaterally made by the tax authority in determining taxable profit
These adjustments fall outside the scope of VAT and do not give rise to VAT corrections. VAT is based on “actual” payments between two parties, where one party receives the same amount as the other pays. This is not always the case with unilateral corrections by the Tax Authorities, according to the AG, and therefore these adjustments must be ignored for VAT purposes. - Transfer pricing adjustments made as a result of actually agreed and supplied services between group companies
In such case, according to the AG, VAT‑taxable services apply. This is also the judgment for the transfer pricing adjustments in the earlier CJEU case SC Arcomet SRL (C‑726/23). However, the AG notes that she has doubts about the correctness of this judgment if the transfer pricing adjustment can in practice be either upwards or downwards. In that case, she considers the transfer pricing adjustment not as consideration for an actual service, but rather as “fictitious invoicing” for a fictitious service. It is unclear what VAT consequences she attaches to this observation. - Transfer pricing adjustments intended to definitively determine the (variable) price of previous supplies
This is the case in the present matter according to the AG. Such transfer pricing adjustments correct the VAT taxable amount of previous supplies. She aligns this with CJEU case law on the consequences of transfer pricing adjustments for customs duties (particularly the judgment in Tauritus (C‑782/23)).
The AG asks the CJEU in its judgment to address the above three categories to eliminate as many existing uncertainties as possible. Experience shows, however, that the CJEU prefers to answer only the specific question presented in the specific case. It is therefore uncertain whether more clarity will be provided in the judgment regarding the VAT treatment of transfer pricing adjustments in general. The judgment is expected later this year.
3. Practical consequences
The VAT treatment of transfer pricing adjustments is receiving increasing attention in practice. Over the past year, the CJEU has issued several judgments on this topic. Important in this case is that the transfer pricing adjustments relate to earlier supplies of goods. If the AG’s opinion is followed, this means that the transfer pricing adjustments are not regarded as consideration for separate repair services supplied by Stellantis PT, but as adjustments to the original prices (upwards or downwards) of earlier sales of cars by the manufacturers to Stellantis PT.
This can have complex consequences, because, for each transfer pricing adjustment, it must be assessed and determined to which earlier supplies it can be attributed, corrective invoices must be issued, and the VAT taxable base of those earlier supplies must be adjusted in the correct VAT returns.
It may be possible to avoid this complexity by treating the transfer pricing adjustments as consideration for a separate service. The AG rightly emphasizes that the VAT treatment of transfer pricing adjustments also depends on what has been agreed between the parties. If separate services (for example, marketing) can be identified, it seems possible – with proper documentation of agreements in place – to determine that transfer pricing adjustments relate to such services (main category 2 above) and do not constitute adjustments to the pricing of earlier supplies (main category 3). This will perhaps require that in practice the adjustments consistently move in “one direction”.
It is now up to the CJEU to issue a final judgment in this case. For your organization, however, it is already important to clearly map the various transfer pricing agreements, properly document them in the documentation and contracts between the involved group companies, and determine the VAT treatment accordingly. This becomes even more important given developments in e‑invoicing and digital reporting in various countries. The developments require invoicing to be completed much more quickly than in the past, with invoices sometimes needing to be reported nearly real-time to the tax authorities. Any corrections to the taxable amount must then also be corrected again at the invoice level. This makes robust and transparent documentation and processes essential.
If you have questions or would like to discuss the consequences of transfer pricing adjustments in your organization, the advisors of the Indirect Tax Group of Meijburg & Co are happy to assist. Please feel free to contact one of our specialists or your regular contact person.
