Ryanair v Revenue: Reference to CJEU on Ryanair’s right to VAT refund arising from Aer Lingus bid

Here, the Supreme Court decided to refer a question to the Court of Justice of the European Union on whether Ryanair is entitled to reclaim VAT paid on professional services relating to its unsuccessful bid to purchase Aer Lingus.



In 2006 Ryanair made a formal bid to purchase the shares in Aer Lingus. At the time, Ryanair purchased professional services to aid it in that process. Those services, as an economic activity, were subject to VAT. Ryanair’s bid was not successful.

Later, Revenue determined that Ryanair was not engaged in an economic activity in purchasing those professional services and refused Ryanair credit for those VAT payments against its VAT liability.

Ryanair unsuccessfully appealed Revenue’s decision to the Appeals Commissioner, in the Circuit Court (Judge Lenane) and in the High Court (Laffoy J). Ryanair appealed to the Supreme Court on a point of law.


Supreme Court

Writing for the Supreme Court, Clarke J held that the case involved an issue of EU law which is not clear.

To qualify for a VAT return, a claimant must be a taxable person carrying out an economic activity as defined under the Sixth VAT Directive (77/388/EEC). Clarke J outlined that there are two lines of jurisprudence regarding the definition of economic activity and the purchase of company shares, which he called the Cibo jurisprudence and the Rompelman jurisprudence.

In Cibo the CJEU distinguished between the purchase of shares as a passive investment and the purchase of shares for the purpose of engaging in economic activity such as providing managerial services to a subsidiary. The former is not an economic activity for the purposes of the VAT Directive; the latter is.

In Rompelman the CJEU held that, at the level of principle, initial investments which are geared towards the carrying out of economic activity at a later stage may qualify for an appropriate VAT deduction.

Clarke J noted two relevant facts of this case: Ryanair’s purchase of Aer Lingus did not proceed and Ryanair did not engage in any economic activity in the form of the provision of management services to Aer Lingus. However, Judge Lehane did find as a matter of fact that Ryanair did not intend to be a passive investor, it intended to provide management services to Aer Lingus to improve productivity. And the Supreme Court is bound by that finding.

The question that the Court will ask the CJEU to determine is: does the fact that Ryanair intended to be an active investor, although its purchase did not proceed, mean that its preliminary investment was an economic activity for the purposes of the VAT Directive and can avail it to reclaim the VAT paid on the professional services?

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