Input tax on professional services expenditure

Ryanair launched a takeover bid for all the shares of another airline and incurred expenditure on professional services. However it was able to acquire only part of the target’s share capital. Ryanair claimed the input tax stating it had intended to provide taxable management services for the airline. The Irish tax authority refused the claim and the matter was referred to the Court of Justice of the EU (CJEU).

The court said the mere holding of shares in a company did not constitute an economic activity unless it was accompanied by the supply of management services subject to VAT (Larentia + Minerva and Marenave Schiffahrts (Cases C-108/14 and C-109/14)). However preparatory acts could be an economic activity. So if a trader carried out preparatory acts that were part of a proposed acquisition of shares in another company in which it intended to provide taxable management services it...