Transfer pricing adjustments and VAT in Poland – CJEU judgment
In Poland, transfer pricing adjustments are neither automatically subject to VAT nor outside VAT; their economic function determines the treatment.
On 13 May 2026, the CJEU ruled in Case C-603/24 that including specific costs in a profitability adjustment does not itself make it payment for a service.
For an adjustment to constitute consideration for a service, there must be a direct link to an identifiable supply and reciprocal obligations between the parties.
If an adjustment is not payment for a separate service, it may still affect the price and taxable amount of an earlier supply of goods or services.
For businesses in Poland, the CJEU judgment is relevant because VAT is harmonised at EU level and the Court’s interpretation affects Polish VAT rules.
The 2026 judgment does not contradict Case C-726/23 Arcomet Towercranes; the different VAT outcomes reflect differences in the contractual arrangements.
Economic substance determines VAT treatment
The agreement, calculation method and actual transactions should reflect the same economic nature of the adjustment.
Documentation does not determine classification
An accounting note or VAT invoice should follow from the tax treatment rather than determine it at the outset.
Transfer pricing and VAT require parallel analysis
An adjustment that is correct from a transfer pricing perspective is not necessarily neutral for VAT purposes in Poland.
The judgment does not require every model to change
Companies can review whether existing settlements are described consistently and their VAT treatment reflects their actual nature.
Transfer pricing adjustments and VAT in Poland cannot be assessed under a single automatic rule. In its judgment of 13 May 2026 in Case C-603/24, the Court of Justice of the European Union (CJEU) confirmed that a profitability adjustment does not become consideration for a service merely because specific costs are included in its calculation. The decisive issue is whether there is a direct link between the payment and an identifiable supply under a legal relationship between the parties. However, the absence of such a service does not automatically place the adjustment outside the scope of VAT, as it may still affect the price of an earlier supply of goods or services.
Transfer pricing adjustments and VAT are a recurring issue for corporate groups operating in Poland. Such adjustments are used to bring the result of a related entity into line with the profitability level required by the group’s transfer pricing model, but their correct VAT treatment has raised questions for years. The issue is not simply whether a profitability adjustment is subject to VAT. The first step is to determine what the settlement actually represents economically: consideration for a specific service, a change to the price of an earlier supply, or solely an adjustment of the entity’s overall profitability.
The judgment of the Court of Justice of the European Union (CJEU) of 13 May 2026 in Case C-603/24 does not establish a single rule applicable to all transfer pricing adjustments. It does, however, provide a clear framework for identifying the factors that should be examined when determining their VAT treatment.
In this article:
Do transfer pricing adjustments in Poland fall within the scope of VAT?
Not every transfer pricing adjustment is subject to VAT. The label applied to the settlement, the use of a profitability adjustment mechanism or the way in which it is documented does not, by itself, determine its VAT treatment.
For VAT purposes, the actual nature of the payment matters. If an adjustment constitutes consideration for an identifiable supply made by one entity to another, it may be taxable. Where it merely adjusts the entity’s overall profitability and cannot be linked to a specific service or supply, the VAT analysis may lead to a different conclusion. This distinction was central to the latest CJEU judgment.
What was the CJEU judgment of 13 May 2026 about?
The case concerned a Portuguese car distributor belonging to an international automotive group. The company purchased vehicles from group manufacturers and sold them to independent dealers on the Portuguese market.
As part of its business, the distributor also incurred various costs associated with vehicle distribution. These included warranty repair costs charged by dealers, as well as personnel, marketing, energy and other operating costs. The group used a transfer pricing mechanism designed to ensure that the distributor achieved a specified profitability level. At the end of the relevant period, the company’s actual result was compared with the target level and an adjustment was then made. Depending on the calculation, the adjustment could result in either a debit or a credit for one of the parties.
The Portuguese tax authority took the view that the portion of the settlement corresponding to repair costs should be treated as consideration for a service supplied by the distributor to the manufacturers. The dispute therefore centred on whether including a particular cost in the calculation of a profitability adjustment was sufficient to treat that adjustment as payment for a service.
What did the CJEU consider decisive when assessing the adjustment?
The CJEU reiterated a fundamental rule governing supplies of services for consideration: there must be a direct link between the service supplied and the consideration received. There must also be a legal relationship under which the parties exchange reciprocal performance.
In the case examined, the intra-group agreement did not show that the distributor had undertaken to provide repair services to the manufacturers in return for a specific payment. Instead, the agreement primarily governed the method for setting prices and determining the target profitability level. It was also significant that repair costs were only one of many elements affecting the calculation.
The adjustment therefore did not represent a straightforward reimbursement of repair costs and was not calculated as remuneration for specific activities. Its amount depended on the distributor’s overall financial result.
As a result, the CJEU found that, in the circumstances presented, the relationship between the repair costs and the adjustment was at most indirect. The fact that a particular category of costs affects the amount of a profitability adjustment does not in itself mean that the adjustment constitutes consideration for a service connected with those costs.
When is a transfer pricing adjustment not consideration for a separate service?
The CJEU judgment shows that an adjustment designed to align overall profitability does not constitute consideration for a separate service merely because particular costs are taken into account in its calculation. For the payment to qualify as consideration for a service, there must be a legal relationship involving reciprocal performance and a direct link between a specific supply and the payment received. In practice, several factors need to be considered together.
| Factor | What suggests there is no separate service | What may increase VAT risk |
|---|---|---|
| Purpose of the adjustment | Adjustment of overall profitability | Payment for a specific activity |
| Agreement | Mechanism for setting prices and profitability | Obligation to perform a specified service |
| Calculation | Multiple costs and parameters affecting the result | Direct calculation of an amount for a specific supply |
| Nature of the payment | Amount depends on the overall financial result | Predictable remuneration for a defined activity |
Meeting any one of these conditions does not automatically determine the VAT treatment. The CJEU again emphasised that the entire settlement model must be analysed rather than a single element of the documentation.
Does the absence of a service mean that the adjustment is outside VAT?
No. This is the most important qualification arising from the latest judgment and one of the reasons why it should not be presented as a general confirmation that profitability adjustments are VAT-neutral.
The Court noted that even if an adjustment does not constitute consideration for a separate service, it is still necessary to determine whether it affects the price of an earlier transaction. In paragraph 47 of the judgment, the CJEU indicated that if the adjustment were regarded as a subsequent change to the price paid for vehicles supplied earlier, its impact on the taxable amount of those supplies would need to be examined.
In practice, this means that a transfer pricing adjustment should be analysed in two stages. First, the company should determine whether the payment constitutes consideration for a separate service.
If it does not, the next question is whether the adjustment changes the consideration payable for an earlier supply of goods or services. Only where the adjustment cannot be attributed to either category can it be assessed as a settlement falling outside the scope of VAT.
Transfer pricing & VAT in Poland
Transfer pricing adjustment in Poland: does VAT apply?
There is no single VAT rule. The answer depends on what the adjustment actually represents.
01
Scenario 1
Payment for a specific service
Is there an identifiable service and a direct link between that service and the payment under the parties’ legal relationship?
→ VAT may apply
02
Scenario 2
Adjustment of an earlier transaction price
Does the adjustment change the price previously paid for goods or services?
→ The VAT taxable amount may need to be corrected
03
Scenario 3
General profitability adjustment
Is it a general profitability adjustment that cannot be linked to a specific service or an earlier transaction price?
→ It may fall outside the scope of VAT
The name “transfer pricing adjustment” does not determine the VAT treatment.
The actual function of the payment and the legal relationship between the parties are key.
Did the CJEU change its approach compared with the Arcomet judgment?
Questions surrounding the VAT treatment of transfer pricing adjustments intensified after the CJEU judgment of 4 September 2025 in Case C-726/23 Arcomet Towercranes.
In that case, an agreement between group companies provided for specific intra-group services. The remuneration was calculated using a mechanism linked to the subsidiary’s profitability. The CJEU found that such a mechanism could constitute consideration for a supply of services for consideration because identifiable services existed and the parties had contractual obligations relating to those services.
The latest judgment does not contradict that decision. The difference lies primarily in the facts. In the 2026 case, the profitability adjustment itself was not linked to an obligation to perform a particular service. In Arcomet, specific services were identified within the contractual relationship between the parties.
The two judgments therefore point to the same underlying principle: VAT treatment is determined not by the method used to calculate an adjustment, but by the actual function of the payment and the substance of the legal relationship between the parties.
What does the CJEU judgment mean for corporate groups in Poland?
Although the case concerned a Portuguese taxpayer, the judgment is also relevant to businesses operating in Poland. VAT is harmonised at European Union level, meaning that the CJEU’s interpretation also affects how Polish VAT rules are interpreted.
For Polish taxpayers, the key point is that the judgment does not justify automatically treating every profitability adjustment as VAT-neutral. Each model should be assessed individually to determine whether the adjustment is linked to a specific supply or to the price of an earlier transaction.
The transfer pricing policy itself is therefore only one part of the analysis. The wording of intra-group agreements, the method used to calculate the adjustment, transfer pricing documentation, accounting treatment and VAT reporting are also relevant. In practice, this creates an additional challenge for finance and tax teams: an adjustment that is correct from a transfer pricing perspective is not necessarily neutral for VAT purposes.
How can a business in Poland assess whether a transfer pricing adjustment affects VAT?
The analysis should start with the economic substance of the settlement rather than with a decision about which document should be issued.
The first question is what the agreement between the related parties actually requires. If it provides solely for a mechanism designed to achieve a specified profitability level, the position differs from a situation in which one party is also required to perform specific activities for the other.
The calculation method should then be reviewed. The company should establish whether the adjustment relates to the overall business result or whether it can be directly attributed to particular costs, supplies of goods or services.
The next step is to compare that mechanism with the transfer pricing documentation and the actual course of the transactions. If the transfer pricing (TP) documentation describes the adjustment as a general profitability alignment while the agreement or calculation effectively points to the reimbursement of specific costs or remuneration for particular activities, the risk of a different VAT classification increases. In practice, the agreement, TP documentation, adjustment calculation, accounting treatment and VAT treatment should all reflect the same economic model of the transaction.
Transfer pricing & VAT in Poland
Transfer pricing adjustments in Poland: 5 things to check before deciding the VAT treatment
The VAT answer should come from the entire settlement model — not from the invoice or accounting note alone.
01
Intercompany agreement
What are the companies actually obliged to provide to each other?
02
Purpose of the adjustment
Is it payment for a service, a price correction or only a profitability adjustment?
03
Calculation method
Is the amount linked to a specific transaction or to the company’s overall financial result?
04
Transfer pricing documentation
Does the TP documentation describe the adjustment in the same way as the agreement and calculation?
05
VAT & accounting treatment
Does the invoice, accounting note and VAT reporting reflect the actual economic nature of the adjustment?
Agreement, calculation, TP documentation, accounting and VAT treatment should tell the same story.
Where there is uncertainty over the VAT classification of an adjustment, the entire settlement mechanism should be reviewed rather than only the way it is documented. In this area, getsix® supports businesses through transfer pricing advisory in Poland.
Should transfer pricing adjustments in Poland be documented with an accounting note or a VAT invoice?
The form of documentation should follow from the tax classification of the adjustment rather than determine that classification at the outset.
If the adjustment is neither consideration for a service nor a change to the price of an earlier transaction, it may remain outside the VAT invoicing system. If, however, it changes the price of goods or services supplied previously, an appropriate adjustment to the taxable amount and the related documentation may be required.
The position is different again where the payment is, in substance, consideration for a specific supply. In that case, the rules applicable to that service must be determined, including the place of taxation and the method of accounting for VAT. The use of an accounting note alone therefore does not establish that the adjustment falls outside VAT. The document should reflect the nature of the settlement previously established on the basis of the agreement and the parties’ actual relationship.
Should companies review their transfer pricing adjustments after the CJEU judgment?
The latest judgment does not mean that every transfer pricing model needs to be changed. It does, however, provide a useful opportunity to check whether existing settlements are described consistently and whether their VAT treatment reflects the actual nature of the adjustment.
Particular attention should be paid to mechanisms in which the adjustment includes specific categories of costs, can be attributed to particular supplies of goods or services, or is connected with additional operational obligations imposed on one of the entities. In such cases, an analysis limited to transfer pricing rules may be insufficient. The VAT implications should be considered in parallel.
What is the key VAT takeaway for businesses using transfer pricing adjustments in Poland?
The judgment of 13 May 2026 confirms that transfer pricing adjustments cannot be classified solely by reference to their name or the calculation mechanism used. A profitability adjustment does not become consideration for a service simply because specific costs are included in the calculation, but neither is it automatically neutral for VAT purposes.
The decisive question is what the payment actually relates to. It may constitute consideration for a service, affect the price of an earlier transaction, or operate as a general profitability adjustment falling outside the scope of VAT.
Before making an adjustment, companies should therefore review the transfer pricing model, intra-group agreements and VAT treatment together. getsix® provides transfer pricing advisory in Poland, including an analysis of settlements between related parties and their consistency with the group’s adopted business model.
Case-law basis:
This article was written by the getsix® Editorial Teamgetsix® provides accounting, tax advisory, HR and payroll, and business consulting services, supporting companies operating in Poland. The getsix® Editorial Team prepares practical information that makes Polish accounting, tax, and HR and payroll matters easier to understand.
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CUSTOMER RELATIONSHIPS DEPARTMENT
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