Comments on ECJ C-726/23 (Arcomet Towercranes): VAT Treatment of Transfer Pricing Adjustments

• The European Court of Justice issued its first ruling on VAT treatment of transfer pricing adjustments in the Arcomet Towercranes case, clarifying when compensation payments for profit margin adjustments are subject to VAT
• Transfer prices are rates set for exchanges of goods, services or intangible assets between units of multinational companies, following the arm’s length principle to ensure conditions match those between independent third parties
• Arcomet Romania belonged to a global crane rental group and received various internal services from its Belgian parent company including management functions, technical support, contract negotiations and risk assumption
• The compensation for these services was calculated based on actual operating profit margins rather than fixed prices, with an appropriate operating margin corridor established between negative 0.71% and positive 2.74%
• When actual margins exceeded the upper limit, Arcomet Romania had to pay the excess profit portion to the Belgian parent company as part of transfer pricing adjustments, while payments below the lower limit required compensation from the parent company

Source: ebnerstolz.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.

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