Court of Justice (First Chamber) 17 October 2018, C-249/17 (Ryanair Ltd v The Revenue Commissioners.)

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In a preliminary ruling under Article 267 TFEU, the Court of Justice (First Chamber) held that Articles 4 and 17 of the Sixth VAT Directive (77/388/EEC) confer on a company intending to acquire all shares of another company in order to provide VAT-able management services to that company the right to deduct, in full, input VAT paid on consultancy expenditure incurred in the context of a takeover bid, even where the intended economic activity was ultimately not carried out. The Court confirmed that preparatory acts undertaken with the intention of commencing an economic activity constitute economic activity for VAT purposes, rendering the acquiring company a taxable person from the outset, and that the right to deduct, once arisen, is retained notwithstanding the failure to complete the transaction. The right to full deduction is conditional upon the exclusive reason for the expenditure being found in the intended taxable economic activity; where expenditure is partly attributable to exempt or non-economic activities, only partial deduction is permitted.AI