In a ruling dated 13 May 2026 (CJEU, C-603/24), the Court of Justice of the EU has clarified the VAT treatment of transfer pricing adjustments within international groups.
The case concerned a Portuguese car distributor whose profit margin was adjusted at year-end to meet the target return set by the group’s transfer pricing policy. The Portuguese tax authorities argued that these adjustments were consideration for intragroup services and should therefore be subject to VAT.
The CJEU disagreed. For a transaction to fall within the scope of VAT, there must be a direct link between an identifiable service and consideration paid within a legal relationship involving mutual obligations. An adjustment designed purely to bring a distributor’s margin in line with a group target does not, in itself, remunerate any distinct service. Simply issuing a top-up payment or raising debit and credit notes between related companies is not enough to create a taxable supply.
The Court does make clear, however, that a case-by-case analysis remains necessary: the key question is whether an adjustment genuinely pays for an identifiable service, or whether it is simply an internal rebalancing mechanism.
