AG Opinion: VAT Is Recoverable on Costs of Failed Ryanair/Aer Lingus Takeover

10 May 2018
Author: JHA

Advocate General (AG) Kokott has opined in C‑249/17 Ryanair Ltd v The Revenue Commissioners that input VAT incurred by Ryanair on costs in a failed takeover of Aer Lingus is deductible.

Ryanair made a bid to purchase a 100% shareholding of Aer Lingus in 2006. When the takeover failed, Ryanair tried to claim a deduction of input VAT paid on professional advisory fees incurred for the attempted takeover. The Irish revenue authority argued that Ryanair was not engaged in an economic activity in acquiring those professional services and refused Ryanair’s claim. The Irish Supreme Court asked the Court of Justice of the European Union (CJEU) whether VAT on Ryanair’s costs could be deducted.

It is the AG’s opinion that input VAT should be fully deductible in the context of a strategic takeover by an operating undertaking. The AG held that failure to proceed with the acquisition did not impact the VAT recovery position. Applying a functional analysis, the AG concluded that the ‘acquisition of a company’s entire share capital with the intention of bringing about a direct, permanent and necessary extension of the taxable activity of the acquiring company constitutes an economic activity’.


The AG took the view that VAT recovery should be allowed even if the costs were sustained by a pure holding company, without an operating business, if such a holding company had the intention to provide (management) services to the target company after the takeover. In this respect, the AG argued that the only decisive factor was the ‘intention to commence an economic activity for VAT purposes, supported by objective evidence’.

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