EU VAT case law

Transfer pricing adjustments might not be subject to VAT.  But in most cases, they will.

Judgment of the CJEU of 13.05.2026, C-603/24, Stellantis.

Factual Background

• We have:
• a first company based, for example, in Germany - the Manufacturer,
• a second company in Portugal - the Distributor,
• a third company in Portugal - the Dealer,
• a fourth entity in Portugal - the customer.
• The Manufacturer and Distributor are affiliated entities within the same group.
• The Manufacturer produces cars. It sells them to the Distributor. The Distributor sells them to the Dealer. The Dealer sells them to the customer.
• If a car has defects, the Dealer repairs it. It charges the Distributor with the costs of repair.
• The Distributor then informs the Manufacturer of the amount of these costs (plus additional operating costs such as staff, electricity, and marketing).
• The Manufacturer (who sells the cars to Distributor) has a contract with the Distributor.
• According to this agreement:
• First, a specific price is set for the sale of cars from the Manufacturer to the Distributor. And the cars are initially sold at that price.
• According to the contract, the Distributor must achieve a specific profit margin. It should be equal to: the Distributor’s selling price (minus) the costs of the repairs (minus) the target margin.
• Thus, the amount of repair costs reduces the target transfer price between the Manufacturer and the Distributor.
• At the end of a given billing period, the Manufacturer issues a credit note or a debit note that reduces or increases the original price (TP adjustment to achieve planned profit margin).

Position of the Portuguese tax authorities