VAT Implications of Transfer Pricing Adjustments: A-G’s Conclusion on Arcomet Case

• Transfer pricing agreements are used by international groups to allocate profits and costs among subsidiaries.
• Transfer pricing corrections can impact VAT.
• On April 3, 2025, the Advocate General concluded that under the Transactional Net Margin Method, compensation from transfer pricing corrections is subject to VAT.
• The case involves the Arcomet group, which rents cranes globally.
• Arcomet Romania buys or rents cranes and sells or rents them to customers.
• Arcomet Belgium negotiates supplier contracts for its subsidiaries.
• An agreement between Arcomet Belgium and Arcomet Romania sets profit margins from -0.71 percent to 2.74 percent.
• In case of excess profit or loss, invoices are exchanged between the two entities.
• The Advocate General believes VAT treatment of transfer pricing should be case-specific.
• The Advocate General concludes that compensation from transfer pricing corrections is a taxable service.
• Different transfer pricing methods can have varying VAT implications.
• Each case must be assessed to determine if compensation is VAT-taxable.
• The final decision from the EU Court of Justice is awaited.

Source: vanoers.nl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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