Provisional text
OPINION OF ADVOCATE GENERAL
RICHARD DE LA TOUR
delivered on 3 April 2025 (1)
Case C‑726/23
SC Arcomet Towercranes SRL
v
Direcţia Generală Regională a Finanţelor Publice Bucureşti,
Administraţia Fiscală pentru Contribuabili Mijlocii Bucureşti
(Request for a preliminary ruling from the Curtea de Apel Bucureşti (Court of Appeal, Bucharest, Romania))
( Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Right to deduct VAT – Intra-Community transactions between related companies – Transfer pricing – Acquisition of intra-group management services – Services considered not to have been used for the purposes of taxed transactions – Supporting documents – Refusal of the right to deduct )
I.      Introduction
1.        Multinational enterprises with integrated operations involving the intra-group supply of services have to face problems arising from the existence of multiple applicable systems of direct and indirect taxation.
2.        In order to alleviate those problems, the Organisation for Economic Cooperation and Development (OECD) drew up Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. (2) The Guidelines serve the objective of securing the appropriate tax base in each jurisdiction and avoiding double taxation, thereby minimising conflict between tax administrations and promoting international trade and investment. (3) The mechanism used for that purpose is transfer prices, namely the prices at which an enterprise transfers physical goods and intangible property or provides services to associated enterprises, in particular enterprises in the management, control or capital of which that enterprise participates directly or indirectly. (4) That transfer price must be adjusted in order to comply with the arm’s length principle. Under that principle, where conditions are made or imposed between the two associated enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly. (5) The OECD Guidelines set out a number of transfer pricing methods for complying with the arm’s length principle.
3.        Recalling those rules is enough to show that the transfer pricing rules were formulated for the purposes of direct taxation. The question therefore arises whether or not they should be taken into account in indirect taxation matters.
4.        I will propose that the Court should give an answer to the effect that the assessment whether the transfer price is subject to the system of value added tax (VAT) must be made on a case-by-case basis and that, in the present case, the transaction must be subject to VAT. I will also propose that the Court give the clarification that, in order to prove that the transaction is deductible, the tax administration may request the taxpayer to produce documents other than the invoice alone, in compliance with the principle of proportionality.
II.    Legal framework
A.      European Union law
5.        Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, (6) as amended by Council Directive 2010/45/EU of 13 July 2010, (7) provides:
‘1.      The following transactions shall be subject to VAT:
…
(c)      the supply of services for consideration within the territory of a Member State by a taxable person acting as such.’
6.        Under Article 9(1) of the VAT Directive:
‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’
7.        Article 24(1) of that directive reads as follows:
‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’
8.        Under Article 168(a) of the directive:
‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a)      the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person.’
9.        Article 178(a) of the VAT Directive provides:
‘In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a)      for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI.’
10.      Article 226(6) of the directive reads as follows:
‘Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:
…
(6)      the quantity and nature of the goods supplied or the extent and nature of the services rendered.’
B.      Romanian law
1.      Tax Code
11.      Article 11(1) of Legea nr. 571/2003 privind Codul fiscal (Law No 571/2003 establishing the Tax Code) (8) of 22 December 2003, in its version applicable to the dispute in the main proceedings (‘the Tax Code’), provides:
‘When establishing the amount of a tax, levy or mandatory social security contribution, the tax authorities may disregard a transaction that has no economic purpose and alter the fiscal effects of such a transaction and may reclassify the form of a transaction or activity so as to reflect the economic content of the transaction or activity.’
12.      Under Article 19(5) of that Code:
‘Transactions between associated entities shall be carried out in accordance with the arm’s length principle, whereby transactions between associated entities are carried out under specified or imposed conditions which must not be different from commercial or financial relationships established between independent enterprises. Transfer pricing principles shall be taken into account in determining the profits of associated entities.’
13.      Article 126(1)(a) of the Code reads as follows:
‘For the purposes of VAT, taxable transactions in Romania are those which satisfy the following cumulative conditions:
(a)      any transaction which, for the purposes of Articles 128 to 130, constitutes or is treated as a supply of goods or services, within the scope of VAT, for consideration.’
14.      Under Article 133(2) of that Code:
‘The place of supply of services rendered to a taxable person acting as such shall be the place where the person who receives such services has established his or her business. If those services are supplied to a fixed establishment of the taxable person located in a place other than the place where he or she has established his or her business, the place of supply of those services shall be the place where the fixed establishment of the person who receives the services is located. …’
15.      Article 145(2)(a) of the Tax Code provides:
‘All taxable persons shall have the right to deduct tax relating to purchases if they are used for the purposes of the following transactions:
(a)      taxable transactions.’
16.      Under Article 146(1)(a) of the Code:
‘In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a)      for tax payable or paid on goods supplied or to be supplied to him or her or on services supplied or to be supplied to him or her by a taxable person, he or she must hold an invoice drawn up in accordance with the provisions of Article 155 as well as proof of payment in the case of purchases made by taxable persons who apply the VAT on receipt system or by taxable persons who purchase goods or services from taxable persons during the period in which they apply the VAT on receipt system.’
17.      Article 150(2) of the Code provides:
‘Tax shall be payable by any taxable person … who receives services the place of supply of which is in Romania under Article 133(2) and which are provided by a taxable person who is not established in Romania or is not deemed to be established there in respect of those services pursuant to Article 125a(2), even if he or she is registered in Romania in accordance with Article 153(4) or (5).’
18.      Article 155(4) and (5) of the Code provide:
‘(4)      Without prejudice to the provisions of paragraphs 30 to 34, the following rules on invoicing shall apply:
(a)      for supplies of goods and services the place of supply of which is deemed to be in Romania in accordance with Articles 132 and 133, invoicing shall be subject to the provisions of this article. …
(b)      by way of derogation from the provisions of point (a):
…
(2)      for supplies of goods and services the place of supply of which is deemed to be in Romania in accordance with Articles 132 and 133, which are made by a supplier/provider who is not established in Romania but who is established in the [European Union] under Article 125a(2) and for which the person liable for tax under Article 150 is the beneficiary, invoicing shall be subject to the rules applicable in the Member State in which the supplier/provider is established.
…
(5)      The taxable person shall issue an invoice to each beneficiary in the following situations:
(a)      for supplies of goods or services made;
…’
2.      Implementing rules for the Tax Code
19.      Point 2(2) of the Implementing rules approved by Hotărârea Guvernului nr. 44/2004 pentru aprobarea Normelor metodologice de aplicare a Legii nr. 571/2003 privind Codul fiscal (Government Decision No 44/2004 approving the Implementing rules for Law No 571/2003 establishing the Tax Code) (9) of 22 January 2004, in their version applicable to the dispute in the main proceedings (‘the Implementing rules for the Tax Code’), provides in respect of the application of Article 126 of the Tax Code:
‘Pursuant to Article 126(1)(a) of the Tax Code, a supply of goods and/or services must be made for consideration. The “consideration” condition implies the existence of a direct link between the transaction and the consideration obtained. A transaction is taxable where it confers a benefit on the customer and the consideration obtained is linked to the benefit received, as follows:
(a)      the condition relating to the existence of a benefit for a customer is met where the supplier of goods or services undertakes to provide specific goods and/or services to the person making the payment or, failing payment, where the transaction has been made to enable such an undertaking to be entered into. That condition is consistent with services being collective, not admitting of precise measurement or being attributable to a legal obligation;
(b)      the condition relating to the existence of a link between the transaction and the consideration obtained is met even if the price does not reflect the open market value of the transaction, that is, it takes the form of contributions, goods or services or price discounts, or is not paid directly by the recipient but by a third party.’
20.      Point 41 of the Implementing rules for the Tax Code provides, in respect of the application of Article 11 of the Tax Code, that, for the purposes of applying transfer pricing rules, the Romanian tax authorities must take into account the principles set out in the OECD Guidelines.
3.      Tax Procedure Code
21.      Article 65(1) and (2) of Ordonanța Guvernului nr. 92/2003 privind Codul de procedură fiscală (Government Order No 92/2003 establishing the Tax Procedure Code) (10) of 24 December 2003 reads as follows:
‘(1)      The taxpayer shall prove the acts and facts that were the basis for its returns and any request made to the tax administration.
(2)      The tax administration shall be obliged to give reasons for the tax assessment with its own evidence or findings.’
III. The facts of the dispute in the main proceedings and the questions referred for a preliminary ruling
22.      SC Arcomet Towercranes SRL (‘Arcomet Romania’) is part of the Arcomet group, an independent global group in the crane rental sector. While Arcomet Romania buys or rents cranes which it then sells or rents to its customers, Arcomet Service NV Belgium (‘Arcomet Belgium’) seeks suppliers for its subsidiaries, including Arcomet Romania, and negotiates contractual terms with them. However, sale and rental contracts are concluded between Arcomet Romania and its suppliers and its customers.
23.      A transfer pricing study for Arcomet Belgium and its subsidiaries carried out in December 2010 showed that, at market level, the subsidiaries should, in accordance with the transfer pricing rules, record an operating profit margin between -0.71% and 2.74%. Consequently, a contract was concluded on 24 January 2012 between Arcomet Belgium and Arcomet Romania (11) under which, first, Arcomet Romania was guaranteed an operating profit margin in that range and, second, an annual equalisation invoice was to be issued by Arcomet Belgium in the case of a surplus profit above 2.74% or by Arcomet Romania in the case of a surplus loss below -0.71%.
24.      In 2011, 2012 and 2013, Arcomet Romania, which recorded a profit higher than the envisaged range, received from Arcomet Belgium three invoices exclusive of VAT which Arcomet Belgium ultimately declared as supplies of services. Arcomet Romania declared the first two invoices as intra-Community purchases of services in respect of which it applied the reverse charge mechanism, but considered that the third invoice had been issued for transactions falling outside the scope of VAT.
25.      Arcomet Romania was the subject of a tax inspection covering, inter alia, the period in which those invoices were issued, following which it was required to pay additional VAT in respect of refused deductions, together with interest and penalties. The right to deduct was refused on the ground that the company had not substantiated the invoiced supply of services or the fact that they were necessary for the purposes of taxable transactions, in the absence of the production of supporting documents.
26.      Arcomet Romania brought an action for annulment of the decision dismissing its administrative appeal against the tax inspection report and the decision establishing additional VAT as well as the corresponding interest and penalties.
27.      In those circumstances, the Curtea de Apel Bucureşti (Court of Appeal, Bucharest) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)      Is Article 2(1)(c) of [the VAT Directive] to be interpreted as meaning that the amount invoiced by a company (the principal company) to an associated company (the operating company), equal to the amount necessary to align the operating company’s profit with the activities carried out and the risks assumed in accordance with the margin method of the OECD … Guidelines, constitutes a payment for a service which therefore falls within the scope of VAT?
(2)      If the answer to the first question is in the affirmative, with regard to the interpretation of Articles 168 and 178 of [the VAT Directive], are the tax authorities entitled to require, in addition to the invoice, documents (for example, activity reports, [works] progress reports, and so forth) justifying the use of the services purchased for the purposes of the taxable person’s taxable transactions, or must that analysis of the right to deduct VAT be based solely on the direct link between purchase and supply or [between purchase and] the taxable person’s economic activity as a whole?’
28.      Arcomet Romania, the Romanian Government and the European Commission lodged written observations. Those parties presented oral argument at the hearing on 16 January 2025.
IV.    Analysis
29.      By its questions relating to the VAT implications of the transfer pricing mechanism, the referring court is asking the Court about a subject which has been discussed within various bodies.
30.      Thus, two documents originating from very different working groups were produced at the hearing. A first document, dated 28 February 2017, concerning possible VAT implications of transfer pricing (12) (‘Working paper No 923 of the VAT Committee’) is the result of the work of the VAT Committee provided for in Article 398 of the VAT Directive, which brings together representatives of the Member States and of the Commission. The second document, dated 18 April 2018, also concerning possible VAT implications of transfer pricing (13) (‘the Working paper of the VAT Expert Group’), was produced by a group of experts set up by a Commission decision: (14) it brings together 40 qualified persons, consisting of seven individuals and representatives of 33 enterprises or professional organisations. That Expert Group was invited to give its opinion on Working paper No 923 of the VAT Committee.
A.      The first question referred for a preliminary ruling, concerning the scope of the VAT Directive in relation to transfer pricing
31.      The referring court wishes to know, in essence, whether Article 2(1)(c) of the VAT Directive must be interpreted as meaning that the amounts invoiced by a parent company, that assumes the commercial responsibilities, to a subsidiary established in another Member State using a method recommended by the OECD Guidelines (in this case, the transactional net margin method) may constitute the consideration for a supply of services for consideration, which falls within the scope of the VAT Directive.
32.      It might be tempting to seek to provide a principled answer to that question of whether or not transfer prices and adjustments thereto are subject to VAT. It would seem, however, that the reality is more complex and the assessment must be made on a case-by-case basis. That is for three reasons.
33.      In the first place, the OECD Guidelines were drawn up for the purposes of direct taxation, which are very different from the purposes of indirect taxation, as the Court has had occasion to acknowledge. (15)
34.      Similarly, Working paper No 923 of the VAT Committee states that ‘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 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)’. (16) It is true that the VAT directive makes reference to the open market value of a consideration only in defining the taxable amount in Articles 72 and 80 thereof in an anti-abuse context, whereas recourse to the open market value is the principle in transfer pricing. (17) Both the objectives and the means therefore differ between those two sets of rules based on distinct concepts of taxable person and taxable amount in particular.
35.      In the second place, as regards transfer pricing, the OECD Guidelines recommend several calculation methods: three traditional transaction methods (18) and two transactional profit methods. (19) As the VAT Committee explains very clearly, (20) there are several types of transfer pricing adjustment. Some adjustments are made by the tax administrations (primary, (21) corresponding (22) or secondary (23) adjustment), while others are made voluntarily by taxpayers (compensating adjustment (24)). Some adjustments are made before the tax return and others are made a posteriori.
36.      In the view of the VAT Committee, all those differences justify an assessment on a case-by-case basis as to whether or not those adjustments are subject to VAT. (25) The VAT Expert Group, which recommends that such adjustments should be considered as outside the scope of the VAT Directive, (26) adds that this should always be the case for adjustments made by the tax administration, since such adjustments cannot be regarded as the consideration for a supply for consideration. (27) However, the Expert Group states that a distinction should be made between situations in which the adjustment is provided for contractually and in which, where there is an adjustment for previous supplies or billing of variances between actual and budgeted cost of marketing or administrative expenses, that must result in liability to VAT or an adjustment of the taxable amount. (28) In reality, the proposal made by the Expert Group to simplify the situation by not making transfer pricing adjustments subject to the VAT system where both parties have a full right to recover VAT is applied by just one Member State. (29) Their working paper was forwarded to the VAT Committee, which had asked the VAT Expert Group about that question, and no further action was taken. However, these discussions must not lose sight of the fact that adjustments connected with a supply of services or goods are a modification of the invoiced price of the services or goods, whereas, according to the order for reference, it seems that in the case at issue in the main proceedings the method of calculating the transfer price is used directly to calculate, a posteriori, the remuneration for the intra-group supply of services, without further adjustment.
37.      In the third place, liability to VAT is linked to the economic and commercial realities of situations, (30) which means that it must be analysed on a case-by-case basis whether the conditions governing the application of the VAT Directive are met.
38.      Therefore, it must be examined whether the conditions laid down in Article 2(1)(c) of that directive are satisfied, that is to say, whether a supply of services has been made for consideration within the territory of a Member State by a taxable person acting as such.
39.      It should be recalled that a supply of services is carried out for consideration, within the meaning of that provision, 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 an identifiable service supplied to the recipient. That is the case if there is a direct link between the service supplied and the consideration received. (31)
40.      As far as the legal relationship is concerned, it is embodied in this case by the contract of 24 January 2012, under which each party undertakes to provide a number of supplies to the other. Thus, from an operational point of view, Arcomet Belgium assumes, inter alia, the majority of the commercial responsibilities, such as strategy and planning, negotiating (framework) contracts with third-party suppliers, negotiating the terms and conditions of financing contracts, engineering, finance, fleet management at central level and quality and safety management. It undertakes to assume the main economic risks linked with the activity of the operating company, provided that the company complies with the instructions, procedures and decisions of the principal in that regard. (32) For its part, Arcomet Romania purchases and owns all goods and is responsible for the sale and rental of the goods and for the supply of services. (33)
41.      The contract of 24 January 2012 also provides for remuneration of the parties equal to the amount necessary to align Arcomet Romania with the activities it carries out and the risks it assumes. That position will be determined by common agreement between the parties and will be based on the transactional net margin method. In the event that Arcomet Belgium is entitled to receive remuneration from Arcomet Romania for its activities described in the contract, (34) Arcomet Belgium will issue an invoice to Arcomet Romania at the end of each year. Arcomet Romania will bear the amount of VAT relating to the remuneration received by Arcomet Belgium in accordance with local tax legislation. (35)
42.      The terms of the contract are thus clear: they provide for a supply and remuneration. It must still be determined whether there is an identifiable service supplied to Arcomet Romania and a direct link between that service and the consideration received.
43.      As far as the identifiable service is concerned, that condition also appears to be satisfied in so far as Arcomet Belgium not only negotiates the terms of contracts to be concluded by its subsidiary, but also performs a number of tasks contributing to the economic life of Arcomet Romania.
44.      As far as the direct link between the service supplied and the consideration received is concerned, that question is more difficult in view of the remuneration arrangements chosen by the parties, as the amount of the profit margin greater than 2.74% must be paid to Arcomet Belgium.
45.      However, according to settled case-law of the Court, the amount of the consideration, in particular the fact that it is equal to, greater or less than the costs which the taxable person incurred, is irrelevant. (36) Consequently, the Court has already ruled that that direct link was not affected where the payment was provided for in the form of a lump sum (37) or a transfer of 50% of the claim to prize money won by horses in competitions. (38) In the latter case, it had been submitted that the Court had ruled that the uncertain nature of the provision of any payment was such as to break the direct link between the service provided and any payment which may be received. (39) However, the Court held that the transfer of 50% of the claim to prize money won by horses in competitions was, as such, devoid of risk and that failure to obtain winnings could not call into question the existence of the transfer provided for by the contract. (40) It added that that transfer of 50% of the winnings constituted remuneration determined in advance according to well-established criteria, guaranteeing the predictability of the amount to which the supplier would be entitled in the case of a win or a good placing for the horse in a competition, without the materialisation of such an event being decisive in that regard and despite the fact that the effective implementation of that transfer depended on that placing. (41)
46.      In my view, the same reasoning can be followed in the case at issue in the main proceedings. Although the amount of remuneration itself is unspecified, the arrangements governing that remuneration, on the other hand, are laid down in the contract of 24 January 2012 based on very precise criteria and are, as such, devoid of risk. Thus, the amount of the remuneration for the services provided by Arcomet Belgium to Arcomet Romania can be determined perfectly well from the time of the conclusion of that contract.
47.      That analysis cannot be called into question by the fact that, in the event of a margin below -0.71%, the invoice is issued by Arcomet Romania.
48.      First, as is noted by the Commission, as that percentage was chosen following a comparability study based on market conditions, it would be surprising if a lower negative margin was realised in practice. Second, in any event, those are not the facts of the present case: the referring court has not given the Court information enabling it to rule on their characterisation, that is to say, whether it is a matter of financing granted by Arcomet Belgium or remuneration for services supplied by Arcomet Romania under the contract of 24 January 2012, for example, or whether any invoices were declared for VAT purposes.
49.      It must also be borne in mind that the services provided by Arcomet Belgium, which are common in the context of an intra-group relationship, have an effect on Arcomet Romania’s margin by virtue of the savings they allow it to make, in particular, or the improvement of the service provided to end customers. In addition, Arcomet Belgium initially declared the three invoices at issue as intra-Community supplies of goods. Similarly, Arcomet Romania declared the first two invoices as intra-Community purchases of services, in respect of which it applied the reverse charge mechanism.
50.      Against that background, the claim made by Arcomet Romania that the remuneration in question corresponds to a transfer price which, as such, is not subject to VAT, is not sufficient in itself to justify an exclusion from the scope of the VAT Directive. As has already been mentioned, no further action was taken on the recommendation made by the VAT Expert Group that all transfer prices should be excluded from the scope of that directive.
51.      Therefore, I propose that the answer to the first question should be that Article 2(1)(c) of the VAT Directive must be interpreted as meaning that remuneration for intra-group services supplied by a parent company, that assumes the commercial responsibilities, to a subsidiary and set out contractually, which is calculated according to the transactional net margin method recommended by the OECD Guidelines, must be regarded as the consideration for a supply of services for consideration within the meaning of that provision and must be subject to VAT.
B.      The second question referred for a preliminary ruling, concerning the arrangements for proving the substantive requirements governing the right to deduct VAT
52.      The referring court also asks whether Articles 168 and 178 of the VAT Directive and the principle of proportionality can be interpreted as not precluding the tax administration from requiring a taxable person requesting deduction of VAT to produce documents other than the invoice in order to justify the use of the services purchased for the purposes of its taxed transactions.
53.      It should be recalled that, first, the Court’s case-law has been consistent with regard to deduction of VAT. Thus, the Court rules that it is clear from Article 168 of the VAT Directive that, in order for the right to deduct input VAT paid to be available, first, the person concerned must be a ‘taxable person’ within the meaning of that directive and, secondly, the goods or services relied on as the basis for claiming the right of deduction must be used by the taxable person for the purposes of its own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person. (42)
54.      The Court adds that the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct is, in principle, necessary. The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them is a component of the price of the output transactions giving rise to the right to deduct. (43)
55.      However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct where the costs of the goods and services in question are part of its general costs and are, as such, components of the price of the goods or services which it supplies. Such costs do have a direct and immediate link with the taxable person’s economic activity as a whole. (44)
56.      In both situations, the Court has held that it is necessary that the cost of the input goods or services be incorporated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his or her economic activities. (45)
57.      In the present case, subject to verifications to be made by the referring court, it seems that the services supplied by Arcomet Belgium to Arcomet Romania such as crane fleet management and negotiating framework contracts with suppliers may, in principle, be included in the costs charged by Arcomet Romania to its customers.
58.      Second, the application of the principle of VAT neutrality by the Court has produced the following rule: that principle requires the deduction or refund of input VAT to be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements. (46) The Court has tempered that rule, however, holding that the position could be different if non-compliance with such formal requirements effectively prevents the production of conclusive evidence that the substantive requirements have been satisfied. (47)
59.      As regards the burden of proof, it is settled case-law that it is for the taxable person seeking deduction of VAT to establish that it meets the conditions for eligibility. The tax authorities may thus require the taxable person to produce the evidence they consider necessary for determining whether or not the deduction requested should be granted. (48)
60.      The Court concluded from this, in particular, that the taxable person is required to provide objective evidence that goods or services were actually supplied as inputs by taxable persons for the purposes of his or her own transactions subject to VAT, in respect of which he or she has actually paid VAT. That evidence may include, inter alia, documents held by the suppliers or service providers from whom the taxable person has acquired the goods or services in respect of which he or she has paid VAT. (49)
61.      At the hearing, the Romanian Government explained that in the course of the inspections the right to deduct VAT in itself had not been called into question. However, those inspections had not enabled Arcomet Romania to prove the existence of the services used for the purposes of its taxable transactions.
62.      As regards the assessment of that evidence, it must be carried out by the national court in accordance with the rules of evidence under national law, carrying out an overall assessment of all the facts and circumstances of the case. (50)
63.      Third, Arcomet Romania claims that, by requiring documents other than merely the invoice for the services supplied, the Romanian tax administration does not comply with the principle of proportionality.
64.      It should be noted that Member States must, in accordance with the principle of proportionality, employ means which, whilst enabling them effectively to attain the objective pursued by national legislation, are the least detrimental to the principles laid down by EU legislation, such as the fundamental principle of the right to deduct VAT. (51)
65.      As regards that principle of proportionality, it must be recalled that a national measure goes beyond what is necessary to ensure the correct collection of the tax if, in essence, it makes the right of exemption from VAT subject to compliance with formal obligations, without any account being taken of the substantive requirements and, in particular, without any consideration being given as to whether those requirements have been satisfied. Transactions should be taxed taking into account their objective characteristics. (52)
66.      Thus, the principle of proportionality does not preclude the requirement of proof that the substantive requirements for the right to deduct have been satisfied beyond producing an invoice alone, since the objective characteristics of the transactions under examination must be taken into account.
67.      Therefore, I propose that the answer to the second question should be that Articles 168 and 178 of the VAT Directive must be interpreted as not precluding the tax administration from requiring a taxable person requesting deduction of VAT to produce documents other than the invoice in order to justify the use of the services purchased for the purposes of its taxed transactions, provided, first, that those documents are requested in compliance with the principle of proportionality and, second, that they are such as to prove the existence of the services at issue and their use for the purposes of the taxable person’s taxed transactions, which is a matter for the national court to ascertain.
V.      Conclusion
68.      In the light of all the foregoing considerations, I propose that the Court of Justice answer the questions referred for a preliminary ruling by the Curtea de Apel Bucureşti (Court of Appeal, Bucharest, Romania) as follows:
(1)      Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010,
must be interpreted as meaning that remuneration for intra-group services supplied by a parent company to a subsidiary and set out contractually, which is calculated according to the transactional net margin method recommended by the Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, must be regarded as the consideration for a supply of services for consideration within the meaning of that provision and must be subject to value added tax (VAT).
(2)      Articles 168 and 178 of Directive 2006/112, as amended by Directive 2010/45,
must be interpreted as meaning that they do not preclude the tax administration from requiring a taxable person requesting deduction of VAT to produce documents other than the invoice in order to justify the use of the services purchased for the purposes of its taxable transactions, provided, first, that those documents are requested in compliance with the principle of proportionality and, second, that they are such as to prove the existence of the services at issue and their use for the purposes of the taxable person’s taxed transactions.
1      Original language: French.
2      Adopted by the OECD Committee on Fiscal Affairs on 27 June 1995 and revised on 20 January 2022 (‘OECD Guidelines’).
3      See OECD Guidelines, paragraph 7 (p. 12).
4      See OECD Guidelines, paragraph 11 (p. 13).
5      See OECD Guidelines, p. 26.
6      OJ 2006 L 347, p. 1.
7      OJ 2010 L 189, p. 1 (‘the VAT Directive’).
8      Monitorul Oficial al României, Part I, No 927 of 23 December 2003.
9      Monitorul Oficial al României, Part I, No 112 of 6 February 2004.
10      Monitorul Oficial al României, Part I, No 941 of 29 December 2003, republished in Monitorul Oficial al României, Part I, No 513 of 31 July 2007.
11      ‘The contract of 24 January 2012’.
12      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.
13      See Working paper No 071 REV2 of the VAT Expert Group, taxud.c.1(2018)2326098 – EN, annexed to Working paper No 945 of the VAT Committee of 19 April 2018, taxud.c.1(2018)2329129 – EN.
14      Decision of 26 June 2012 setting up a group of experts on value added tax (OJ 2012 C 188, p. 2).
15      See judgment of 23 March 2006, FCE Bank (C‑210/04, EU:C:2006:196, paragraph 39).
16      Point 3.4 (p. 23) of that document.
17      See Rouberol, I., ‘Interactions between Transfer Pricing and VAT Adjustments in the European Union’, International VAT Monitor, Vol. 27, IBFD, Amsterdam, 2016, No 5, p. 316-319, in particular p. 316.
18      The comparable uncontrolled price method, the resale price method and the cost plus method (see OECD Guidelines, pp. 20, 22 and 25).
19      The transactional net margin method (which can be based on costs, sales or assets) and the transactional profit split method (see OECD Guidelines, pp. 24 and 26 and paragraph 2.1 (p. 93)).
20      See Working paper No 923 of the VAT Committee, paragraph 2.1.5.
21      An adjustment that a tax administration in a first jurisdiction makes to a company’s taxable profits as a result of applying the arm’s length principle to transactions involving an associated enterprise in a second tax jurisdiction (see OECD Guidelines, p.  24).
22      An adjustment to the tax liability of the associated enterprise in a second tax jurisdiction made by the tax administration of that jurisdiction, corresponding to a primary adjustment made by the tax administration in a first tax jurisdiction, so that the allocation of profits by the two jurisdictions is consistent (see OECD Guidelines, p. 21).
23      An adjustment that arises from imposing tax on a secondary transaction (see OECD Guidelines, p. 25).
24      An adjustment in which the taxpayer reports a transfer price for tax purposes that is, in the taxpayer’s opinion, an arm’s length price for a controlled transaction, even though this price differs from the amount actually charged between the associated enterprises. This adjustment would be made before the tax return is filed (see OECD Guidelines, p. 21).
25      See Working paper No 923 of the VAT Committee, paragraph 3.2.1.
26      See Working paper of the VAT Expert Group, p. 2.
27      See Working paper of the VAT Expert Group, paragraph 2.2.1.1, to which Arcomet Romania referred.
28      See Working paper of the VAT Experts Group, table reproduced in paragraph 2.2.2.2.
29      See Working paper of the VAT Expert Group, paragraph 2.2.3.
30      See, to that effect, judgment of 20 January 2022, Apcoa Parking Danmark (C‑90/20, EU:C:2022:37, paragraph 38).
31      See judgment of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 23).
32      See Articles 4.1 and 4.2 of the contract of 24 January 2012.
33      See Article 2.2 of the contract of 24 January 2012.
34      That is if the profit before tax margin for Arcomet Romania is higher than 2.74%.
35      See Articles 5.2 and 5.3 of the contract of 24 January 2012.
36      See judgment of 20 January 2022, Apcoa Parking Danmark (C‑90/20, EU:C:2022:37, paragraph 45).
37      See judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA (C‑846/19, EU:C:2021:277, paragraph 42 and the case-law cited).
38      See judgment of 9 February 2023, Finanzamt X (Supplies of the owner of a stable) (C‑713/21, EU:C:2023:80, paragraph 49).
39      See judgment of 9 February 2023, Finanzamt X (Supplies of the owner of a stable) (C‑713/21, EU:C:2023:80, paragraph 32 and the case-law cited).
40      See judgment of 9 February 2023, Finanzamt X (Supplies of the owner of a stable) (C‑713/21, EU:C:2023:80, paragraphs 46 and 48).
41      See judgment of 9 February 2023, Finanzamt X (Supplies of the owner of a stable) (C‑713/21, EU:C:2023:80, paragraph 50 and the case-law cited).
42      See judgment of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 25 and the case-law cited).
43      See judgment of 7 March 2024, Feudi di San Gregorio Aziende Agricole (C‑341/22, EU:C:2024:210, paragraph 29 and the case-law cited), and of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 28 and the case-law cited).
44      See judgment of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 29).
45      See judgment of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder contribution (C‑98/21, EU:C:2022:645, paragraph 47).
46      See judgment of 16 May 2024, Slovenské Energetické Strojárne (C‑746/22, EU:C:2024:403, paragraph 36).
47      See judgment of 16 May 2024, Slovenské Energetické Strojárne (C‑746/22, EU:C:2024:403, paragraph 37).
48      See judgment of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 36 and the case-law cited).
49      See judgment of 11 November 2021, Ferimet (C‑281/20, EU:C:2021:910, paragraph 39 and the case-law cited).
50      See judgment of 12 December 2024, Weatherford Atlas Gip (C‑527/23, EU:C:2024:1024, paragraph 37 and the case-law cited).
51      See judgment of 14 October 2021, Finanzamt N and Finanzamt G (Communication of the allocation decision) (C‑45/20 and C‑46/20, EU:C:2021:852, paragraph 62).
52      See judgment of 17 October 2019, Unitel (C‑653/18, EU:C:2019:876, paragraph 27).