VAT Scope of Transfer Pricing Adjustments
| Criteria | In Scope of VAT | Outside Scope of VAT |
|---|---|---|
| Link to Specific Supply | Directly tied to a specific supply of goods or services | Based on overall profitability or margin alignment |
| Contractual Basis | Adjustment is foreseen in the original contract or pricing mechanism | No contractual provision or pricing formula |
| Monetary Flow | Payment, credit note, or debit note is issued to reflect the adjustment | No financial transaction—purely accounting entry |
| Documentation | Clear audit trail with affected invoices and calculation methodology | No breakdown of transactions or supporting documentation |
| Purpose of Adjustment | Alters the consideration for a taxable supply | Reallocates profits for corporate income tax purposes only |
| EU Legal Support | Supported by ECJ case law and EU VAT Committee guidance | EU guidance (e.g., Working Paper No. 923) suggests exclusion from VAT scope |
See also
- Italy – VAT Implications of Transfer Pricing Adjustments (Answer 214/2025) – VATupdate
- EU – VAT and Transfer Pricing – Working papers of the VAT Expert Group and the VAT Commitee – VATupdate
- VAT and Transfer Pricing – Four recent cases @ ECJ/CJEU – 2 cases decided, 1 AG Opinion issued – VATupdate
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