The VAT treatment of transfer pricing adjustments is once again in the spotlight. This time, this is due to the judgment of the CJEU of 13 May 2026 in the Stellantis Portugal case (C-603/24).

At the outset, it is worth noting that significant expectations were attached to the published judgment. In particular, it was expected that this time the Court would decide to define, as precisely as possible, the conditions for treating transfer pricing adjustments from a VAT perspective - or at least do so better than in its numerous previous, albeit rather non-specific, rulings. This was undoubtedly hoped for by taxpayers making profitability adjustments in distribution models involving related parties.

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The judgment may, however, be read in two ways. On the one hand, it did not provide new interpretative guidance for VAT purposes. Once again, the CJEU emphasised that the specific settlement model, contractual arrangements and the ability to demonstrate a direct link between a supply and the consideration received are of key importance.

On the other hand, the judgment may have significant practical relevance from a transfer pricing perspective, primarily because it once again highlights the need to analyse the actual nature of an adjustment on a case-by-case basis. A profitability adjustment, accounting note or year-end adjustment should not be treated automatically either as a VAT-neutral settlement outside the scope of VAT or as remuneration for a service. What matters is what actually follows from the settlement model, the agreement, the calculation method and the documentation supporting the given settlement.

What was the case about?

The case concerned General Motors Portugal - currently Stellantis Portugal - acting as a local car distributor in Portugal. Under the business model adopted within the group, the company purchased vehicles from group manufacturers and then sold them to local dealers, who resold them to end customers.

Importantly, the company also incurred costs related to the distribution of cars, including the costs of repairs carried out after the sale of the vehicles. The repairs were performed by dealers, who subsequently charged the Portuguese distributor for their costs, adding VAT. Information on the repair costs was then provided by the company to the group manufacturers.

Transfer pricing adjustments were made between the company and the manufacturers. In accordance with the contractually agreed methodology, the initial prices of the cars were adjusted so that the company’s actual profit corresponded to the target profitability level. The price adjustment was documented with accounting notes as a settlement outside the scope of VAT and - depending on the outcome of the calculation - could take the form of either credit notes or debit notes.

This element is particularly important from a TP perspective. The mechanism described in the case did not concern a simple recharge of a specific cost, but rather a broader model for determining and adjusting the distributor’s profitability. In other words, repair costs were one of the parameters affecting the calculation, but the adjustment itself was intended to achieve a specific profit level. This distinction may be crucial when assessing whether a given settlement is merely a profitability adjustment, an adjustment to the price of the original transaction, or remuneration for a separate supply.

The Portuguese tax authorities, however, took the view that, to the extent the adjustment took into account repair costs incurred by the distributor, it in fact constituted remuneration for services supplied by the distributor to the manufacturers. Consequently, in the authorities’ view, such a settlement should be subject to VAT.

What did the CJEU say?

The Court indicated that the mere adjustment of transfer prices provided for in an agreement between group entities, aimed at ensuring a specific profit margin for the distributor and documented with a credit or debit note, does not in itself constitute remuneration for a supply of services for consideration.

In other words, the mere fact that certain costs incurred by the distributor are included in the adjustment calculation is not sufficient to conclude that the distributor supplies a service to the manufacturer.

In the case at hand, the CJEU noted that the agreement between the group entities primarily concerned the mechanism for determining and adjusting transfer prices. It did not indicate, however, that the company was obliged vis-à-vis the manufacturers to provide vehicle repair services for consideration.

It was also relevant that repair costs were only one of the elements of the adjustment calculation. The mechanism also took into account other distribution and operating costs and, in the Court’s view, if a link between the adjustment and the repair service could be identified at all, that link could only be regarded as indirect.

Interestingly, this is a very practical indication from a transfer pricing perspective. The mere inclusion of certain costs in the adjustment calculation does not, in itself, determine the nature of the entire settlement. In distribution models, TP adjustments often take into account a number of financial elements — operating costs, marketing costs, warranty costs, sales levels, target margin or other parameters affecting profitability. The judgment shows, however, that this does not automatically mean that each of these elements creates a separate taxable supply. At the same time, it does not mean that a taxpayer may disregard the analysis simply because the settlement has been labelled a “transfer pricing adjustment”.

The CJEU also reserved that the final assessment of the facts is for the national court. The Court therefore indicated an interpretative direction rather than conclusively determining all elements of the case - especially since the request for a preliminary ruling did not contain circumstances that would allow the existence of a separate legal relationship involving the provision of repair services by the distributor to the manufacturers to be clearly confirmed.

It is also worth noting that, in one of the final points of the judgment’s reasoning (paragraph 47), the CJEU expressly indicated that the mere fact that the national court does not classify the TP adjustment as remuneration for a repair service does not mean that the profitability adjustment cannot constitute a VATable adjustment to the price of the vehicle supplies, i.e. the original, “primary” transaction between GMP and the manufacturer. The examination of this issue will again be for the national court. It seems that, with this statement, the Court once again avoids taking responsibility for a more explicit determination of the conditions under which a profitability adjustment should be subject to VAT.

Why this judgment matters - and why it doesn’t

On the one hand, it should be noted that the Court did not adopt a simple assumption that, because an adjustment takes into account costs incurred by one entity, this automatically means that there is a service supplied to another group entity. This is important because, in practice, profitability adjustments are often based on multiple financial elements, including operating costs. This provides some interpretative guidance for this type of settlement between related parties.

At the same time, there is no doubt that the judgment does not provide taxpayers with full comfort. The CJEU once again clearly left room for interpretation when assessing the nature of the settlement. What remains crucial is whether, based on the circumstances of a given case and the available documentation, it is possible to identify a specific supply, a legal relationship involving the exchange of reciprocal performances, and a payment constituting remuneration for that supply.

For taxpayers, this means the need to ask several very specific questions: does the adjustment relate to specific supplies of goods or services, or only to the overall level of profitability? Can the payment be linked to a specific reciprocal supply? Does the intragroup agreement describe only the transfer pricing mechanism, or also a separate obligation to perform specific services? Is the adopted method of documenting the adjustment consistent with its economic rationale and with the local transfer pricing documentation?

This consistency is currently one of the most important elements of tax safety. The TP documentation, intragroup agreement, adjustment calculation, accounting note, VAT settlements and accounting treatment should all “tell the same story”. If the TP documentation indicates that the adjustment is intended solely to ensure an arm’s length level of profitability for the distributor, but at the same time the contractual description or calculation suggests the reimbursement of specific costs or remuneration for specific activities, the risk of a different tax classification increases significantly.

In practice, the Stellantis Portugal judgment should therefore be treated not as the end of the discussion, but as an impulse to review one’s own intragroup settlements. The issue is not limited to whether a TP adjustment should be documented with a note or an invoice. The broader question is whether the adopted settlement model is consistent, properly described, defensible from an evidentiary perspective, and correctly reflected both in the TP documentation and in the VAT settlements.

The conclusions from the judgment are therefore cautious, but they may have practical significance. The CJEU does not provide taxpayers with a simple action plan, but it clearly shows that the classification of an adjustment depends on the realities of the specific model. It is therefore all the more worthwhile to analyse them in advance - before the adjustment becomes an issue at the year-end closing stage, in day-to-day settlement processes under the Polish National e-Invoicing System (KSeF), or during a tax or customs and fiscal audit.

See also

Transfer pricing adjustment with VAT – CJEU judgement

VAT on TP adjustments – what will the CJEU judgement bring?

Next preliminary question regarding VAT on transfer pricing adjustments – Stellantis Portugal case (C-603/24)

Judgment in the Högkullen case – CJEU clarifies VAT rules for intra-group transactions

Adjusting the Adjustments - reflections on multi-tax challenges. The never-ending story of TP-VAT-CIT-WHT-Investment Relief-Customs risks and year-end closing

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CRIDO supports businesses in the area of transfer pricing and VAT settlements, including the analysis of the nature of TP adjustments, assessment of tax risks, preparation of documentation, review of intragroup settlement models and ongoing tax advisory support regarding the classification and documentation of profitability adjustments.