Transfer Pricing, VAT Risks Still Hazy After Stellantis Opinion
What’s at Issue
The intersection of transfer pricing and VAT is under increasing scrutiny following recent European decisions, including Arcomet, Högkullen, JPMorgan Chase, and the Advocate General opinion in Stellantis Portugal.
The core question is: Are year-end transfer pricing adjustments a consideration for a VAT -taxable “supply” of goods and services?
In Stellantis, the opinion suggested the adjustment was merely a price correction for cars previously sold—not payment for a separate service—meaning no additional VAT should apply. However, outcomes remain highly fact specific.
Current Status
- No uniform rule—VAT treatment depends on whether a direct link exists between the payment and a specific supply.
- Profit-based TP adjustments may be viewed as VATable, where tied to identifiable services (as in Arcomet).
- Courts may characterize arrangements as a single supply or multiple supplies, affecting VAT outcomes.
- Tax authorities globally are increasingly focused on TP/VAT alignment.
What Companies Should Be Doing
- Map supply flows and align functional analysis with VAT treatment.
- Review year-end TP adjustments to assess VAT exposure.
- Align contracts, conduct, and documentation—courts rely heavily on contractual terms.
- Maintain contemporaneous evidence of intragroup services (invoices, deliverables, time records).
- Exempt sectors (finance/insurance) should assess potential input VAT restrictions.
Expectation: VAT audits in this area will increase as authorities focus on closing the VAT gap.
