Gregory T Bryant, CPA | Esq
Caroline White, Esq
Background
In January, we published an article discussing the rationale behind differing customs values and transfer prices, taking the position that, in most cases, they should and will be different. (https://biltgroup.net/customs-transaction-value-compared-to-taxs-arms-length-value/). Our analysis focused on transfer pricing rules under the US Internal Revenue Code and OECD guidelines compared with the US customs rules. On May 13, 2026, the Court of Justice of the European Union (CJEU) delivered a ruling in the Stellantis Portugal case that aligns with our reasoning, but in the context of VAT and transfer pricing.[1]
Our previous article emphasized that customs transaction value focuses on accurately identifying the value of each product considered separately, while transfer pricing rules emphasize evaluation of the entire value chain, ensuring that prices reflect the true income of each party from the entire transaction in the aggregate. The Stellantis decision confirms this rationale.
The Stellantis Case
Stellantis Portugal purchased vehicles from its affiliate and periodically made transfer pricing adjustments to ensure the target operating margin established under its transfer pricing policy was met. This adjustment was based on the company’s aggregate operating results, which naturally included the cost of warranty repairs. The Portuguese tax authority argued that the transfer pricing adjustment was consideration for repair services, and thus subject to VAT.
The court rejected this argument because the repair services were not directly tied to the transfer pricing adjustment. In other words, there was not a causal connection between the two because transfer pricing encompasses much more than consideration for one intercompany service. Although the warranty repairs could affect the transfer pricing adjustment, the adjustment would likely still be made if no repair services had been performed because it considers all operating and distribution costs.
The court also clarified that in cases where the transfer pricing adjustment is clearly tied to identifiable consideration for something, the taxable base for VAT purposes may need to be adjusted as well, but there is not an automatic VAT adjustment simply because a transfer pricing adjustment is made. There must be something more that clearly identifies that the taxable base is being adjusted by the transfer pricing adjustment. The Court found that for a service to be taxed, there must be a direct link between a specific service and a payment. Adjustments to meet a target margin do not constitute a “legal relationship” for a supply of services.
Implications
Our previous article analyzed new IRS guidance on IRC § 1059A, which is an anti-abuse rule aimed at preventing taxpayers from simultaneously minimizing customs duties and maximizing income tax deductions or basis. This IRS guidance was an important clarification for US taxpayers navigating both transfer pricing and customs issues, and now the CJEU has similarly provided important guidance limiting the automatic application of VAT to transfer pricing adjustments for companies that operate in the EU as well.
Multinational companies now have definitive guidance from multiple sources that draw the same conclusion: transfer pricing outcomes and transaction-level regimes must be evaluated independently. They are not completely disconnected, but transfer pricing evaluates the entire value chain, which is a distinct goal that separates it from both customs values and VAT.
For a more in-depth analysis of the differences between US customs and transfer pricing guidelines, read our January 2026 article here (https://biltgroup.net/customs-transaction-value-compared-to-taxs-arms-length-value/).
Sources
Case C-603/24, Stellantis Portugal, S.A. v. Autoridade Tributária e Aduaneira
https://www.dlapiper.com/en-us/insights/publications/2026/05/transfer-pricing-adjustments-and-vat
PLR 202552012
[1] Stellantis Portugal, S.A. v Autoridade Tributária e Aduaneira (Case C-603/24), decided May 13, 2026,
UPDATE: EU Court Issues Guidance on Transfer Pricing vs. VAT Analysis
Gregory T Bryant, CPA | Esq
Caroline White, Esq
Background
In January, we published an article discussing the rationale behind differing customs values and transfer prices, taking the position that, in most cases, they should and will be different. (https://biltgroup.net/customs-transaction-value-compared-to-taxs-arms-length-value/). Our analysis focused on transfer pricing rules under the US Internal Revenue Code and OECD guidelines compared with the US customs rules. On May 13, 2026, the Court of Justice of the European Union (CJEU) delivered a ruling in the Stellantis Portugal case that aligns with our reasoning, but in the context of VAT and transfer pricing.[1]
Our previous article emphasized that customs transaction value focuses on accurately identifying the value of each product considered separately, while transfer pricing rules emphasize evaluation of the entire value chain, ensuring that prices reflect the true income of each party from the entire transaction in the aggregate. The Stellantis decision confirms this rationale.
The Stellantis Case
Stellantis Portugal purchased vehicles from its affiliate and periodically made transfer pricing adjustments to ensure the target operating margin established under its transfer pricing policy was met. This adjustment was based on the company’s aggregate operating results, which naturally included the cost of warranty repairs. The Portuguese tax authority argued that the transfer pricing adjustment was consideration for repair services, and thus subject to VAT.
The court rejected this argument because the repair services were not directly tied to the transfer pricing adjustment. In other words, there was not a causal connection between the two because transfer pricing encompasses much more than consideration for one intercompany service. Although the warranty repairs could affect the transfer pricing adjustment, the adjustment would likely still be made if no repair services had been performed because it considers all operating and distribution costs.
The court also clarified that in cases where the transfer pricing adjustment is clearly tied to identifiable consideration for something, the taxable base for VAT purposes may need to be adjusted as well, but there is not an automatic VAT adjustment simply because a transfer pricing adjustment is made. There must be something more that clearly identifies that the taxable base is being adjusted by the transfer pricing adjustment. The Court found that for a service to be taxed, there must be a direct link between a specific service and a payment. Adjustments to meet a target margin do not constitute a “legal relationship” for a supply of services.
Implications
Our previous article analyzed new IRS guidance on IRC § 1059A, which is an anti-abuse rule aimed at preventing taxpayers from simultaneously minimizing customs duties and maximizing income tax deductions or basis. This IRS guidance was an important clarification for US taxpayers navigating both transfer pricing and customs issues, and now the CJEU has similarly provided important guidance limiting the automatic application of VAT to transfer pricing adjustments for companies that operate in the EU as well.
Multinational companies now have definitive guidance from multiple sources that draw the same conclusion: transfer pricing outcomes and transaction-level regimes must be evaluated independently. They are not completely disconnected, but transfer pricing evaluates the entire value chain, which is a distinct goal that separates it from both customs values and VAT.
For a more in-depth analysis of the differences between US customs and transfer pricing guidelines, read our January 2026 article here (https://biltgroup.net/customs-transaction-value-compared-to-taxs-arms-length-value/).
Sources
Case C-603/24, Stellantis Portugal, S.A. v. Autoridade Tributária e Aduaneira
https://www.dlapiper.com/en-us/insights/publications/2026/05/transfer-pricing-adjustments-and-vat
PLR 202552012
[1] Stellantis Portugal, S.A. v Autoridade Tributária e Aduaneira (Case C-603/24), decided May 13, 2026,
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