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A closer look - Ryanair Limited -v- The Revenue Commissioners [2017] IESC 19

  • Ireland
  • General


The Irish Supreme Court has recently referred the following question to the Court of Justice of the European Union (“CJEU”) – whether Ryanair can reclaim VAT it expended on professional services arising from its failed attempt to purchase shares in Aer Lingus, in October 2006, under the Sixth VAT Directive (77/388/EEC)?


Ryanair paid VAT on professional service fees, which were classified as an “economic activity” and subject to VAT, when it unsuccessfully attempted to acquire shares in Aer Lingus in 2006. Subsequently, Ryanair sought a VAT refund from the Revenue Commissioners on the ground that because Ryanair intended to take an active role in the management of the Aer Lingus business, rather than simply acting as a passive investor, VAT should be attributed to that intended taxable economic activity. The Revenue Commissioners, the Appeal’s Commissioner and the High Court rejected Ryanair’s argument, which Ryanair is now appealing, on a point of law, to the Supreme Court.

When is VAT deductible?

Under the Sixth VAT Directive (77/388/EEC) VAT is deductible if the claimant is:

(i) a taxable party; and
(ii) the VAT liability arose from that party carrying
out an economic activity.

At present, there are two lines of CJEU authority concerning the definition of a share purchase as an economic activity, which are relevant to Ryanair’s claim. First, Cibo Participations SA (Case C-16/00), wherein the CJEU ruled that the purchase of shares for the purpose of providing managerial services to the target company did amount to an economic activity and was VAT deductible under the Sixth VAT Directive.

However, the CJEU held that if shares are purchased as a passive investment this transaction would not amount to an economic activity and would not constitute a VAT deductible service. Secondly, the CJEU in Rompelman v Minister van Financien (Case C-268/83), held that the initial investment activity, which is related to and completed before the economic activity itself is performed, may be classified as forming part of the an economic activity and as such qualifies as a VAT deductible activity.

Practical implications flowing from the Ryanair decision

The future ruling from the CJEU in Ryanair will hopefully bridge the gap that exists between the Cibo and Rompelman case law, and provide clarity whether VAT paid on professional service fees connected with a potential acquisition of shares, where it is objectively concluded that the acquiring company intended to provide management services to the target company, if the acquisition had been completed, is classified as an economic activity and VAT deductible under the Sixth VAT Directive.


This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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