1 Background

The VAT treatment of intra-group transfer pricing adjustments (TP adjustments) has now been the subject of discussion in practice and case law for some time. In its judgment in Arcomet Towercranes (KMLZ VAT Newsletter 34 | 2025), the ECJ already clarified that compensation payments, intended to align the profit margin of a group company with the arm’s length principle, may constitute consideration for a taxable supply, provided that they are directly linked to a specific supply. In Stellantis Portugal, the Court was also required to determine under which circumstances subsequent TP adjustments constitute consideration for a separate supply, and when they instead result in an adjustment of the taxable amount of already completed transactions.

2 Facts

Stellantis Portugal, formerly General Motors Portugal (GMP), acted as a sales company within the General Motors group. It purchased vehicles and spare parts from affiliated manufacturers (OEMs) and sold them to independent dealers, who in turn resold them to final customers. In the event of production defects, warranty claims or roadside assistance cases, the dealers carried out repair works and invoiced GMP for the corresponding costs. Under the intra-group agreements, the initially determined prices for the goods supplied by the OEMs to GMP could be adjusted in order to ensure that GMP achieved a predefined profit margin. These adjustments were made at the end of each reference period. In addition to general operating costs, the repair costs borne by GMP were also taken into account in determining that margin. Depending on the outcome of the calculation, the OEMs issued either a credit note or a debit note to GMP, so that payments could arise in either direction.

The Portuguese tax authorities considered that GMP had provided repair services to the OEMs for consideration, since it initially bore the repair costs – for which the OEMs were responsible – and subsequently passed them on to the OEMs through the TP adjustments.

3 ECJ decision (judgment of 13 May 2026 – C‑603/24 – Stellantis Portugal)

The ECJ focused on the requirement of a direct link between the supply and the consideration received, which is necessary for a taxable transaction. Such a link presupposes a legal relationship within the framework of which there is reciprocal performance, the remuneration received constituting actual consideration for an identifiable service. According to the ECJ, such a legal relationship existed, on the basis of the intra-group agreement, only with respect to the supplies of goods from the OEMs to GMP. However, no obligation on the part of GMP to provide repair services to the OEMs for consideration could be derived from that agreement.

Even if the referring court were, nonetheless, to assume such a legal relationship, the ECJ expressed doubts as to whether the TP adjustments constituted actual consideration for any repair services. The Court emphasised that uncertainty as to the provision of any payment may break the direct link between the supply and the payment. In the present case, the ECJ did not consider that full reimbursement of the repair costs by the OEMs was ensured. The TP adjustments were calculated on the basis of various cost components, not only repair costs, and could therefore result in payments in either direction. The costs were only taken into account until the predefined profit margin was achieved. Accordingly, any link between the TP adjustments and possible repair services was, at most, indirect.

If the referring court were instead to conclude that no supply of repair services for consideration existed, but rather that the adjustments constituted a subsequent change to the price of the vehicles supplied, it would be for the national authorities to assess the impact on the taxable amount of those supplies.

4 Consequences for the practice

A comprehensive clarification of the VAT treatment of TP adjustments remains outstanding. Nevertheless, the judgment provides important guidance. Although the ECJ leaves the final classification to the referring court, it appears to regard the adjustments as subsequent amendments to the taxable amount of the supplies of vehicles. It also confirms the principle, already emphasised in Arcomet Towercranes, that the VAT treatment depends primarily on the existing legal relationships, in particular, the civil law arrangements. Of particular importance are also the explanations regarding the uncertainty of remuneration. While, in Arcomet Towercranes, the ECJ rejected such uncertainty, despite the (theoretical) possibility of payments in both directions, it considers it to be present here in relation to potential repair services.

In practice, this means that intra-group agreements must be carefully analysed. Mechanisms for establishing arm’s length prices must be designed in a manner that is, from a VAT perspective, robust. In particular, a clear distinction must be drawn between price adjustments and consideration for separate supplies. The contractual classification must be implemented consistently in both the accounting and VAT treatments.