Opinion of Advocate General of the Court of Justice of the EU on Ryanair VAT refund case
Deloitte welcomes today’s opinion from an Advocate General of the Court of Justice of the EU(CJEU) that should ultimately result in Ryanair getting a VAT refund of €770,000. While VAT is a complex tax, which requires expertise in both EU and domestic law, the technical VAT arguments have, in our view, always supported Ryanair’s contention that it was entitled to recover VAT on its costs. We expect that the CJEU will follow the opinion of the AG when it issues its judgment in about 6 months’ time.
The case concerned the recovery of VAT on costs incurred by Ryanair in its unsuccessful takeover of Aer Lingus by way of the purchase of its shares in 2006. In the course of its bid it incurred VAT of €770,000 on professional costs and sought to recover that VAT from Revenue. It argued that it should be entitled to recover it on the basis the costs were related to the activity of managing Aer Lingus which it planned to do after the takeover.
However, Revenue disallowed recovery of the VAT on the basis that the takeover did not proceed and that the costs were essentially related to the holding of shares. In broad terms VAT on costs related to the purchase of shares, which is regarded as a non business activity for VAT purposes, is not recoverable.
Ryanair took a case to the Appeal Commissioners, the Circuit Court and the High Court all of whom held in favour of Revenue. In March 2017 the case went to the Supreme Court and it took the view that the resolution of matters involved questions of EU law and sought clarification of the law from the CJEU.
While the AG’s opinion favours Ryanair it will still have to wait for the CJEU to issue its ruling, which will probably take about six months, and then for the Supreme Court to issue its final ruling, which may take another eighteen months.
Assuming that the ultimate judgment goes in Ryanair’s favour it will bring certainty to the VAT recovery position for all businesses that have incurred costs on the acquisition of other companies that ultimately did not proceed. In the meantime we recommend that those businesses that have incurred VAT would now consider claiming a refund of that VAT. This is particularly important where the costs were incurred within the last four years due to the four year time limit for claiming refunds of VAT.
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