On 13 May 2026, the Court of Justice ruled in Stellantis Portugal (C-603/24) on the VAT treatment of transfer price adjustments within a group.
The case
The Portuguese company belonged to the General Motors group. It bought vehicles from the group's European manufacturers and resold them to independent dealers in Portugal. When a vehicle had a manufacturing defect, the dealer repaired it and charged the Portuguese company, with VAT. A transfer pricing agreement guaranteed the company a set profit margin, so the price of the vehicles was adjusted afterwards through credit or debit notes.
The Portuguese tax authority treated this as a taxable repair service from the company to the manufacturers.
The ruling
The adjustment is not consideration for a supply of services if it meets three features:
- it is duly set out in an agreement between the group companies, intended to guarantee a predetermined margin on resale;
- it is evidenced by a credit or debit note;
- it is calculated on the basis of, among other things, the repair costs that the buying company incurred.
The exception is a legal relationship with reciprocal commitments, in which the buyer supplies services and the seller pays for them through the adjustment. That would create a direct link.
Here, repair costs were only one parameter next to operating costs. They counted only to reach the margin, and the company had no guarantee that all of them would be reimbursed. Any link therefore appeared to be indirect at most. The Portuguese court must verify this.
What to check
- Review your transfer pricing agreements. Does an adjustment secure a margin, or does it pay for an identifiable service?
- Keep the agreement and the credit or debit notes consistent.
- Look at the goods side as well. If the adjustment changes the purchase price, the Court said it is for the national authorities to assess the effect on the taxable amount of the supply of the vehicles.
- The case arose under the Sixth VAT Directive.
mr. J. el Khalfioui LL.M.