Opinion of the Advocate General — ECLI:EU:C:2026:21
Date: 2026-01-15
Language of the case: Portuguese

summary 32. The adjustment of the consideration for a supply, expressly referred to in the question, can therefore never itself constitute a supply of services. 33. If the question is taken literally, it can therefore be answered very quickly. The mere adjustment (upwards or downwards) of a sale price for a supply in principle never itself constitutes a supply of services within the meaning of Article 2(1) of the VAT Directive. B. The actual question referred for a preliminary ruling: Consequences of a price adjustment made for reasons of income tax law 34. If the request for a preliminary ruling is examined in more detail, however, it raises the dogmatically interesting question of the consequences, under VAT law, of an adjustment of transfer pricing made for reasons of income tax law. On close inspection, that question has even been referred to the Court in another case (the case in Arcomet Towercranes (9)) although it was not answered exhaustively in that case. 35. In that judgment, the Court reformulated the question, which had been appropriately referred and which was not straightforward to answer, making it rather straightforward to answer. It is doubtful whether that rather straightforward answer was also a useful answer. I will therefore take the opportunity here and reformulate a question that is rather straightforward to answer so that the underlying problem becomes clear and can be resolved by the Court. If the Court does not resolve the problem here, the resolution of the problem would only be delayed. The uncertainties already created in practice by the judgment referred to above would then continue to exist. 36. In essence, the referring court seeks to ascertain how adjustments to a sale price agreed between two intra-group companies (also referred to as the transfer price for the purposes of income tax law) are to be treated for the purposes of VAT law where that price adjustment serves primarily to allocate the profit between the two affiliated undertakings in an appropriate manner (within the meaning of income tax law). 37. As a general rule, the aim of contractually agreed profit allocation is to prevent, for the purposes of income tax law, the tax authority from subsequently adjusting transfer prices because the arm’s length principle may not have been observed, so that one company (usually that of a low-tax jurisdiction) generated, from the perspective of the tax authority (usually that of a high-tax jurisdiction), excessive profits that were actually generated and taxable in the other jurisdiction (in the example, the high-tax jurisdiction). 38. Advocate General Richard de la Tour, who, unlike the Court, addressed the difficult question in the case referred to above, agrees that, for the purposes of VAT law, rules or criteria relating to income tax cannot be decisive. (10) What matters is whether the conditions of a transaction that is taxable (and liable to tax) (Article 2(1) of the VAT Directive) are satisfied where a transfer price is subsequently adjusted. 39. Unlike Advocate General Richard de la Tour, (11) however, I consider it to be entirely possible and even necessary to give a principled answer to the question of the consequences under VAT law of an adjustment of transfer pricing made for reasons of income tax law. Despite the complex reality in a systematic area of law such as VAT law, this does not necessarily have to be decided afresh, on a case-by-case basis, each time. 40. Indeed, there are certain situations in which an adjustment of transfer pricing may, in some circumstances, have consequences for the purposes of VAT law, and others in which it does not. Those situations can also be distinguished from each other, without being exhaustive. C. The reformulated question 41. In that regard, the reformulated question and the one that actually requires an answer is as follows: ‘Must an adjustment of the consideration for an intra-group supply that is made for income tax reasons be regarded as a significant change in the taxable amount for the purposes of VAT law in accordance with Article 90 of the VAT Directive or as the taxable amount for a separate service supplied by the person who benefits from the change in the transfer price, or is it irrelevant for the purposes of VAT law as a mere adjustment of profits between two intra-group undertakings?’ 42. A number of situations are relevant in that regard. Accordingly, it is conceivable for the taxable person to make separate services or supplies with a view to generating input and output, which thus influences the profits as desired. The Court appears to have assumed such a situation in the case in Arcomet Towercranes. (12) However, it would also be possible for the parties to invoice something only on paper in order to steer profits accordingly. These are usually agreements that allow adjustments in both directions, whereby a supply of services, at least in one direction, is difficult to imagine (see, in that regard, section C.1.). 43. It is also conceivable, however, for the tax authority (for example, ten years later in the context of a tax audit) to make an adjustment of transfer pricing with a view to an appropriate allocation of profits, which – usually without any real payment flows – ultimately leads to a (fictitious) attribution of profits on one side (and, in fact, a fictitious increase in expenses and thus a decrease in the profits on the other side) (see section C.2.). However, it is also conceivable for the existing purchase price subsequently to be adjusted on account of certain variables which were still open when the initial purchase price was set (see section C.3.). 1. Separate supply of service for the creation of input and output vs. fictitious invoicing of fictitious supplies intended to correct profits 44. Under Article 2(1)(c) of the VAT Directive, ‘the supply of services for consideration within the territory of a Member State by a taxable person acting as such’ is subject to VAT. 45. According to settled case-law, a supply of services is effected ‘for consideration’ within the meaning of Article 2(1)(c) of the VAT Directive and is therefore subject to VAT only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the actual consideration for the service supplied to the recipient. (13) That criterion relating to the existence of a legal relationship – as is also rightly apparent from the recent case-law of the Court of Justice – is to be given a broad meaning. (14) 46. Where the service to be supplied and the consideration to be paid for it arise from an underlying contract, such a legal relationship can, in principle, be assumed to exist. Moreover, this appears to have been the correct starting point for the Court (15) and the Advocate General (16) in the case in Arcomet Towercranes. If consideration has actually been agreed for a supply of services, provided that a corresponding positive result is achieved or not achieved, there is (at the time when the relevant condition is fulfilled) a supply of services for consideration that is relevant for the purposes of VAT law. 47. In the present case, there is not even a contract under which a service supplied by the purchaser (the applicant) to the seller (OEM) could somehow be justified. First, the applicant purchases only the cars and resells them. That resale also entails bearing the warranty costs. Second, the tax authority’s assumption ‑ that the applicant supplies services in the form of the distribution and management of the warranty in favour of its seller and therefore in return for the consideration resulting from the price adjustment ‑ would make no sense if the applicant’s profit exceeded the prescribed range. In the event of lower distribution costs or lower warranty costs, the applicant would still have to pay the seller something for its own supply of services. That is far from the reality. 48. If something of that nature had been contractually agreed, that would rather militate in favour of a fictitious supply of services, so that such a contract would rightly (17) be irrelevant to the taxation of the expense of a consumer good under VAT law. However, in the present case, it was not even the subject of a contractual agreement, but a supply of services is merely alleged by the tax authority. 2. Subsequent adjustment of the transfer price by the tax authority for the purposes of profit adjustment 49. However, the situation is different where an adjustment of the transfer price, which has been ordered by the tax authority (and is thus unilateral), is made with a view to an appropriate allocation of profits between companies (usually between different States). 50. So long as that occurs only in connection with the taxation of company X’s income in Member State A, it is a pure fiction. For income tax reasons, the profit is increased accordingly. Whether company Y’s profit is reduced in State B (which would logically be the case) is an entirely different question. Indeed, given that the other State may have other views about the correct transfer price and that, as I explained above, there is no such thing as one correct transfer price, that is not necessarily the case. That can also be described as a dilemma for the purposes of income tax law, for which, inter alia, dispute resolution procedures (18) have been developed. 51. By contrast, VAT law is based on the principle that an adjustment of the price (consideration) always has the same effect on both sides. Thus, the supplier’s tax liability is reduced or increased (Articles 90 and 73 of the VAT Directive), while the recipient’s input tax deduction increases or decreases proportionally (Article 186 of the VAT Directive). In that regard – this also distinguishes VAT law from income tax law – it is not the objective value of a supply which is decisive, but the value taken as the basis by the parties, as the Court only recently reiterated. (19) 52. For that reason, Working paper No 923 of the VAT Committee also quite rightly states: ‘There is a tension between the transfer pricing rules set out for the purposes of direct taxation[,] which, based on the arm’s length principle[,] seek to arrive at the arm’s length valuation of a transaction (i.e. the open market value), and the VAT rules, generally based on the existence of a supply for consideration, where consideration is seen as a subjective value (i.e. the price actually paid)’. (20) 53. The tax authority’s view of the correct transfer pricing may therefore have consequences under income tax law; it does not, in principle, have any consequences under VAT law. In the present case, the parties’ views as to the amount of the consideration remain decisive. 54. The VAT Expert Group’s entirely accurate statements also refer to this. According to those statements, such transfer pricing adjustments are outside the scope of the VAT Directive. (21) The VAT Expert Group states, however, that a distinction should be drawn between cases where the adjustment is provided for by contract and that, if there is an adjustment for previous supplies, that must lead to an adjustment of the taxable amount. (22) 55. On the other hand, if, for reasons of income tax law, the tax authority unilaterally (and ultimately fictitiously) increases (or decreases) the profit subsequently, that does not constitute any change in the consideration agreed between the undertakings concerned. Therefore, in principle, that does not alter the services previously supplied in return for the agreed consideration (see Article 73 of the VAT Directive) and thus also does not alter the amount of the VAT due and already paid. However, that does not appear to be the situation in the present case. 3. Subsequent adjustment of an undetermined but determinable (variable) price 56. The present case concerns, rather, the subsequent adjustment of a price for the vehicles supplied, which, at the time of the agreement, was yet to be determined and was therefore designated by a reference price, but which could vary upwards or downwards depending on changes in various parameters. In that regard, it is entirely possible to speak of an undetermined but determinable (variable) price. According to the facts presented by the referring court, the decisive parameters are the costs borne by the purchaser (the applicant) (the applicant’s own distribution costs and the warranty costs borne by it) in connection with the distribution of the vehicles produced by the General Motors Group and purchased by the applicant. 57. At the end of each period, the transfer price was adjusted according to the operating profit previously agreed for the distribution unit (in this case, the applicant), such that the actual amount of the applicant’s operating profit was the same as the target amount of operating profit. 58. That method of calculating the sale price between the OEMs and the applicant ensured that the applicant retained the profit that had been allocated to it within the group, but no more or less. That profit allocated depends on the variables (its own distribution costs and the warranty costs borne by it), which were calculated subsequently for each asset purchased. Depending on the evolution of the variables, the purchase price increased or decreased subsequently. 59. For such situations, there are corresponding provisions in the VAT Directive governing the consequences under VAT law. There is therefore no need to construct fictitious supplies of services beyond the supplies made, particularly where those could lead to a negative price. 60. Article 90 of the VAT Directive expressly states that, where the price is reduced after the supply takes place, the taxable amount is to be reduced accordingly under conditions which are to be determined by the Member States. In this case, that would be the taxable amount of the supply to the applicant. At the same time, Article 73 of the VAT Directive covers subsequent price increases because, under that provision, the taxable amount of the seller’s supply is ultimately all it receives for its supply. That naturally includes subsequent increases of the purchase price. 61. Those two provisions clearly show that adjustments to the actual price of a supply change the taxable amount of that supply. When that is the case, such a change in the taxable amount cannot at the same time constitute a supply of services. A subsequent price adjustment therefore has an impact only on the taxable amount of the underlying transaction. 62. In other situations, the Court has already had to consider the effects of subsequent price changes and has always done so without assuming the existence of a (fictitious) service ‘by adjusting the contract’. Thus, comparable questions arise in customs law when the customs value is adjusted subsequently. While in the case in Hamamatsu (23) the Court held that a general adjustment of transfer prices without any specific reference to adjustments concerning the individual goods imported constituted an unforeseeable change with no effects under customs law, in the case in Tauritus (24) it considered the contractually agreed subsequent change of an undetermined but determinable (variable) purchase price of individual goods to be significant under customs law. That corresponds to the distinction proposed here according to the arrangements for adjusting a transfer price. 63. In my view, the Court’s ruling in the case in Arcomet Towercranes (25) does not preclude that conclusion. First, that case did not concern the adjustment of a transfer price, but the existence of a supply of services for consideration if the profit was too high or too low. Irrespective of whether the result is actually convincing in that specific case or whether fictitious services were in fact invoiced, the Court ultimately held only that there is a supply of services for consideration where the parties have contractually agreed on a supply of services for consideration, presumably on the assumption that the service was actually supplied. VI. Conclusion 64. I therefore propose that the question referred for a preliminary ruling by the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal) should be answered as follows: Article 2(1)(c) and Articles 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. 1 Original language: German. 2 See also, on this topic, Echevarria, G., The interplay between transfer pricing and Value Added tax: Recent Case Law, in EC Tax Review 2025/5, p. 201 (p. 207 et seq.). 3 Judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646). 4 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 (OJ 1977 L 145, p. 1). 5 Council Directive of 28 November 2006 (OJ 2006 L 347, p. 1). 6 The position would be different if the applicant had supplied a service for consideration and then offset it against the debt relating to the purchase price. However, first, according to the facts provided, that was not done in the present case and, second, if it had been done, it would never result in a higher sale price. That is why that possibility can be disregarded in the present case. 7 See my Opinion in Zlakov (C‑744/23, EU:C:2025:332, point 39 et seq.) for further details. 8 At least according to the Court of Justice – see fundamental judgment of 20 June 1991, Polysar Investments Netherlands (C‑60/90, EU:C:1991:268, paragraph 13); see also judgments of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution) (C‑98/21, EU:C:2022:645, paragraph 41 et seq.); of 8 November 2018, C&D Foods Acquisition (C‑502/17, EU:C:2018:888, paragraph 30 et seq.); and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 16 et seq.). However, that is not entirely convincing and is therefore not without controversy – see my Opinion in Högkullen (C‑808/23, EU:C:2025:149, point 32 et seq.). 9 Judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646). 10 Opinion in Arcomet Towercranes (C‑726/23, EU:C:2025:244, point 38). 11 Opinion in Arcomet Towercranes (C‑726/23, EU:C:2025:244, point 32). 12 Judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646). 13 Judgments of 4 July 2024, Credidam (C‑179/23, EU:C:2024:571, paragraph 36); of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 36); and of 3 March 1994, Tolsma (C‑16/93, EU:C:1994:80, paragraph 14). 14 Judgment of 27 April 2023, Fluvius Antwerpen (C‑677/21, EU:C:2023:348, paragraph 31). 15 Judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646, paragraphs 35 and 36). 16 Opinion of Advocate General Richard de la Tour in Arcomet Towercranes (C‑726/23, EU:C:2025:244, point 41 et seq.). 17 A possibly different conclusion is reached in the judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646, paragraph 48), and in the Opinion of Advocate General Richard de la Tour in Arcomet Towercranes (C‑726/23, EU:C:2025:244, point 48), which, however, did not address the argument to the contrary due to the specific facts of the case. 18 Within the European Union, there is now even Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the European Union (OJ 2017 L 265, p. 1) for that purpose. However, that directive covers only disputes arising from the interpretation and application of treaties and conventions which provide for the elimination of double taxation on income and, where appropriate, on capital. 19 Judgment of 3 July 2025, Högkullen (C‑808/23, EU:C:2025:516, paragraph 21), with reference to judgments of 25 November 2021, Amper Metal (C‑334/20, EU:C:2021:961, paragraph 28), and of 7 November 2013, Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 33). 20 See Working paper No 923 of the advisory committee on value added tax (‘the VAT Committee’) (Directorate-General Taxation and Customs Union (DG TAXUD)), taxud.c.1(2016)1280928 – EN in section 3.4 (p. 23). 21 See Working paper No 071 REV2 of the VAT Expert Group, taxud.c.1(2018)2326098 – EN, p 2. 22 See section 2.2.2.2 (p. 8) of Working paper No 071 REV2 of the VAT Expert Group, taxud.c.1(2018)2326098– EN, reproduced table. 23 Judgment of 20 December 2017, Hamamatsu Photonics Deutschland (C‑529/16, EU:C:2017:984, paragraphs 18 and 31 et seq.). 24 Judgment of 15 May 2025, Tauritus (C‑782/23, EU:C:2025:353, paragraphs 60 and 61). 25 Judgment of 4 September 2025, Arcomet Towercranes (C‑726/23, EU:C:2025:646).