VAT and TP charges – Three different cases referred to the ECJ

Recent developments highlight the intersection between VAT and Transfer Pricing (TP) and the need for attention.
EU case law currently offers limited guidance on the relationship between VAT and TP charges.
Three separate cases referred to the CJEU are likely to bring changes in this area.
The cases involve Romanian companies receiving charges from foreign group companies, with disputes arising over the applicability of reverse charged VAT and the necessity of the services for taxable activities.
Another case from Sweden focuses on the application of the open market value within VAT, with disagreements regarding the remuneration charged and the inclusion of certain costs.

Soft law sources, such as working papers from the VAT committee and the VAT Expert Group, acknowledge the lack of a consensus on the topic and emphasize the principle of VAT neutrality. However, the application of Article 80 of the EU VAT Directive may impact this principle, and its implementation is optional for Member States.

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C-527/23 (Weatherford Atlas Gip) – Questions – Refusal of the right to deduct if services are not used for taxable transactions

Facts & Background:

Arcomet BE negotiated crane supplies with customers through its local affiliate, Arcomet RO.
To align with its transfer pricing (TP) policy, the Arcomet group adjusted the profitability of its operating entities.
Equalization amounts were invoiced based on Arcomet RO’s pre-tax profit or loss and were subject to VAT.
The Romanian tax authorities disputed the VAT recovery.

Question:

The main questions revolve around whether the equalization payments can be considered as consideration for a supply and, if so, whether they are eligible for VAT recovery.

C-726/23 (Arcomet Towercranes) – Questions – Are Transfer Pricing Settlement invoices a Supply of Services?

Facts & Background:

WAGSA received services from a group company and accounted for reverse charge VAT.
The Romanian tax authorities rejected the VAT recovery, arguing that the services lacked a “direct and immediate” link to WAGSA’s outputs and did not provide a direct benefit to WAGSA.

Question:

The main questions revolve around whether the services provided by a group company can be considered as “shareholder” services and whether a business qualifies as a “taxable person acting as such” when incurring such costs.

C-808/23 (Högkullen) – Questions – Taxable amount of services provided by a parent company to its subsidiaries

Facts & Background:

Hogkullen provided management services, with costs amounting to SEK 28 million in 2016, while fees totaled SEK 2.3 million.
The Tax Agency argued that the services were undervalued compared to their open market value and should be adjusted, taking into account capital raising and shareholder costs.
There is no requirement for VAT to follow transfer pricing.

Question:

The main questions revolve around whether “management services” have an open market comparator and whether charges must reflect the parent company’s full cost base.

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