2025-10-10
TP true-ups under VAT? CJEU on 4 Sep 2025
CJEU: Is a TP profit true-up a service? Key takeaways from 4 Sep 2025 (C-726/23, Arcomet) The Court held that intra-group payments determined under TNMM (e.g., skimming part of a subsidiary’s operating margin above a threshold) can be deemed as consideration for services and thus fall within VAT—if there is a legal relationship and a direct link between the supply and the consideration.
In Arcomet, the slice of operating margin above 2.74% was treated as remuneration for actual head-office services.
Why this matters For years, year-end TP adjustments were often seen as “purely accounting” and VAT-neutral. Arcomet ends that automatic presumption: if the true-up reflects concrete activities (management, procurement, finance, engineering), it’s a taxable supply. Not every adjustment triggers VAT—facts and contracts decide.
What the Court actually said
• Qualification. A TNMM-based payment may be a service fee where the legal-relationship/direct-link test is met.
• Evidence. Authorities may request documents beyond the invoice to prove the service existed and was used—subject to proportionality.
• Input VAT. No refusal merely because an expense seems “unnecessary”; what matters is the use for taxed output transactions (see also Weatherford Atlas Gip, C-527/23). Wider context
• Högkullen (C-808/23, 3 Jul 2025): valuing intra-group services by reference to open market value (Arts. 72/80 VAT Directive); don’t assume a bundled single service without analysis.
• Tauritus (C-782/23, 15 May 2025): post-transaction price adjustments may affect customs value—watch the TP–VAT–customs interplay.
What to do—practical and simple
1. Label the adjustment. Is it a mere accounting equalisation (no services) or top-up for identified activities? If the latter, VAT rules apply.
2. Invoice, not a credit/debit note (if it’s a service). Determine place of supply and account for reverse charge/import of services where relevant.
3. Make contracts and TP policy explicit. Define roles, risks, scope of support and TNMM mechanics (ranges, direction of flows) to evidence the supply ↔ consideration link.
4. Document the service (“substance”). Show what was done (scope, deliverables), by whom (teams/skills), when (timeline/time-sheets), how it was used (deployments, processes), and the business effect (KPIs).
5. Unbundle. Where feasible, separate management/IT/HR, etc., and benchmark components—aligned with Högkullen.
6. Sync VAT–CIT–customs. Ensure the TP story matches invoicing and assess any customs-value impact (Tauritus).
Poland angle
With the Ministry of Finance and KAS launching new units in Aug 2025 to step up scrutiny, expect closer reviews of intra-group settlements—including the VAT treatment of TP adjustments.
Bottom line
Arcomet doesn’t make every TP true-up taxable. It sets a clear test: where the adjustment genuinely remunerates services, VAT is in play. Strong contracts, proper invoicing, and solid evidence of substance are your best defence.
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