Advocate-General Kokott on 15 January 2026 published her opinion in the Stellantis Portugal case, addressing the VAT implications of a transfer pricing adjustment. Her analysis provides welcome guidance in an area long marked by uncertainty and controversy. The AG also called on the Court of Justice of the European Union (CJEU) to deliver a clear ruling that can be applied in practice -- one that would simplify the VAT assessment of transfer pricing adjustments and offer much-needed certainty for taxpayers.
During the year at issue, Stellantis Portugal was part of a multinational group of companies engaged in the production and sale of cars. The group included manufacturing entities (OEMs) and national sales companies (NCS/NCO), such as Stellantis, that purchased the vehicles from the OEMs and sold them to local dealers in specific countries for final sale to customers.
Stellantis acquired the vehicles at a (reference) price that was subsequently adjusted upward or downward (price setting) to achieve an arm’s length result. Under the intragroup transfer pricing agreement, Stellantis was intended to earn a defined profit margin after deducting all costs, with the profit margin subject to corporate income tax in Portugal. Among the costs incurred by Stellantis were repair costs for defective vehicles, warranty-related repairs and roadside assistance procedures. Once the final price of the cars was determined (price testing), the OEM issued a credit or debit note to Stellantis. In the year under review, a credit note was issued, and Stellantis received a reimbursement payment from the OEM reflecting the adjustment in the sales price to achieve the correct profit margin.
Following an audit, the Portuguese tax authorities assessed additional VAT on Stellantis on the basis that the reimbursement payment constituted consideration for a service (i.e., repairs) supplied by Stellantis to the OEM.
AG Kokott concluded that a post-transaction adjustment of the consideration for a supply cannot, on its own, constitute a service for VAT purposes. She rejected the Portuguese tax authorities’ arguments for the following reasons:
The AG encouraged the CJEU to go beyond confirming that no service was supplied in this case. She urged the court to clarify the VAT treatment of transfer pricing adjustments more broadly. In her view, these consequences are:
AG Kokott’s opinion provides the CJEU a valuable opportunity to issue a practical, comprehensive ruling on the VAT implications of transfer pricing adjustments. It would be particularly helpful for the court to also address situations not covered in the AG opinion that are common in practice and often create considerable uncertainty:
Madeleine Merkx
BDO in Netherlands
Background
During the year at issue, Stellantis Portugal was part of a multinational group of companies engaged in the production and sale of cars. The group included manufacturing entities (OEMs) and national sales companies (NCS/NCO), such as Stellantis, that purchased the vehicles from the OEMs and sold them to local dealers in specific countries for final sale to customers.Stellantis acquired the vehicles at a (reference) price that was subsequently adjusted upward or downward (price setting) to achieve an arm’s length result. Under the intragroup transfer pricing agreement, Stellantis was intended to earn a defined profit margin after deducting all costs, with the profit margin subject to corporate income tax in Portugal. Among the costs incurred by Stellantis were repair costs for defective vehicles, warranty-related repairs and roadside assistance procedures. Once the final price of the cars was determined (price testing), the OEM issued a credit or debit note to Stellantis. In the year under review, a credit note was issued, and Stellantis received a reimbursement payment from the OEM reflecting the adjustment in the sales price to achieve the correct profit margin.
Following an audit, the Portuguese tax authorities assessed additional VAT on Stellantis on the basis that the reimbursement payment constituted consideration for a service (i.e., repairs) supplied by Stellantis to the OEM.
Supply of a Service?
AG Kokott concluded that a post-transaction adjustment of the consideration for a supply cannot, on its own, constitute a service for VAT purposes. She rejected the Portuguese tax authorities’ arguments for the following reasons:
- It was unclear what “service” Stellantis would be supplying. Based on the intragroup arrangement, a payment may be positive or negative. It would be illogical for Stellantis to pay for a service it supposedly provides to itself.
- Simply incurring costs does not amount to a supply.
- The simple upward or downward adjustment of profit for income tax purposes is irrelevant for VAT purposes and does not constitute consideration for services supplied.
When does a Transfer Pricing Adjustment Have VAT Consequences?
The AG encouraged the CJEU to go beyond confirming that no service was supplied in this case. She urged the court to clarify the VAT treatment of transfer pricing adjustments more broadly. In her view, these consequences are:
- No VAT consequences: A unilateral profit adjustment by the tax authorities;
- VAT consequences: A contractually agreed and performed service for which compensation is paid when profit deviates from the target (i.e., it is too high or too low) (Arcomet Towercranes case); and
- VAT consequences: A retroactive adjustment to the price of agreed supplies of goods or services (Stellantis).
BDO Perspective
AG Kokott’s opinion provides the CJEU a valuable opportunity to issue a practical, comprehensive ruling on the VAT implications of transfer pricing adjustments. It would be particularly helpful for the court to also address situations not covered in the AG opinion that are common in practice and often create considerable uncertainty:
- Reciprocal supplies between two group entities; and
- Adjustments that relate to different types of goods or services.
Madeleine Merkx
BDO in Netherlands