ECJ C-603/24 (Stellantis Portugal) – Judgment – Transfer price adjustment not VATable service without direct link.

On May 13, 2026, the ECJ released the judgment in the case C-603/24 (Stellantis Portugal).

Context: Reference for a preliminary ruling – Common system of value added tax – Directive 2006/112/EC and Directive 77/388/EEC – Supplies between affiliated undertakings – Adjustment of the intra-group sale price based on the warranty costs and operating costs incurred by the purchaser – Adjustment of the price of a supply as a separate supply of services effected for consideration – Relevance, for the purposes of value added tax law, of adjustments of a transfer price

Summary

Facts: Stellantis Portugal (legal successor to Opel Portugal/GMP), as a national sales company within the General Motors group, purchased vehicles from OEM manufacturers. These vehicles were resold to independent dealers who then sold to final customers. When vehicles required repairs under warranty or due to production defects, dealers repaired them and invoiced GMP. GMP reported these repair costs, along with other operational costs, to the OEMs. An internal 2004 agreement stipulated that transfer prices for vehicles sold by OEMs to GMP would be adjusted to ensure GMP achieved a predetermined profit margin, factoring in these various costs. These adjustments were evidenced by credit or debit notes from OEMs to GMP.
Issues: The Portuguese Tax and Customs Authority considered these adjustments to be remuneration for vehicle repair services provided by GMP to the OEMs, thus subject to VAT. GMP contested this, arguing the adjustments were merely part of the transfer price mechanism to guarantee a profit margin, not payment for a service. The core legal question was whether such a transfer price adjustment constitutes “consideration for a supply of services” under Article 2(1) of the Sixth VAT Directive.
Decision: The Court ruled that a transfer pricing adjustment, even if it accounts for repair costs and aims to guarantee a profit margin, does not constitute consideration for a “supply of services effected for consideration” for VAT purposes, unless there is a clear legal relationship between the companies involving reciprocal commitments for the supply of services by the acquiring company (GMP) to the selling company (OEMs) and remuneration for those specific services in the form of the adjustment, thus establishing a direct link.
Argumentation for Decision:
- Direct Link Criterion: For a supply of services to be “for consideration” and subject to VAT, there must be a direct link between the service provided and the consideration received, based on a legal relationship of reciprocal exchange.
- Lack of Explicit Service Obligation: The Court found no evidence in the 2004 agreement or other submitted facts indicating a legal obligation for GMP to provide repair services to the OEMs for remuneration. The agreement’s purpose was profit margin guarantee via price adjustment, not payment for specific services.
- Indeterminacy of Remuneration: The adjustments were calculated based on various costs (repair, personnel, electricity, marketing) to reach a target profit margin, meaning the repair costs were only one factor among many. The outcome could be a credit or debit, and GMP was not guaranteed full reimbursement of specific costs once the profit margin was met. This lack of certainty and direct correlation between specific repair services and the adjustment amount weakens the “direct link” required for VAT.
- Intervention Argument Dismissed: The Portuguese government’s argument that GMP acted as an intermediary for repair services on behalf of OEMs (under Article 6(4) of the Sixth VAT Directive) was dismissed due to insufficient evidence.
Conclusion/Guidance to National Court: The national court must determine if a legal relationship exists, beyond the profit margin agreement, where GMP was explicitly obligated to provide repair services to the OEMs for which the adjustments served as direct remuneration. If not, the adjustments are not consideration for a service. The Court also noted that if the adjustments are viewed as a post-acquisition price modification, national authorities would need to assess its impact on the VAT taxable base for the initial vehicle supply (under Article 11 of the Sixth VAT Directive).

Article in the EU VAT Directive 2006/112/EC

Article 2 of the Sixth VAT Directive (Article 2 of the EU VAT Directive 2006/112/EC).

Article 2

1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.

Facts

Corporate Structure and Operations:
- Stellantis Portugal, S.A., formerly General Motors Portugal, Lda (GMP), operates in the motor vehicle trade.
- GMP is part of an economic group involved in manufacturing and distributing vehicles and parts.
- The group includes Original Equipment Manufacturers (OEMs), National Sales Companies/Organizations (NSCs/NSOs), and contract assemblers.
Business Transactions:
- GMP functions as an NSC/NSO, purchasing vehicles from European manufacturers within the General Motors group.
- These vehicles are resold to independent Portuguese dealers, who then sell them to final customers.
- Dealers handle vehicle repairs for manufacturing defects, warranty issues, and roadside assistance, charging GMP for these services including VAT.
Financial Adjustments:
- GMP informs European manufacturers of costs incurred in distributing vehicles and parts.
- Costs include vehicle repair costs, operating costs (staff, electricity, marketing).
- An adjustment is made to the vehicle sale price based on these costs, documented by credit or debit notes issued by the European manufacturers.
Tax Inspection and Dispute:
- A tax inspection was conducted on GMP for the 2006 financial year.
- The inspection found that GMP initially bears after-sales costs and then passes these costs to OEMs.
- The tax authority argued that these transactions should be subject to VAT within Portugal.
- As a result, supplementary VAT assessments were issued to GMP for a total amount of EUR 1,504,215.49.
Legal Proceedings:
- GMP appealed against the supplementary VAT assessment.
- The Tribunal Central Administrativo Sul upheld the tax authority’s decision.
- GMP further appealed to the Supremo Tribunal Administrativo.

Questions

Must Article 2 of the Sixth VAT Directive (Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment), as worded in the version in force at the time of the facts, be interpreted as meaning that the concept of the supply of services effected for consideration contained in that provision includes an adjustment of the sale price of vehicles which is duly provided for and determined in a contract concluded between the parties, in order to achieve a minimum profit margin, and which is documented by means of a credit or debit note issued to the applicant/appellant by the European manufacturers of the General Motors group?

Summary

The question is whether the concept of “supply of services effected for consideration” includes an adjustment of the sale price of vehicles as provided in a contract to achieve a minimum profit margin, documented by credit or debit notes issued by European manufacturers.

AG Opinion

Articles 2(1)(c), 73 and 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the relevance, for the purposes of VAT law, of an adjustment of profits made for reasons of income tax law depends on what it relates to and how it is made.

Where the adjustment of profits is made by means of separate supplies of services for consideration (creation of input and output) and there are not only fictitious supplies of services, those separate supplies of services for consideration constitute taxable transactions for the purposes of Article 2(1)(c) of Directive 2006/112.

Where the adjustment of profits is made unilaterally and subsequently by the tax authority solely for the purposes of an appropriate allocation of profits between two tax-levying States, that is not, in principle, relevant for the purposes of VAT law.

On the other hand, where, as in the present case, the adjustment of profits is made by means of a sale price which has been provided for precisely for that purpose and agreed to be variable and which relates to a specific supply of goods, that constitutes a reduction in the taxable amount under Article 90 of Directive 2006/112 or a further part of the taxable amount under Article 73 thereof in respect of the supply made. Since the change in the taxable amount of a supply relates solely to the consideration, it cannot itself constitute a ‘supply of services for consideration’ within the meaning of Article 2(1)(c) of Directive 2006/112.

Judgment

Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment,

must be interpreted as meaning that:

a transfer pricing adjustment for motor vehicles that is:

– duly established in an agreement concluded between companies belonging to the same group and intended to guarantee that the company acquiring such vehicles will obtain a profit margin previously determined on the resale of those vehicles;

– evidenced by a credit or debit note sent by the selling company to the acquiring company, and

– calculated on the basis, inter alia, of the costs incurred by the latter company in connection with the repair of those vehicles by third parties,

does not constitute consideration for a ‘supply of services for consideration’ within the meaning of that provision, unless there is a legal relationship between those companies characterised by reciprocal commitments for the supply by the acquiring company of services to the selling company and the payment by the latter of remuneration for those services in the form of such an adjustment, making a direct link between the provision of these services and this adjustment.

Source

Curia

Other ECJ/CJEU cases referred to

Mitteldeutsche Hartstein-Industrie (C-528/19): Reiterated the direct link requirement between a service and consideration for VAT liability, emphasizing a legal relationship with reciprocal exchange for an individualizable service.
Latvijas Informācijas un komunikācijas tehnoloģijas asociācija (C-87/23): Applied the direct link principle, clarifying when services provided to third parties can constitute taxable supplies for VAT purposes.
Arcomet Towercranes (C-726/23): Further elaborated on the direct link, stressing that consideration must not be gratuitous, uncertain, or difficult to quantify for VAT purposes.
Omnitel Comunicaciones e.a. (C-441/23): Concerned the admissibility of preliminary ruling requests, specifically the national court’s duty to clearly outline facts for the ECJ and interested parties.

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Briefing Document: EU VAT, Intra-Group Transfer Pricing, and Repair Services

Review of recent ECJ judgment on VAT liability for intra-group transfer price adjustments related to vehicle repair costs, and a related resource.

This European Court of Justice (ECJ) judgment provides crucial clarification on the interpretation of “supply of services for consideration” under Article 2(1) of the Sixth VAT Directive (77/388/EEC) in the context of intra-group transfer pricing adjustments.

Case Overview

Parties: Stellantis Portugal, S.A. (legal successor of Opel Portugal, Lda., formerly General Motors Portugal – “GMP”) vs. Tax and Customs Authority, Portugal.
Subject Matter: The liability to VAT of alleged supplies of motor vehicle repair services by GMP to other companies within the General Motors group (Original Equipment Manufacturers – “OEMs”). The dispute revolves around whether transfer price adjustments between intra-group entities constituted consideration for such services.
Applicable Law: Sixth Council Directive 77/388/EEC, specifically Article 2(1), as the facts of the main proceedings predate the replacement by Directive 2006/112/EC.

Factual Background

Group Structure: GMP acted as a National Sales Company/National Sales Organisation (NSC/NSO) in Portugal for the General Motors group. It purchased vehicles from OEMs within the EU and sold them to independent dealers, who then sold to end customers.
Repair Costs: When vehicles required repairs due to production defects (recall campaigns), manufacturer warranties (policy and warranty), or roadside assistance, independent dealers performed these repairs and invoiced GMP.
Cost Reporting: GMP informed the OEMs of these repair costs, alongside other distribution and operating costs (e.g., personnel, electricity, marketing).
Transfer Pricing Agreement (2004): An agreement among General Motors group companies dictated that the transfer prices of vehicles, parts, and accessories sold by OEMs to NSC/NSOs like GMP could be adjusted. The primary purpose of this adjustment was “to ensure that the latter [NSC/NSO] obtained a previously determined profit margin.” These adjustments were based on “all the distribution costs of those vehicles incurred by GMP, including the costs associated with repairs to those vehicles and GMP’s operating costs” and were effected via credit or debit notes from OEMs to GMP.
Tax Authority’s Position: Following an audit for the 2006 tax year, the Portuguese Tax and Customs Authority concluded that the OEMs were responsible for the repairs. Therefore, they argued that GMP, by bearing and subsequently having these costs covered via transfer price adjustments, was providing repair services to the OEMs, making these services subject to VAT (€1,504,215.49).
GMP’s Argument: GMP contended that the transfer price adjustments did not constitute remuneration for repair services but rather were part of the mechanism to achieve a predetermined profit margin on vehicle sales.

Key Legal Principles & Court’s Analysis

“Supply of Services for Consideration” (Article 2(1) Sixth VAT Directive): The Court reiterated settled case-law that a supply of services is “for consideration” and thus subject to VAT “only if there is a direct link between that supply of services, on the one hand, and consideration actually received by the taxable person, on the other.” This “direct link is established where there is a legal relationship between the service provider and its recipient in the context of which reciprocal services are exchanged, the remuneration received by the provider of those transactions constituting the actual consideration for an individualisable service provided to that recipient.”
Lack of Direct Legal Relationship for Repair Services: The Court found that the 2004 agreement primarily focused on “to fix the transfer prices of the vehicles sold by those OEMs to GMP” and to ensure GMP’s predetermined profit margin. Crucially, it noted:

- “None of the clauses of the 2004 agreement referred to in the order for reference indicates that there was a legal relationship between GMP and the OEMs concerned according to which GMP was under an obligation to undertake, for remuneration, the repair of the vehicles which it purchased from those OEMs.”
- The adjustments covered not only repair costs but also GMP’s “operating costs,” implying a broader mechanism than specific payment for repair services.
- The objective was to achieve a specific profit margin, not necessarily to reimburse all costs incurred for repairs. The adjustments could be credit or debit notes.
Uncertainty of Remuneration: The Court highlighted that “the uncertain nature of the very existence of remuneration is liable to break the direct link between the service provided to the recipient and the remuneration possibly received.” For a direct link, remuneration “must not be gratuitous, aleatory or difficult to quantify.” Given that repair costs were only one parameter among others, and the ultimate goal was a profit margin, the link to specific repair services was tenuous.
Conclusion on Direct Link: The Court determined that, based on the information provided, “the link that may exist between any repair services for the vehicles concerned provided by GMP to the OEMs concerned and the adjustments to the transfer prices of those vehicles is, at most, only indirect.”
Rejection of Agency Argument (Article 6(4)): The Portuguese government’s argument that GMP acted on behalf of the OEMs in procuring repairs from dealers (Article 6(4)) was rejected due to a lack of evidence that GMP “intervened in such a supply of services and acted on behalf of another.”
Alternative Interpretation (Price Adjustment for Goods): The Court noted that if the national court finds these adjustments are not remuneration for services, they might constitute “a post-facto modification of the price paid by GMP when acquiring the said vehicles from those OEMs.” In such a scenario, national authorities would need to assess its impact on the VAT taxable base for the supply of vehicles under Article 11 of the Sixth VAT Directive.

The Court’s Ruling

The Court ruled:

“Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, must be interpreted as meaning that:

a transfer pricing adjustment for motor vehicles that is:

duly established in an agreement concluded between companies belonging to the same group and intended to guarantee that the company acquiring such vehicles will obtain a profit margin previously determined on the resale of those vehicles;
evidenced by a credit or debit note sent by the selling company to the acquiring company, and
calculated on the basis, inter alia, of the costs incurred by the latter company in connection with the repair of those vehicles by third parties,

does not constitute consideration for a ‘supply of services for consideration’ within the meaning of that provision, unless there is a legal relationship between those companies characterised by reciprocal commitments for the supply by the acquiring company of services to the selling company and the payment by the latter of remuneration for those services in the form of such an adjustment, making a direct link between the provision of these services and this adjustment.”

This ruling underscores that for such adjustments to be considered VATable consideration for services, there must be a clear, explicit legal relationship establishing a reciprocal exchange, where the adjustment directly remunerates an individualisable service. The mere inclusion of certain costs (like repairs) in a broader transfer pricing adjustment mechanism aimed at a profit margin is insufficient to establish this “direct link.”

Overall Themes and Most Important Ideas/Facts

Strict Interpretation of “Supply of Services for Consideration”: The ECJ reaffirms its stringent criteria for identifying a VATable supply of services. A “direct link” between a specific service and its consideration, rooted in a “legal relationship” with “reciprocal commitments,” is paramount. Broad intra-group accounting adjustments, even if they factor in certain costs, are not automatically deemed consideration for a distinct service.
Importance of Explicit Legal Relationships in Intra-Group Dealings: For intra-group transactions to be considered distinct supplies of services for VAT purposes, the underlying legal agreements must clearly define the service provision and the specific remuneration for that service. A general profit margin guarantee, even if accounting for various costs including repairs, does not equate to specific remuneration for repair services from a VAT perspective.
Distinction Between Service Remuneration and Price Adjustments for Goods: The judgment suggests that if a transfer price adjustment is not remuneration for a distinct service, it might be a post-facto adjustment to the purchase price of the goods (vehicles in this case). This reclassification has significant implications for determining the taxable base of the original supply of goods.
Burden of Proof for “Direct Link”: The national court is ultimately responsible for assessing the facts and determining the nature of transactions, but the ECJ provides clear guidance on the high bar for establishing a “direct link.” Simply attributing costs or having them factored into a broader adjustment mechanism is likely insufficient without explicit contractual obligations for the service provision.
Relevance of Specialized VAT Information Platforms: The “New Note” highlights the complexity and constant evolution of EU VAT law, emphasizing the need for accessible and expert-curated resources like VATupdate.com to help professionals navigate these challenges and stay informed about critical ECJ rulings.