For years, transfer pricing has been viewed almost exclusively through the lens of direct taxation. However, its interaction with VAT is no longer a marginal issue. The recent judgment of the Court of Justice of the European Union (CJEU) in Case C-603/24, Stellantis Portugal, confirms that the relationship between these two areas is much closer than it may appear.
This judgment, handed down on May 13 2026, is also the third recent ruling of the CJEU concerning the VAT implications of transfer pricing adjustments, which shows that these two realities can no longer be analysed as separate compartments.
A debate that no longer belongs solely to direct taxation
The Stellantis case concerns a multinational group in the automotive sector with an entity acting as a distributor. That company purchased vehicles from group manufacturers and resold them to dealers, which in turn sold them to final consumers.
The intra-group agreement provided for a transfer pricing adjustment mechanism. These adjustments were linked, among other factors, to costs arising from repairs, warranties, and after-sales assistance relating to vehicles previously purchased and resold by the dealers. The Portuguese tax authorities argued that the amount in question remunerated an autonomous service supplied by the distributor to the manufacturers.
Price adjustment or autonomous service?
The dispute sought to determine whether the position of the Portuguese tax authorities was correct or whether the adjustment made should be treated as a reduction of the price of the vehicles previously purchased.
EU VAT legislation expressly refers to matters close to transfer pricing when regulating the taxable amount in transactions carried out between related parties (articles 72 and 80 of the VAT Directive). However, framing the debate solely in terms of the taxable amount overlooks the decisive issue of whether the adjustment falls within the scope of VAT in the first place.
The question therefore requires a return to the most basic principles of VAT, such as determining whether there is a transaction carried out for consideration. In other words, the analysis must establish whether the amount paid as a result of the adjustment constitutes consideration for a supply subject to VAT.
The CJEU resolves the issue by stating that the classification of a transaction for VAT purposes depends on the existence of a supply made for consideration between taxable persons, with a direct link between the service supplied and the consideration received.
From this perspective, not all adjustments arising from transfer pricing policies receive the same VAT treatment. Adjustments unilaterally imposed by the tax authorities to reallocate profits between jurisdictions would not constitute consideration agreed between the parties and would therefore fall outside the scope of VAT.
By contrast, adjustments voluntarily agreed by the parties and linked to specific and identifiable prior transactions would fall within the scope of VAT. According to the CJEU, such adjustments cannot automatically be regarded as an autonomous service. In certain circumstances, what they actually do is determine the final price of the underlying transactions. They would therefore constitute a modification of the taxable amount of a previous transaction.
The case is particularly interesting because it helps to nuance the impact of a previous judgment of the CJEU, Case C-726/23 (Arcomet Towercranes), which caused some concern by accepting that intra-group adjustments could constitute, in any event, an autonomous supply of services where they had been contractually agreed.
Practical consequences for multinational groups
Multinational groups will need to carefully review how they structure their transfer pricing policies and, above all, the adjustment mechanisms applied to their intra-group transactions.
Contractual documentation, the nature of the price initially agreed, whether the adjustment is linked to specific prior transactions, and the pricing method chosen now become elements that, in many cases, determine the VAT treatment of the transaction.
Whether these adjustments are relevant for VAT purposes is not a purely theoretical question. That classification determines invoicing obligations, how the transaction must be reported, and, ultimately, essential aspects of the functioning of the tax, such as the correct deduction of input VAT.
Beyond the specific case, the underlying message is difficult to dispute. Transfer pricing and VAT are not parallel worlds. Maintaining a strict separation between them is now an increasingly difficult position to defend.
