- Distinct Functions and Compliance Issues: VAT and transfer pricing (TP) serve different purposes—VAT is an indirect consumption tax, while TP is focused on profit allocation among related parties. This divergence often leads to misunderstandings, as the standards for VAT liability may not align with those for acceptable TP arrangements.
- Advocate General’s Opinion and Case Implications: The Advocate General’s opinion in the Arcomet case suggests that TP adjustments can be subject to VAT, emphasizing that these adjustments may represent remuneration for services rendered. This perspective could reshape how companies manage TP documentation and VAT compliance, especially regarding the relationship between services and taxable outputs.
- Potential Shift in Legal Landscape: The outcomes of the Arcomet and Stellantis cases may clarify the interaction between TP and VAT, potentially reducing the risk of double taxation and inconsistent treatment across EU Member States. Confirmation of the Advocate General’s opinion could lead to significant changes in the treatment of intra-group transactions under VAT regulations.
Source VATabout
Do Transfer Pricing Adjustments Fall Under VAT? AG Opinion Offers Little Clarity
- Distinct Legal Frameworks: The Advocate General’s opinion in the Arcomet case emphasizes that transfer pricing (TP) adjustments cannot be universally classified for VAT purposes, as VAT operates under different legal principles than those outlined by OECD guidelines for direct taxation. Each case involving TP adjustments must be assessed individually to determine VAT obligations.
- Conditions for VAT Applicability: The opinion clarifies that remuneration for services between related entities is subject to VAT if certain conditions are met, including the existence of identifiable services, a mutual agreement outlining benefits and remuneration, and a clear link between the services and consideration received. Simply having financial flows or invoices does not suffice for VAT deduction.
- Need for Comprehensive Documentation: The case highlights the importance of comprehensive documentation to justify VAT deductions. Tax authorities can require evidence beyond invoices to confirm the actual performance of services and their connection to the taxpayer’s business activities, reflecting ongoing uncertainties and varied practices across EU Member States regarding the intersection of TP and VAT.
Source: mddp.pl
See also
- ECJ C-726/23 (Arcomet Towercranes) – AG Opinion – Transfer Pricing Adjustment for intra-group services subject to VAT; documentation required
- Briefing Document: Advocate General’s Opinion in Case C-726/23 (SC Arcomet): VAT, Transfer Pricing and Intra-Group Services
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- The Advocate General’s opinion in case C-726/23 may significantly alter the perception of transfer pricing (TP) adjustments in relation to VAT, potentially leading to VAT arrears for taxpayers, as it suggests that certain financial flows previously deemed outside VAT may now be subject to taxation.
- The case involves SC Arcomet Towercranes SRL and Arcomet Service NV, where transfer pricing rules led to invoices being issued for excess profits and losses. The Advocate General argued that adjustments should be assessed individually, highlighting that services provided by one entity to another within a group could be subject to VAT if they are based on transfer pricing methods.
- If the CJEU confirms this opinion, taxpayers may need to document and prove that services from related entities are used for taxable transactions to maintain their right to deduct VAT, prompting a reevaluation of how related-party transactions are managed and documented.
Source PwC
CJEU and VAT on transfer pricing adjustments
- In April 2025, Advocate General JR de la Tour issued an opinion on Case C-726/23, addressing the VAT implications of transfer pricing adjustments between related entities, specifically involving a Romanian and a Belgian company in the crane rental business.
- The Advocate General emphasized that each case must be analyzed individually, referencing the VAT Committee’s guidance that corrections tied to contractual agreements or adjustments related to marketing and administrative expenses should be subject to VAT or lead to a tax base correction.
- The opinion suggests that the transactional net margin method used by the companies to determine remuneration indicates that such payments should be treated as taxable services under VAT, potentially resulting in unfavorable changes for taxpayers if the CJEU adopts this position in its ruling.
Source Prawo.pl
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