A-G opinion on VAT implications of TP-adjustments
16/01/26
On 15 January 2026, Advocate General Kokott (AG) issued an opinion in the case of Stellantis Portugal S.A. (C-603/24). This is the latest chapter in a series of CJEU referrals on the intersection between transfer pricing and VAT. The AG concludes that transfer pricing adjustments made for income tax purposes are relevant for VAT if they change the price actually paid or received (consideration) for the underlying supply, and not when they only serve to reallocate profits within the group without altering the consideration.
Background
Stellantis Portugal, S.A. (then part of the General Motors group) operated as a national sales company, purchasing vehicles from GM’s European manufacturers (OEMs) and reselling them to independent Portuguese dealers, who in turn sold the vehicles to final customers. When manufacturing defects arose, customers had repairs performed by dealers. The dealers then invoiced Stellantis for repairs (including VAT). Stellantis subsequently reported these repair costs, together with its operating expenses (such as staff, electricity, and marketing), to the OEMs. Under an intragroup transfer pricing agreement, OEM-to-distributor transfer prices were determined by deducting distribution costs and a targeted operating profit from external sales prices. At the end of the period, the parties made adjustments by debit or credit notes to bring the distributor’s actual profit in line with the agreed profit target margin.
Following a tax inspection, the Portuguese tax authority concluded that, by bearing and passing on after-sales costs (including repair, warranty and roadside assistance costs), Stellantis was effectively supplying services to the OEMs in Portugal. As a result, those amounts should be treated as the consideration for those services, subject to Portuguese VAT. It assessed additional VAT on repair, warranty, and roadside assistance costs and issued supplementary assessments.
The Portuguese Supreme Administrative Court referred a question to the Court of Justice of the European Union (CJEU), asking whether a subsequent adjustment of the price of a supply, made under an intra‑group mechanism linked to warranty and operating costs, can constitute a separate supply of services effected for consideration under the VAT Directive.
Opinion of the AG
The AG considers that intra-group price adjustments (either upward or downward) are adjustments to the consideration for the original supply and do not constitute an independent supply of services. A purchaser receiving a reimbursement after a price reduction is not providing a service; from a VAT perspective there is no concept of “negative consideration,” and such reimbursements simply correct the initial price. Likewise, the bearing of warranty costs reflects the seller’s own obligations to customers and is not a service to the supplier. Finally, profit reallocations via transfer pricing adjustments that only allocate profits are irrelevant for VAT, as they are not the consideration for an economic activity. Accordingly, a mere sale price adjustment cannot, in itself, be a supply of services under the VAT Directive.
In the AG’ s view, the ruling in Arcomet did not exhaustively clarify the VAT consequences of transfer pricing adjustments, leaving uncertainties in practice. The AG therefore reformulates the questions referred by the Portuguese Court, focusing on whether a transfer pricing adjustment should be treated as an adjustment to the taxable amount, or as the taxable amount for a separate supply of services provided by the person who benefits from the change in the transfer price. The AG distinguishes three situations.
First, if group companies genuinely agree on and perform a separate, remunerated service arising from an underlying contract, that service is VAT-taxable. In the case of Stellantis, there is no contract under which any service supplied by Stellantis to the OEMs could be justified;
Second, if a tax authority makes a unilateral profit adjustment to apply the arm’s-length principle, that adjustment does not alter the consideration agreed by the parties and therefore has no VAT impact;
Third, where the parties originally agree a variable price that is later adjusted by reference to objective parameters (such as distribution or warranty costs), that subsequent change is a price adjustment to the original supply. Price decreases reduce the taxable amount under art 90 EU VAT Directive and price increases are captured by art. 73 EU VAT Directive as the taxable amount of the seller’s supply is ultimately all it receives for its supply. The VAT consequence of the transfer pricing adjustment in the case of Stellantis is a change to the taxable amount of the original supplies, not the taxation of any separate (fictitious) service.
What this means for your organisation
The Stellantis case is the most recent in a series of preliminary questions on VAT and transfer pricing following Weatherford Atlas Gip SA (C-527/23), Högkullen AB (C-808/23), and Arcomet Towercranes (C-726/23). Contrasting the case with Arcomet Towercranes, the AG notes that the Stellantis case concerns a subsequent adjustment of the price of a supply intended to implement an intra‑group allocation of profits.
The AG emphasizes that the VAT treatment of transfer pricing adjustments depends on whether these actually change the consideration for the original supply or merely reallocate profit without a distinct, remunerated service. The opinion is not binding and it remains to be seen whether the CJEU will speak in such general terms about the VAT consequences of transfer pricing adjustments. Nevertheless, this opinion offers useful points of reference for practice. For more information on the impact for your business, please contact your usual PwC advisor.
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