On 13 May 2026, the Court of Justice of the European Union (“CJEU”) issued its judgment in Stellantis Portugal (C-603/24), another important case on the VAT treatment of transfer pricing adjustments.
Stellantis Portugal purchased vehicles from European group manufacturers and resold them to independent Portuguese dealers. Where vehicles were affected by manufacturing defects, warranty issues or roadside assistance events, the dealers carried out the repairs and invoiced the related costs, with VAT, to the Portuguese distributor.
Under the group’s transfer pricing policy, the prices charged by the manufacturers to the Portuguese distributor were adjusted periodically to ensure that the distributor achieved a predetermined operating margin. These adjustments were documented by credit or debit notes and were calculated by reference to the distributor’s overall cost base, including repair costs and operating costs such as staff, electricity and marketing.
The Portuguese tax authorities challenged the VAT treatment of those adjustments. They argued that, insofar as the adjustments reflected warranty and repair costs, they constituted consideration for repair or after-sales services supplied by the Portuguese distributor to the manufacturers and should therefore be subject to Portuguese VAT.
Judgment of the CJEU
The CJEU rejected the approach of the Portuguese tax authorities.
The Court recalled that a service is supplied for consideration only where there is a direct link between the service supplied and the consideration received. This requires a legal relationship involving reciprocal performance, with the remuneration constituting actual consideration for an identifiable service.
In this case, the intra-group agreement governed the transfer prices of the vehicles and aimed to ensure that the Portuguese distributor achieved a predetermined profit margin. It did not create an obligation for the distributor to repair vehicles for the manufacturers in return for remuneration.
The Court also noted that the adjustments were not calculated solely by reference to repair costs. They reflected several cost items and the broader objective of achieving the agreed profit margin. The mechanism could result in either credit notes or debit notes and, once the target margin was achieved, the distributor was not necessarily reimbursed for all repair costs.
On that basis, the CJEU concluded that any link between potential repair services and the transfer pricing adjustments was, at most, indirect. The adjustments could therefore not be treated as consideration for a separate supply of services.
The CJEU did not, however, rule out that the transfer pricing adjustment could be treated as an adjustment of the sale price of the vehicles supplied by the manufacturers to the Portuguese distributor. If so, the adjustment could still have VAT consequences, not as consideration for a separate service, but as an adjustment to the taxable amount of the underlying supply of cars.
A helpful but limited judgment
The judgment is welcome because it confirms that a transfer pricing adjustment should not automatically be treated as consideration for a VAT-taxable service merely because the adjustment formula includes service-related costs.
This is particularly relevant for groups using resale-minus, TNMM or other profitability-based mechanisms where year-end true-ups are based on broad cost and margin calculations. The mere inclusion of warranty, marketing, logistics or other service-type costs in the formula should not, in itself, create a VAT-taxable service.
However, the judgment remains limited. The Court focused on what the adjustment was not: it was not consideration for a separate repair service. It did not provide a comprehensive framework for determining what the adjustment was from a VAT perspective.
This is somewhat disappointing. In her opinion, Advocate General Kokott had proposed a clearer distinction between:
1. genuine separate supplies of services for consideration;
2. purely unilateral transfer pricing corrections made for direct tax purposes, which should in principle be irrelevant for VAT;
3. contractual adjustments to the price of specific goods or services, which should affect the taxable amount of the underlying supply.
That framework would have provided more practical guidance, especially after Arcomet Towercranes (see PwC flash). Instead, the CJEU stayed close to the narrow question referred and left several practical issues unresolved.
Practical takeaways
The judgment confirms that the VAT treatment of transfer pricing adjustments remains highly fact-sensitive. Businesses should not assume that all transfer pricing true-ups are outside the scope of VAT. Equally, tax authorities should not assume that cost-based adjustments are, by default, payments for separate services.
For multinational groups, the contractual framework remains critical. Transfer pricing policies, intercompany agreements, credit/debit notes and VAT reporting should be aligned and should clearly support the intended VAT treatment.
In practice, year-end adjustments should be documented as either:
- price adjustments to underlying supplies;
- payments for identifiable services; or
- profit reallocations outside the scope of VAT.
This is particularly important for businesses operating in partially exempt sectors, where an incorrect VAT treatment may result in VAT leakage.
The Stellantis judgment provides useful protection against an excessive requalification of transfer pricing adjustments as services. However, it does not close the debate. The VAT treatment of transfer pricing adjustments remains a grey area requiring careful case-by-case analysis.
For more information or to discuss what this means for your business, please contact your usual PwC advisor, or connect with Lionel Wielemans and Claire De Lepeleire.
