Arcomet Case: CJEU Rules Transfer Pricing Adjustments Can Trigger VAT Obligations

The Arcomet case addresses the complex interaction between transfer pricing rules designed for corporate income tax and VAT as an indirect consumption tax, with the EUCJ ruling that equalisation payments under transfer pricing arrangements can be subject to VAT when they reflect identifiable services between related parties
Arcomet Belgium provided management services to its Romanian affiliate under a transfer pricing study with target margins, requiring equalisation invoices when actual margins fell outside the agreed range, but Belgium initially issued these invoices without VAT while Romania treated them inconsistently
The Court held that equalisation payments constituted VAT taxable consideration for services supplied by Arcomet Belgium, ruling that variable and conditional remuneration does not prevent VAT qualification if the calculation method is contractually agreed and objectively determinable
Tax authorities may require evidence beyond invoices to prove services were actually supplied and used for taxable activities, and while VAT deduction cannot be refused solely for formal shortcomings, taxpayers must provide proportionate and reliable documentation
The judgment provides important clarification but leaves open questions about reverse situations, cases without equalisation invoices, and detailed VAT basis issues, confirming that transfer pricing policies require parallel VAT analysis to avoid the double risk of either failing to apply VAT when required or applying it incorrectly

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.