Ryanair incurred considerable deal fees in relation to an envisaged takeover of a competitor. The takeover failed. Ryanair claimed input VAT deduction on the professional costs incurred based on its intention to perform taxable transactions with input VAT credit.
In relation to deal fees, generally, input VAT deduction is allowed if management services against consideration are rendered to the target company.
The CJEU confirmed earlier this year that all transactions constituting an economic activity performed by the holding company for the benefit of its subsidiary must be considered and that there is no need to exclude certain specific types of services. Hence, for instance a taxable leasing of immovable property on a continuing basis is sufficient (see case C-320/17 Marle Participations Sarl).
In the Ryanair case (see case C-249/17 Rynair Ltd), the CJEU now rules that the fact that the planned takeover did not take place and was aborted may in no circumstances lead to a rejection of the input VAT deduction on the acquisition costs if the intention to perform economic activities generating a right to deduct can be determined based on objective facts.
The Ryanair case represents a further positive evolution in the case law on VAT deduction on acquisition costs.
However, it also shows that timely planning and documentation is crucial to maximize as much as possible right to deduct input VAT on deal fees.