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ECJ Case C‑249/17 (Ryanair Ltd) – Judgment – Input VAT recovery on costs relating to acquisition of shares

Judgment of 17 October 2018 in case C-249/17 (Ryanair Ltd.) regarding input VAT recovery relating to acquisition

Facts (simplified:

  • Ryanair Ltd. launched a takeover bid for all the shares of another airline (‘the target company’). It incurred, on that occasion, expenditure relating to consultancy services and other services in connection with the planned acquisition (‘the services at issue’). Nevertheless, it was not possible to carry out that transaction fully for reasons relating to compliance with competition law, so that Ryanair was able to acquire only a part of the share capital of the target company.
  • Ryanair requested the deduction of input VAT paid on that expenditure, stating that its intention, after it gained control of the target company, had been to involve itself in its management by providing management services subject to VAT.
  • The tax authorities refused that deduction, arguing that no VAT could be deducted on costs relating to a transaction that never resulted in taxable activities.
  • The Supreme Court asked the following questions to the European Court of Justice:
    • Can a future intention to provide management services to a takeover target, in the event that the takeover is successful, be sufficient to establish that the potential acquirer is engaged in economic activity ?
    • Can there be a sufficient “direct and immediate link” between professional services rendered in the context of such a potential takeover and output, being the potential provision of management to the acquisition target in the event that the takeover is successful, so as to permit a deduction to be made in respect of the VAT payable on those professional services?


The ECJ ruled as follows:

A company which intends to acquire all the shares of another company in order to pursue an economic activity consisting in the provision of management services subject to VAT to that other company, has the right to deduct, in full, input VAT paid on expenditure relating to consultancy services provided in the context of a takeover bid, even if ultimately that economic activity was not carried out, provided that the exclusive reason for that expenditure is to be found in the intended economic activity.

Or, in short: Ryanair is allowed to deduct the input VAT.

Source: Curia