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We recently considered developments in EU law relating to VAT and transfer pricing in an article published in the Irish Tax Review. There we highlighted the reasoned (and in our view sensible) approach taken by Advocate General Kokott in her opinion in the VAT case of Stellantis Portugal S.A. v. Autoridade Tributária e Aduaneira (C-603/24) and her invitation to the Court of Justice of the European Union (CJEU) to give a principled answer on the issue of the VAT treatment of transfer pricing adjustments.
The CJEU judgement in Stellantis was delivered on 13 May 2026. The Court found that intra-group transfer pricing adjustments made in order to arrive at a predetermined margin for a group distributor company did not constitute consideration for the supply of a service by the distributor to the group companies that supplied it with vehicles.
The Court confirmed its previously stated position that a taxable service requires reciprocal obligations and that there must be a direct link between an identifiable service and consideration received. Operational costs of the distributor, including the costs of repairing vehicles, were taken into account in arriving at the transfer pricing adjustment. The Court found that the intra-group agreement between the distributor and its group suppliers did not create an obligation on the distributor to repair, in return for remuneration, the vehicles that it purchased from the group suppliers. The Court found that any link between the repair services undertaken by the distributor and the adjustments was at most only indirect.
Despite the urging of the AG for the Court to provide for a reasoned approach in its judgement (which would be of great assistance to taxpayers in navigating the interaction of VAT and transfer pricing), the decision was limited to responding directly to the question posed to the Court regarding the transfer pricing adjustments made under the relevant intra-group agreement. A general principled approach was not handed down nor did the judgement expressly reference the principled approach proposed by the AG.
An AG’s opinion is not legally binding and, in the absence of the CJEU expressly endorsing the principled approach taken in the AG’s opinion, the judgement does not provide the degree of clarity that potentially could have been given by the Court. However, the Court concluded that transfer pricing adjustments are not, of themselves, supplies of services under the VAT directive. Helpfully, that conclusion does not cut across the principled approach adopted by the AG.
The decision highlights the affect the drafting of relevant intra-group contracts has on the appropriate VAT treatment and the importance of appropriate drafting. Accordingly, it is a reminder to taxpayers of the need to consider both VAT and transfer pricing aspects when drafting relevant intra-group agreements, especially where there is increased VAT sensitivity where VAT-exempt activities are carried on by the group concerned.
If you have any questions on the decision or would like to discuss its implications for your business please reach out to your usual A&L Goodbody Tax contact.
Date published: 15 May 2026
