Stellantis Portugal Case: TP Adjustment Affects VAT Assessment

On 15 January 2026, Advocate-General (AG) Kokott published her opinion in the Stellantis Portugal case, addressing the VAT implications of a transfer pricing (TP) adjustment. Her analysis provides welcome guidance on an area long marked by uncertainty and controversy. The AG also calls on the court to deliver a clear ruling that can be applied in practice - one that would simplify the VAT assessment of TP adjustments and offers much-needed certainty for taxpayers.  

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 - which purchased the vehicles from the OEMs and sold them to local dealers in specific countries for final sales 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 note or a 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 in order 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. 

Is a service being supplied?  

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 TP‑related price adjustment have VAT consequences? 

The AG encourages the CJEU to go beyond confirming that no service was supplied in this case. She urges the court to clarify the VAT treatment of TP 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); and 
• VAT consequences: A retroactive adjustment to the price of agreed supplies of goods or services (Stellantis). 

Under the EU VAT Directive, contractually agreed price adjustments - upward or downward - retroactively affect the taxable amount. In Stellantis, the adjustment modified the price of a specific supply, reducing the taxable amount. The AG also briefly acknowledges the possibility of “deemed supplies of services” though she does not clarify when such supplies might arise or how they should be treated in the context of TP adjustments. 

Outlook & Practical Considerations 

AG Kokott’s opinion gives the CJEU a valuable opportunity to issue a practical comprehensive ruling on the VAT implications of TP adjustments. It would be particularly helpful for the court to additionally address situations not covered in the AG’s opinion: 

• Reciprocal supplies between two group entities; and  
• Adjustments that relate to different types of goods or services. 

These scenarios are common in practice and often create significant uncertainty. 

For businesses with TP adjustments, it remains essential to determine whether adjustments trigger VAT consequences. Even where full input VAT recovery is available, taxpayers may still face penalties and interest if adjustments are treated incorrectly.  

More information? 

If you have questions about VAT and transfer pricing adjustments, we are happy to assist you. Please contact one of our VAT specialists for more information. 

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