VAT and Transfer Pricing: what the Stellantis case means for multinational groups

On 13 May 2026, the Court of Justice of the European Union (CJEU) released its judgment in the Stellantis Portugal case. The case addresses a topic that has been debated for years within multinational groups, transfer pricing teams, and indirect tax specialists alike:

Can a transfer pricing adjustment trigger VAT?

At first sight, this may appear to be a highly technical discussion. In practice, however, the judgment has broader implications for how multinational groups design, document, and operationalise their intercompany arrangements.

Why the Stellantis case matters

For many years, transfer pricing adjustments were often approached primarily from a direct tax perspective. Year-end adjustments, margin corrections, and compensating payments were frequently viewed as part of the broader transfer pricing framework without triggering indirect tax consequences.

The Stellantis case shows that this approach is no longer sufficient.

The CJEU focused less on the label “transfer pricing adjustment” itself and more on the underlying economic and legal reality. In particular, the Court assessed:

• Whether reciprocal obligations existed
• Whether there was a direct link between the payment and an identifiable service
• Whether the payment could be connected to a specific supply for VAT purposes

In this specific case, the Court concluded that such a direct link was not sufficiently established with respect to repair services.

The background of the case

The case involved Stellantis Portugal, operating as a routine reseller purchasing vehicles from related production entities and selling them onwards to dealers.

The transfer pricing model was based on an agreed profitability margin. The price setting of cars was based on projections.

Stellantis Portugal sold the cars under commercial terms to dealers. Part of this arrangement was amongst others that those dealers could get repair costs reimbursed that would fall within guarantee periods.

During the relevant period, repair costs and commercial realities impacted the expected margins, leading to transfer pricing corrections between the parties.

Portuguese tax authorities argued that the transfer pricing correction effectively represented compensation for repair-related services and therefore fell within the scope of VAT.

The CJEU ultimately disagreed and concluded that the required direct link between the payment and an identifiable repair service was not sufficiently demonstrated.

Below is a simplified overview of the structure and reasoning behind the case:

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A broader trend: TP adjustments are to be designed carefully

Although the outcome of the case may provide some comfort in specific circumstances, the broader message from the judgment is clear:

Transfer pricing adjustments need to be designed carefully.

Tax authorities increasingly examine whether contractual arrangements, operational execution, invoicing flows, and financial outcomes align consistently across both direct and indirect tax frameworks.

This creates several practical considerations for multinational groups.

This is the second large case within less than a year that is ruled by the CJEU that relates to TP adjustments. For context, the prior case;  

• On 4 September 2025, the CJEU ruled in the case C-726/23 (SC Arcomet Towercranes SRL) that transfer pricing adjustments relating to the remuneration of intra-group services may be subject to VAT. The transfer pricing adjustment should follow a contract and be calculated in accordance with a TP method recommended by the OECD TP Guidelines.
• Additionally, the CJEU ruled that Tax Authorities are not limited to accepting invoices as proof for VAT deduction claims and may require additional documentation.

Apart from the results of these cases, the publicity surrounding this typically makes tax auditors more focused on the topic of such publicity – in this case TP adjustments and the VAT treatment of it.

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Areas that may require additional attention

1. Intercompany agreements

Many agreements were originally drafted with a strong focus on transfer pricing defensibility. Following the Stellantis judgment, the wording around services, responsibilities, pricing mechanics, and compensating adjustments may become increasingly important from a VAT perspective as well.

2. Operational transfer pricing models

Operational transfer pricing is becoming more important than ever. The way adjustments are processed operationally, including invoicing mechanics and accounting treatment, can materially influence the indirect tax analysis.

3. Year-end adjustments and true-ups

Not every year-end adjustment automatically creates VAT exposure. However, the rationale and mechanics behind such adjustments will likely face increasing scrutiny.

Groups should carefully assess:

• What exactly is being compensated
• Whether identifiable services are involved
• Whether the adjustment relates to a broader pricing mechanism or a standalone supply

4. Alignment between functions and execution

The judgment reinforces a familiar challenge in international tax: documentation alone is not enough.

The contractual framework, operational reality, transfer pricing policy, and invoicing processes must work together consistently.

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What multinational groups should consider now

The Stellantis judgment is unlikely to be the final word on the interaction between VAT and transfer pricing. However, it does show the direction in which tax authorities and courts are moving.

For multinational groups, this means it may be worthwhile to reassess:

• Existing TP adjustment mechanisms
• Intercompany invoicing processes
• VAT treatment of compensating adjustments
• Operational execution of TP policies
• Alignment between legal agreements and business reality

The key takeaway is not simply whether VAT applies in one specific case.

The more important message is that tax authorities increasingly expect multinational groups to demonstrate coherence across their entire intercompany framework.

A transfer pricing policy that works from a direct tax perspective may still create indirect tax exposure if the underlying operational and contractual reality is inconsistent.

We work, upon preference, together with our specialized VAT partners or your existing VAT advisor to ensure your solution matches your specific business reality and your processes and documentation/compliance supports this and demonstrates consistency.

Please reach out if you would like support or a quick sanity check.

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