The applicability of VAT to transfer pricing adjustments remains an issue for large corporations. The matter has recently come under scrutiny before the EU Court of Justice (CJEU) in case C‑603/24 (judgment rendered on 13 May 2026).

In that case, General Motors Portugal (GMP), the Portuguese distribution subsidiary of General Motors, purchased vehicles from European OEMs (its affiliates) and sold them to third-party dealers in Portugal who resold them to final customers.

  • GMP purchased the vehicles from OEMs at a discount relative to the sale prices applied to the dealers (resale margin) so as to pay for its distribution costs and earn an appropriate profit margin.
  • Any manufacturing defects, road side assistance cases and warranty anomalies with respect to the vehicles were repaired by the dealers, who invoiced GMP for their repair services.
  • GMP sent OEMs information about all of its distribution costs, including those repair costs. The costs were then included in the calculation of the profit margin to be earned by GMP.
  • At the end of each year the OEMs adjusted the transfer prices for the vehicles using debit or credit notes so as to secure the agreed profit margin for GMP.
  • During a tax audit the authorities held that GMP was providing vehicle repair services to the OEMs as it acted as agent in the supplies of such services by the dealers to the OEMs. According to the authorities, the remuneration (consideration) for the services was embedded in the adjustments of transfer prices for the vehicles. For that reason, the authorities sought to apply VAT to the transfer pricing adjustments on the basis that those adjustments in fact constituted remuneration for GMP for repair services rendered in Portugal.

CJEU held that neither the agreements between the OEMs and GMP nor any other circumstances suggested that there is a direct legal relationship whereby GMP would be required to provide repair services to OEMs in consideration for the OEMs paying remuneration in the form of price adjustments. Any link between the repairs and the adjustment was at best indirect.

Therefore, the end-of-year revision adjusting the transfer prices to reflect GMP’s distribution costs, including repair costs, cannot be considered to constitute remuneration for repair services as there is no legal relationship between the parties which is characterised by reciprocal commitments.

The case is not really a revolution from the Polish point of view. As long as a transfer pricing adjustment does not change the consideration for a supply, but instead is merely intended to calibrate profitability, it will generally remain outside the VAT system. Issues do however arise in the case of cross-border adjustments as their VAT treatment differs between countries. The discussed case should prove helpful in ensuring a more homogeneous approach across the European Union.

As the CJEU judgment shows, authorities cannot impose VAT effects without a case-specific analysis and without characterising the transaction for transfer pricing purposes.

If you are in doubt as to the correct VAT treatment of your transfer pricing adjustments, feel free to contact your WTS&SAJA consultant.

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