Stanovisko GA k DPH u vyrovnání ziskovosti mezi spřízněnými subjekty

Opinion of the Advocate General on VAT for Profit Adjustment Between Related Entities

The Romanian subsidiary of the Arcomet group purchases, rents, and sells cranes, while the Belgian parent company provides services such as supplier sourcing, contract negotiation, planning, finance, administration, and more.

According to the transfer pricing study, the operating margin of the Romanian company was supposed to be within the specified range of -0.71 to 2.74%. The companies entered into a contract for the provision of the mentioned services, which regulated the issuance of balancing invoices in case of excessive profit or loss. The Romanian company achieved higher profits, leading to the issuance of invoices by the parent company.

In case C-726/23, the Advocate General addressed the question of whether such amounts constitute consideration for a service provided by the parent company, which is subject to Romanian VAT under the reverse-charge mechanism. In other words, whether there is a direct link between the services provided and the consideration. He reached a positive conclusion, among other reasons, because the remuneration for the services was not set arbitrarily. However, he did not specifically comment on the VAT regime for a potential negative balancing payment (if the Romanian company had instead incurred excessive losses).

The Advocate General also assessed whether tax authorities can require additional documents (e.g., activity reports, progress reports) to justify the use of purchased services for taxable transactions, in addition to the invoice. He concluded that the tax authority can request other evidence besides the invoice, but must respect the principle of proportionality.

We will have to wait for the resolution of the case until the Court of Justice of the EU issues its decision.

In the area of transfer pricing, we can also look forward to other judgments related to VAT, such as case C-808/23 Högkullen AB regarding the recharging of services using the cost-plus method and the related scope of the right to deduction (currently also in the phase of the Advocate General's opinion) or case C-603/24 Stellantis Portugal regarding the application of VAT on discounts provided by car manufacturers due to warranties.

We have also covered the issue of transfer pricing from the perspective of indirect taxes in our previous Tax and Legal News.

If you have any questions, please contact the authors of the article or the EY team you collaborate with.

Authors:

Ivana Krylová

Lenka Doležalová