- International company groups frequently supply goods and services, focusing on transfer prices for income tax purposes.
- Transfer prices are used to price intra-group cross-border transactions as if they were between unrelated third parties.
- Price adjustments are often made retrospectively due to tax audits or by the groups themselves.
- Recent jurisdiction highlights the impact of these transactions on value-added tax (VAT).
- VAT and transfer pricing have different objectives, with VAT focusing on the utilisation of goods and services and transfer prices on profit allocation for income tax.
- Key VAT considerations include whether balancing payments are based on a service, the impact of transfer price adjustments, and the application of minimum tax base or VAT deduction restrictions.
- The European Court of Justice (ECJ) ruled in the ‘Högkullen’ case that services provided by a management holding company are not a uniform supply but individual services.
- The ECJ’s decision affects VAT assessment by treating services individually rather than as a uniform supply.
- The court proceedings questioned whether a market purchase price for the combination of individual services could be determined for the minimum tax base.
- The ECJ previously ruled in the ‘Weatherford case’ that VAT deduction is permissible for general administrative services purchased and provided within group companies.
Source: fgs.de
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.
