Author: Peter Empsten

In its judgment of 13 May 2026 (C‑603/24, Stellantis Portugal), the EU Court of Justice held that intra-group recharges based on a transfer pricing model do not, in principle, constitute consideration for a service and are therefore not automatically subject to VAT.

The Court reiterates a fundamental principle of VAT law: a service is taxable only where there is a direct link between a specific supply and an actual consideration received, within a legal relationship involving reciprocal obligations.

In this case, according to the Court, there was insufficient evidence of such a link. The intra-group recharge primarily aimed to ensure a pre-agreed profit margin and was calculated on the basis of multiple cost elements, meaning that any connection with potential services was at most indirect. VAT can only be due where such a legal relationship and direct link between a supply of goods or services and a reciprocal performance/payment actually exist.

This judgment aligns closely with the Court’s settled case law on the requirement of a “direct consideration.” The Court consistently emphasizes that not every payment within a contractual or economic relationship constitutes a taxable transaction. What is new in this decision is the explicit application of these principles to intra-group recharges in the context of a transfer pricing model.

Action points for companies:

• Analyse your transfer pricing policy: assess whether intra-group recharges merely serve margin alignment purposes or can be linked to specific services.
• Review contracts and documentation: avoid agreements that implicitly suggest a service if this is not intended.
• Substantiate the absence of a direct link: ensure clear documentation demonstrating that adjustments are based on overall margin targets rather than individual services.
• Reassess VAT positioning in existing structures: particularly in sectors where warranty or repair costs play a role (automotive, technology, etc.).
• Prepare for audits: expect increased scrutiny from tax authorities regarding the distinction between services and price adjustments within groups. After all, only legally due VAT is deductible.