On 13 May 2026, the Court of Justice of the European Union (CJEU) delivered its judgment in Case C-603/24, addressing a request for a preliminary ruling concerning the interpretation of Article 2(1) of the Sixth VAT Directive in relation to supplies of services for consideration.
The CJEU examined whether certain transfer pricing adjustments made between companies within the General Motors group, intended to ensure predetermined profit margins, could be regarded as consideration for vehicle repair services subject to VAT.
The dispute arose between Stellantis Portugal, S.A., the successor company to Opel Portugal (formerly General Motors Portugal – “GMP”), and the Portuguese Tax Authorities. GMP operated in Portugal as part of the General Motors group, which included, among others, companies engaged in the manufacture and supply of motor vehicles, parts and accessories to other group entities.
When vehicles presented manufacturing defects, issues covered by the manufacturer’s warranty, or roadside assistance-related problems, customers brought them to dealerships. The dealerships carried out the repairs and invoiced GMP for the related costs, charging the applicable VAT.
The dispute originated from a tax audit relating to the 2006 financial year, during which the Portuguese Tax Authorities took the view that certain transfer pricing adjustments made between GMP and the group’s manufacturing entities actually constituted remuneration for VATable vehicle repair services. This conclusion was reached even though the adjustments took into account not only repair costs but also other costs incurred by GMP in the course of its distribution activities, such as personnel, electricity and marketing expenses.
Under an intragroup agreement entered into in 2004, the transfer prices of vehicles, parts and accessories could be adjusted at the end of each period to ensure that the distribution entities achieved a predetermined profit margin. These adjustments were implemented through credit notes where GMP’s profit fell below the agreed margin and through debit notes where its profit exceeded the target margin.
The key issue was whether the inclusion of repair costs in the calculation of the transfer pricing adjustments was sufficient to conclude that GMP had supplied repair services to the group’s manufacturing entities and that such adjustments constituted consideration for those services.
Resolving this issue was crucial because the Portuguese Tax Authorities considered that repair costs arising from manufacturing defects, manufacturer warranties or roadside assistance obligations should ultimately be borne by the manufacturers. According to their interpretation, GMP initially incurred those costs and subsequently recharged them to the manufacturers through the transfer pricing adjustments. On that basis, the authorities concluded that GMP had supplied repair services subject to VAT and assessed additional VAT and compensatory interest amounting to EUR 1,504,215.49.
The CJEU recalled that, for a supply of services to be subject to VAT, there must be a legal relationship between the parties involving reciprocal performance, such that the remuneration received constitutes the actual consideration for a specific service supplied to the recipient.
In the case at hand, the intragroup agreement was intended to ensure that GMP achieved a predetermined profit margin through transfer pricing adjustments, but it did not establish any specific obligation on GMP to provide repair services to the manufacturers in exchange for remuneration. Furthermore, repair costs were only one of the elements taken into account in calculating the adjustment, alongside other general operating expenses. Accordingly, the CJEU held that the connection between the repairs and the transfer pricing adjustments was merely indirect and that those adjustments could not automatically be regarded as consideration for VATable repair services.
Nevertheless, the CJEU left the final assessment of the facts to the national court. It will be for the Portuguese court to determine whether, independently of the transfer pricing agreement, there existed a legal relationship allowing the identification of a specific supply of services directly linked to a corresponding remuneration, in which case the adjustment could be subject to VAT.
The judgment also leaves open an important practical issue. Where a transfer pricing adjustment does not constitute remuneration for an independent supply of services, it may be necessary to assess whether it should instead be treated as a subsequent adjustment to the purchase price of the vehicles, potentially affecting the taxable amount of the original supplies.
How can we assist you?
With more than 30 years of experience in indirect taxation, customs and international trade, Salinas & Partners is available to assist you in assessing the VAT and customs implications of transfer pricing adjustments, as well as in defending tax assessments arising from the characterization of such adjustments as VATable supplies of services.
