On September 4, 2025, the Court of Justice of the European Union (CJEU) issued a landmark decision on the VAT treatment of intragroup transfer pricing adjustments invoiced pursuant to OECD-recognized transfer pricing methods.

The case originated in a concrete situation: SC Arcomet Towercranes SRL, a Romanian subsidiary of the Belgian group Arcomet, achieved an operating margin higher than the one agreed under its contract with the Belgian parent company. The contract, based on the transactional net margin method (TNMM), provided for an annual adjustment to ensure that the subsidiary’s operating margin remained between –0.71% and 2.74%, considered to reflect an arm’s length range for the financial years 2011, 2012, and 2013. As a result, a transfer pricing adjustment was made at year-end, which the Belgian tax authorities treated as a service provided by Arcomet Belgium.
 

The Romanian tax authorities, however, denied the subsidiary’s right to deduct VAT on the adjustment, arguing that the reality and necessity of the services had not been demonstrated. This dispute led to a tax audit, penalties and interest, and ultimately to a preliminary question referred to the CJEU on the VAT treatment of intragroup flows and the evidentiary requirements tax authorities may impose.
 

The CJEU's decision clarifies two essentials points :

• the VAT treatment of intragroup services remunerated under OECD-recognized transfer pricing methods;
• the evidentiary requirements that tax authorities may impose in order to grant the right to deduction

This ruling is a turning point for the management of intragroup flows. It provides greater legal certainty but also underlines the importance of detailed intragroup agreements and robust supporting documentation to secure tax positions. Our experts provide a detailed analysis of the ruling.
 

VAT and transfer pricing: strengthened consistency

The CJEU confirmed that intragroup services remunerated under OECD methods constitute VAT-taxable, individualizable services.
 

What does this mean in practice?

The remuneration paid by the subsidiary to the parent company under a transfer pricing adjustment calculated using the TNMM constitutes a genuine and individualizable consideration.

Services must be described in a precise intragroup agreement, with a clear link between the services provided and the economic benefit to the subsidiary (e.g., efficiency gains, cost savings, enhanced service to clients).

In the Arcomet case, the CJEU held that:
“The payments made by Arcomet Romania under the contract of 24 January 2012 constituted the remuneration for activities carried out by Arcomet Belgium. Moreover, the services received in return for these payments were liable to confer a concrete benefit on Arcomet Romania [...] the services provided by Arcomet Belgium, common in an intragroup context, had an impact on Arcomet Romania’s operating margin through the savings they enabled or the improvements in the service delivered to end customers.”

The method of calculating remuneration (OECD transfer pricing) does not undermine the VAT qualification of the services:

“This remuneration is neither gratuitous, nor random, nor difficult to quantify or uncertain within the meaning of the Court’s case law [...] its terms are set in advance in the contract and according to precise criteria, so that the remuneration is not subject to contingency.”
 

Key takeaway: Even if intragroup flows primarily concern goods, year-end transfer pricing adjustments may be classified as services for VAT purposes if the contractual framework supports such a characterization.

Practical implications for multinational groups

This confirmation is highly significant:

• It reduces the risk of VAT challenges by tax authorities when OECD transfer pricing methods are used.
• However, the scope of the ruling remains to be assessed—whether it applies only to TNMM adjustments or whether it can also be extended to other OECD-endorsed methods. 

Our expert's advice :
Intragroup agreements must be sufficiently detailed: outlining each entity’s functions, the nature of the services, and the remuneration criteria. Explicit reference to the transfer pricing method and expected margins (as in the Arcomet case) strengthens the credibility of such agreements. This contractual precision facilitates VAT justification and ensures alignment between transfer pricing and VAT logic. A high level of consistency between contractual documentation and transfer pricing files is therefore essential.
 

VAT audits: strengthened but proportionate evidentiary requirements

Evidentiary requirements

The CJEU held that an invoice alone may not always be sufficient to exercise the right of deduction. Tax authorities may request additional evidence, such as reports, deliverables, or documentation demonstrating the effective use or performance of the services.

CJEU, September 4, 2025, Case C-726/23:
“The tax authority may not refuse the right of deduction solely on the grounds that an invoice does not satisfy certain formal conditions laid down by national legislation [...] if it has all the information needed to verify that the substantive conditions for this right are met. However, where the tax authority concludes that the invoices produced do not comply with the formal requirements [...], it may verify whether the substantive conditions of this right are satisfied and require the taxable person to produce additional evidence to that effect.”

Nevertheless, such requests must respect the principle of proportionality. Tax authorities cannot require an excessive volume of documents or information to challenge the right of deduction.
 

Limits to tax audits and best practices

The ruling sets clear boundaries: tax authorities may verify the reality of services but cannot question the company’s business decisions.

“Tax authorities may therefore require the taxable person to provide the necessary evidence to assess whether the right of deduction should be granted [...] However, the evidence requested must be necessary and proportionate to the assessment of whether the substantive conditions for deduction are met.”
 

Our experts’ advice:
We recommend preparing a structured evidentiary file, including:

• reports, minutes, deliverables, studies
• internal correspondence evidencing the performance and use of services;
• proof of the economic benefit to the subsidiary

Such preparation significantly reduces the risk of reassessment during a VAT audit.

Impacts and levers for multinational groups

The Arcomet ruling brings VAT logic closer to OECD transfer pricing principles, reducing discrepancies between direct and indirect taxation. It thus provides a more predictable framework for intragroup flows.

It also calls for anticipation of related issues, such as customs duties or payroll taxes where certain intragroup flows are not subject to VAT.
 

Our experts’ advice:
Following this ruling, companies should update or supplement intragroup agreements and verify consistency across functional profiles, transfer pricing policies, transfer pricing documentation, and intragroup contracts. Mapping intragroup flows is also essential to identify VAT, customs, payroll tax, or other potential impacts. An integrated analysis helps detect and anticipate tax risks.

The CJEU’s Arcomet decision represents a decisive milestone for intragroup taxation:

• Transfer pricing adjustments based on intragroup services remunerated under OECD-recognized methods are subject to VAT;
• Evidence required by tax authorities must be necessary and proportionate, without any obligation to prove the “economic necessity” of the services;
• Companies now benefit from a clearer legal framework, but it is crucial to strengthen intragroup agreements and supporting files.

Beyond tax considerations, this ruling encourages groups to improve internal governance: formalizing recharging processes, ensuring traceability of services, and implementing appropriate internal controls.

Anticipating these requirements is now a lever for tax efficiency and greater peace of mind for multinational groups.