Agefi Luxembourg - décembre 2025

AGEFI Luxembourg 40 Décembre 2025 Droit / Emploi O n 4 September 2025, the Court of Justice of the Eu- ropeanUnion (1) ( Cour de Justice de l’Union Européenne) (the “CJEU”) held that year-end trans- fer pricing (“TP”) adjustments in- creasing profits to align results with the arm’s-lengthprinciple may, in certain circumstances, con- stitute consideration for value- added tax (“VAT”) purposes – notably in instanceswhere the services inquestion aswell as pay- ment termswere agreed in ad- vance. TheCJEUalso ruled that any documentation requirements imposed to support the deduction of input VAT should remainneces- sary andproportionate and should not obligate taxpayers to demon- strate the economic necessity or suitability of the services provided. Summary of the case ArcometRomania(“ RomCo ”),partofthe globalArcomet tower-crane rental group, sources and deploys cranes for the Ro- manian market. While its Belgian parent company (“ BelCo ”), negotiates contrac- tual terms with suppliers on behalf of all group entities, RomCo enters into the ac- tual purchase, leasing, and client-facing contracts relevant to its local activity. A 2010 TP study established an arm’s- length profitability corridor for RomCo, setting its operating margin between – 0.71% and 2.74%. To operationalize this result, BelCo and RomCo signed a 2012 agreement instituting an annual adjust- ment mechanism based on the OECD transactional net margin method (“ TNMM ”). The mechanism required BelCo to invoice RomCo whenever RomCo’s margin exceeded the upper threshold and, conversely, required RomCo to invoiceBelCo if itsprofitability droppedbelowthe lower limit. During the years that followed, RomCo’s margin remained above the top of the range, hence leading BelCo to issue year- end adjustment invoices. While RomCo initially applied the reverse-chargemech- anism, it later took the view that at least oneoftheseadjustmentsfelloutsideofthe scope of VAT. The Romanian tax authori- ties disagreed, disallowing input VAT on the basis that RomCo had not demon- strated the existence or necessity of the services allegedlyprovidedbyBelCo. Unsatisfiedwith such outcome, RomCo brought an action before the Romanian Regional Court. The ensuing litigation escalated and eventually led the Bucharest Court ofAppeal to ultimately refer the case to the CJEU. The main questions to be dealt with in the context of the preliminary rulingwere: 1. Do TP “true-up” payments within a group constitute consideration for a tax- able service under Article 2(1)(c) of the Directive 2006/112/EC (2) (the “ VAT Di- rective ”) –or are theymerelyaccounting adjustmentswithnounderlying service? 2. If deemed taxable services,may taxau- thorities condition the right to inputVAT deduction ondocuments beyond the in- voice itself (e.g. activity reports), ormust the deduction rely solely on the direct link between the purchase and the tax- able activity? In this respect, the Advocate General (“ AG ”) publishedhisOpinionon3April 2025 and stressed that the VAT implica- tions of TP adjustments depend on the underlyingeconomic reality. In this case, he considered that theprofit adjustments reflected contractual arrangements con- nected to identifiable functions per- formed by BelCo – such as strategic oversight andnegotiation–whichmeant that the payments constituted the con- sideration for taxable supplies. The AG also referred to the 2016VATCommittee report distinguishing tax authority-dri- ven adjustments (outside the Directive’s scope) fromadjustments agreedbetween related parties and noted that Member States enjoy discretion regarding VAT treatment of past-supplyor cost-variance adjustments,withonlyonehavingopted for non-taxation when both parties ben- efit froma full input VAT recovery. Decision of theCJEU The first question addressedwhether re- muneration for intragroup services, con- tractually defined and calculated under the OECDGuidelines, corresponding to the portion of the subsidiary’s operating margin above 2.74%, constitutes consid- eration for a supply of services subject to VAT underArticle 2(1)(c) of the VAT Di- rective. The CJEU followed the AG’s opinion, confirming that a service is sup- plied “for consideration” only if there is alegalrelationshipbetweenproviderand recipient involving reciprocal perform- ance, and thepayment constitutes theac- tualconsiderationforanidentifiableserv- ice. In the case at hand, the CJEU ob- served that BelCoundertookoperational and commercial functions and bore eco- nomic risks, while RomCo paid an amount linked to its profitmargin above 2.74%. This arrangement satisfied the di- rect link requirement between the serv- ices performed and the amounts paid. The CJEU emphasized that the use of a TPmethod, such as the TNMM, and the fact that payments varied with results, did not affect their VAT treatment, as the terms were contractually agreed in ad- vance and certain. TheCJEUrejectedtheviewthatthesepay- ments were merely arm’s-length adjust- ments under TP rules without an underlying supply, emphasizing that the economic and commercial reality of the transaction must be considered, and that remunerationatarm’s-lengthcanstillcon- stitute actual consideration if tied to iden- tifiable services. Unlike a passive holding company, BelCowas actively involved in managing the subsidiary, andwas there- foreperformingservicesthatwentbeyond mere shareholding. Finally,theCJEUclarifiedthatthevariable nature of the payments – dependent on the subsidiary’s profit – did not under- mine the direct link, as the remuneration was neither voluntary nor uncertain, and the calculation method was clearly de- fined in advance. The second question concerned whether Articles 168 (3) and 178 (4) of the VAT Direc- tivepreventtaxauthoritiesfromrequiring a taxable person to submit evidence be- yond the invoice to claim input VAT de- duction. The CJEU confirmed that the right to deduct VAT is subject to substantive and formal conditions: - Formally, the invoicemust complywith the rules under theDirective, but authori- tiescannotdenydeductionsolelybecause an invoice lacks certaindetails if sufficient informationexiststoverifythesubstantive conditions. -Substantively,deductionisonlyallowed if the services were actually supplied and used for the taxable person’s own taxable transactions;economicnecessityorappro- priateness of the services should not be a requirement. Finally, the CJEU clarified the burden of proof: the taxable person must demon- strate that the conditions for deduction are met, while tax authorities may re- quest necessary and proportionate addi- tional evidence to verify the supply and its use for taxable transactions. This may include documents from the service provider, but the evidence must remain proportionate to thepurpose of confirm- ing the right of deduction. Key takeaways TheArcomet ruling is particularly inter- esting yet should be considered in con- text. The mere fact that remuneration is calculatedusingaTPmethodsuchas the TNMM does not automatically bring it within or outside the scope of VAT. In this case, the judges confirmed that VAT applied because there was a clear con- tractual arrangement underwhich iden- tifiable services were provided in exchange for consideration. It is this fac- tual link between actual services ren- dered and remuneration paid – not simply the application of a TPmethod – that determines VAT treatment. FromaTPperspective, the judgment un- derscores that the strength of an intra- grouparrangement depends not onlyon achievinganarm’s-length result but also on the clarity and structure of theunder- lying contractual andcommercial frame- work. The CJEU highlighted that the agreement between the Belgian parent and its Romanian subsidiary clearly al- located responsibilities and functions, with the remuneration mechanism tied directly to those roles. In other words, it is not enough to demonstrate that a profit margin falls within an arm’s- length range; the arrangement itselfmust be carefully documented and economi- cally coherent. Methods such as the TNMM, particu- larlywhen combinedwith year-end ad- justments, require meticulous design and thorough explanation. Where such adjustments correspond to identifiable services, VAT implications naturally arise, as with any intragroup service. At the same time, they provide a potential focal point for tax authorities to assess whether the arrangement reflects theun- derlying economic reality. For taxpayers, the lessons are clear: intra- group agreements and TP documenta- tion must not only justify the pricing methodology but also tell the commer- cial story behind the numbers. Proper documentation strengthens compliance, mitigates audit risk, and provides a ro- bust defense in the event of scrutiny by tax authorities. Overall, the decision should be seen as clarifying rather than revolutionary. It does not signal a broad expansion of VAT toall TPadjustments. TheCJEUap- plied long-standing VAT principles and confirmed that VAT applies where a clearly identifiable service isprovided for remuneration. Contrary to this, adjust- ments without an underlying service should remain outside the VAT scope. In practice, the ruling offers both legal certaintyandpractical guidance, helping to reduce the risk of divergent interpre- tations across Member States and rein- forcing the importance of careful contractual andoperational design in in- tragroup arrangements. EmilienLEBAS, Partner,HeadofInternationalTax,Taxcontroversy& disputeresolution leader,KPMGLuxembourg QuentinWARSCOTTE, Partner,IndirectTax,KPMGLuxembourg ValentinePLATEAU, Manager,InternationalTax,KPMGLuxembourg 1) Cour de Justice de l’Union Européenne - 4 septembre 2025,ArcometC-726/23 2)Article2(1)(c)oftheDirective2006/112/EC:“ 1.The followingtransactionsshallbesubjecttoVAT:[...]c) the supply of services for considerationwithin the ter- ritoryofaMemberStatebyataxablepersonacting assuch” 3)Article168a)oftheDirective2006/112/EC:“ Inso far as the goods and services are used for the purposes of thetaxedtransactionsofataxableperson,thetaxableper- sonshallbeentitled,intheMemberStateinwhichhecar- ries out these transactions, to deduct the following from theVATwhichhe is liabletopay:a)theVATdueorpaid inthatMemberStateinrespectofsuppliestohimofgoods orservices,carriedoutortobecarriedoutbyanothertax- ableperson .” 4)Article178a)andf)oftheDirective2006/112/EC: “ Inordertoexercisetherightofdeduction,ataxableper- son must meet the following conditions: a) for the pur- posesofdeductionspursuanttoArticle168(a),inrespect ofthesupplyofgoodsorservices,hemustholdaninvoice drawnupinaccordancewithArticles220to236andAr- ticles238,239and240;[...]f)whenrequiredtopayVAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down byeachMemberState.” Tax controversy series Court of Justice of the European Union –Arcomet case E n date du 1 er décembre 2025, le mi- nistre de l'Économie, des PME, de l'Énergie et du Tourisme, Lex Delles, et le ministre des Finances, Gilles Roth, se sont réunis avec les partenaires sociaux (CGFP, LCGB, OGBL et UEL) au château de Senningen dans le cadre du dialogue social national du Semestre européen. Lors de cette troisième entrevue de l'année, les partenaires sociaux et le gouvernement ont notamment évoqué le lancement du nouveau cycle 2026 du Semestre européen avec le paquet d'automne de la Commission européenne, de même que l'avis relatif au projet de plan budgé- taire basé sur le budget de l'État 2026. La Commission européenne note que les docu- ments budgétaires du Luxembourg sont en ligne avec les exigences de la nouvelle architecture bud- gétaire européenne. Cette réunion avait pour objectif de discuter de l'analyse de la Commission européenne et des réponses à fournir aux propo- sitions de recommandations adressées au Luxembourg. Leministre des Finances, Gilles Roth, a rappelé que « le dialogue social est essentiel pour ce gouverne- ment et pour moi personnellement. Il est le fonde- mentdenotremodèleluxembourgeois.C'estsurcette base que peut également prospérer la croissance inclusive et durable à laquelle nous aspirons tous ». Pour sa part, le ministre de l'Économie, des PME, de l'Énergie et duTourisme, LexDelles, a commenté : «Dansunenvironnementinternationaltoujoursmar- quéparl'incertitude,lesindicateursrécentsmontrent néanmoins des perspectives encourageantes. Dans cecontexte,ilestessentielderenforcerlacompétitivité denotreéconomiepourassureruneprospéritédura- ble : soutenir l'innovation, stimuler la productivité, leverlesobstaclesàl'investissement,renforcerlemar- chéuniqueetpoursuivrenoseffortsdesimplification administrative. Le Semestre européen nous offre un cadredetravailconcertépourrelevercesdéfisetfaire avancer ensemble nos priorités économiques. » Source :ministèredesFinances/ministèrede l'Économie Réunion du dialogue social national dans le cadre du Semestre européen 2026 « Le dialogue social est le fondement de notre modèle luxembourgeois » ©ME