True-up vs VAT – where is the line drawn?
Annual transfer pricing adjustments (true-up / outcome testing) continue to raise practical questions, particularly regarding their impact on VAT. A recent ruling issued by the Krajowa Informacja Skarbowa confirms a clear distinction between profitability adjustments and VAT-relevant transactions.
According to the ruling of April 9, 2026 (0111-KDIB3-1.4012.244.2026.2.MG), not every transfer pricing adjustment triggers VAT consequences.
The decisive factor is the nature of the adjustment. If the annual true-up:
- is solely aimed at aligning profitability with arm’s length standards
- does not relate to specific supplies, periods, or invoices
- does not alter individual transaction prices
- does not involve any additional consideration between the parties
then it:
- falls outside the scope of VAT
- does not require a corrective invoice
- may be documented with an accounting note
Why does this distinction matter?
The key lies in separating:
- adjustments to remuneration for specific transactions (subject to VAT)
- adjustments to overall profitability within controlled transactions (transfer pricing / corporate income tax scope)
Confusing these categories may lead to incorrect VAT treatment and increased tax risk.
Practical takeaway
An annual true-up aimed exclusively at achieving arm’s length profitability is generally VAT-neutral and should not be invoiced.
That said, each case should be assessed individually, particularly where adjustments start to affect specific transactions or pricing elements.