The intersection between transfer pricing and value added tax (VAT) has been the subject of increasing doctrinal and jurisprudential attention in Europe, reflecting the complexity of determining whether intercompany price adjustments should have implications for VAT purposes. One of the most recent and relevant issues in this area is the case of Stellantis Portugal, S.A. (C-603/24), currently before the Court of Justice of the European Union (CJEU), which raises a significant preliminary question on the VAT treatment of price adjustments contractually agreed between companies in the same group.
At the heart of the debate is the distinction between transfer pricing adjustments that modify the price of a transaction already carried out and those that could constitute independent services, with direct implications for the determination of the VAT tax base. The non-binding opinion of Advocate General Kokott, issued on January 15, 2026, offers key interpretative guidance on this point, although the final decision of the CJEU is still pending.
Context of the facts and legal approach
Stellantis Portugal, part of the automotive group that was part of the General Motors network, acted as a national distributor, purchasing vehicles from manufacturers within the group based in Europe and reselling those cars to independent dealers in Portugal. Under an intra-group contract, the transfer prices of the vehicles were subject to retrospective adjustments at the end of each period to ensure that Stellantis achieved a pre-agreed profit margin taking into account the actual costs incurred, including repair, logistics, and operating expenses. These adjustments were made through debit or credit notes issued by the manufacturers to the distributor.
Following a tax inspection, the Portuguese authorities argued that part of these adjustments represented remuneration for repair services provided by Stellantis to the manufacturers and were therefore subject to VAT. In view of this controversy, the Supreme Administrative Court of Portugal referred a question to the CJEU for a preliminary ruling to determine whether such contractually agreed transfer price adjustments constitute a supply of services subject to VAT or whether, on the contrary, they are adjustments to the price of goods already delivered.
Opinion of the Advocate General: price adjustments vs. provision of services
In the context of preliminary ruling C-603/24, the Advocate General of the Court of Justice of the European Union, Juliane Kokott, issued her Opinion in January 2026, in which she analyzes the classification, for VAT purposes, of transfer price adjustments arising from intra-group relationships. In her reasoning, the Advocate General argues that adjustments made after the end of the financial year, when they respond to contractual mechanisms aligned with the arm’s length principle, do not constitute an independent provision of services, but rather a correction of the price of transactions previously carried out.
Although this Opinion is not binding, it constitutes an interpretative element of high technical value, which is particularly relevant given that the Court of Justice usually accepts, in whole or in part, the criteria set out by the Advocate General in matters of indirect taxation. In this regard, the final ruling of the CJEU will be decisive in clarifying the interaction between transfer pricing adjustments and the VAT tax base in the context of intra-group transactions within the European Union.
Practical implications for multinational companies
The Advocate General’s opinion, although not binding on the CJEU, provides a relevant interpretative framework that may influence the final decision. From a technical perspective, the approach adopted highlights several key principles:
- Substantive economic relationship: A transfer pricing adjustment that only serves to align internal profits—without a direct link to the supply of external goods or services—should not create a separate VAT liability.
- Contractual link: Only when there is a clearly defined provision of services in a contract can an adjustment be considered a component of the price of a taxable consideration.
- Tax base adjustment: Contractual adjustments to the price of goods sold may, in principle, modify the VAT tax base of such sales, affecting the tax quantification without constituting independent services.
For multinational groups, these distinctions have direct implications for how intragroup transactions are documented, valued, and reported, and how transfer pricing policies are articulated in conjunction with VAT compliance.
Compliance and tax coordination considerations
From a corporate governance perspective, the intersection of transfer pricing and indirect taxation requires robust coordination processes between tax, accounting, and tax compliance areas. Maintaining solid documentation of intra-group agreements, clearly defining the nature of each adjustment, and aligning accounting treatment with VAT obligations is essential for managing risks and responding effectively in audits.
In particular, the existence of contractual agreements that explicitly describe whether an adjustment is based on the correction of the price of goods or the provision of services will allow for a stronger technical defense against possible tax challenges.
Elements to consider in tax planning and defense
The preliminary ruling requested in the case Portugal v. Stellantis Portugal (C-603/24) highlights one of the most complex challenges in contemporary international taxation: the correct articulation between transfer pricing adjustments and the VAT regime, avoiding distortions in the determination of the tax base or the generation of unforeseen tax contingencies. The Advocate General’s analysis provides relevant interpretative criteria which, if accepted by the CJEU, would help to define more precisely when an intra-group adjustment constitutes a mere price correction and when it could become relevant for indirect tax purposes.
In this context, TPC Group, as a company specializing in transfer pricing, assists multinational groups in the comprehensive review of their intragroup policies, the proper documentation of adjustment mechanisms, and the alignment between transfer pricing and indirect taxes. A technical and coordinated approach is key to strengthening the group’s tax position and anticipating possible challenges from tax and customs authorities in different jurisdictions.
Source: TPCases