Lisa Lokasto

If you’re setting up a new business and haven’t yet made any sales, you might assume VAT registration isn’t relevant yet. You can register for VAT Pre-revenue

Brace yourself, we’re getting into case law.

Under Irish and EU VAT law, a business can register for VAT before generating revenue, provided it can demonstrate a genuine intention to trade.

This principle is well established in case law, most notably in the INZO case (C-110/94). INZO is the foundational EU case. If you’re Irish you might better remember a local example: Ryanair’s failed takeover bid for Aer Lingus Ryanair (C-249/17).

Ryanair attempted to recover VAT on consultancy and advisory fees linked to the failed takeover bid fiasco. Although the acquisition didn’t go ahead, the CJEU held that VAT on preparatory costs was still deductible, provided the intended activity was genuine and involved making taxable supplies.

Both cases reinforced the same legal foundation. VAT recovery depends on the intention to carry out taxable activity not on the outcome. (These are EU-level case law decisions. If you’re looking for an Irish example, a Tax Appeals Commission case is linked below.)

VAT Registration Pre-Revenue: What the Law Allows

A business can register for VAT even before it starts trading or generating income. This is particularly relevant for:

• Startups in R&D-heavy sectors
• Companies in pharma, medtech, and tech etc, where the pre-trading phase can last years
• Businesses that incur significant VAT bearing setup costs

In these cases, early VAT registration may allow recovery of input VAT on pre-trading costs but only from the start of the registration period, not before.

What Counts as a “Genuine Intention to Trade”?

It’s not enough to say you intend to trade. You must show you’re taking real, credible steps.

This might include,for example:

• A detailed business plan
• Signed contracts, leases, or supplier agreements
• Purchase of equipment or tools necessary for the trade
• Commissioning of feasibility studies or R&D work
• Applications for licences or regulatory approvals

In INZO, the European Court of Justice confirmed that declared intention to trade, backed by such evidence, qualifies for VAT registration even if the trade ultimately fails.

What If the Business Doesn’t Proceed?

This is where legal certainty and fairness come into play.

The court in INZO held that if VAT registration is granted based on a genuine intention to trade, it cannot be retroactively withdrawn just because the business failed unless fraud or abuse is involved.

This reflects the principle of VAT neutrality: the VAT system must not penalise businesses that attempt to trade but don’t succeed.

However, input VAT must be repaid if:

• The business pivots to VAT-exempt activity, or
• The intention to trade was not genuine

Adjustments can arise where assets ultimately aren’t used for taxable activities (e.g., liquidation). In Vittamed (C-293/21), the CJEU held that VAT must be adjusted if goods or services are never used for taxable activities

Practical Considerations for Startups

While prerevenue VAT registration is legitimate, startups should be aware of:

• Revenue scrutiny: Evidence may be requested before registration is approved
• Ongoing compliance: VAT returns will be required for each period, fully supported.
• Clawbacks: If the company is liquidated or the activity ceases, VAT previously reclaimed could be reassessed (though recovery may be limited if the business is insolvent).

Still, for companies with genuine commercial intent and high pre-trading costs, prerevenue VAT registration can offer valuable cash flow support.

Irish Case Support: 58TACD2023

In a 2023 Irish Tax Appeals Commission case (58TACD2023), Revenue initially rejected a VAT registration application from a pre-trading business. The applicant successfully appealed, providing a business plan, lease, and service agreements.

The Commission ruled in favour of the taxpayer confirming again that objective steps toward trading are sufficient to justify VAT registration.

Summary

In short, yes, a company can register for VAT even before it generates revenue.

Thinking About VAT Registration Before Trading?

Early VAT registration can support cash flow and reduce setup costs. Done wrong, it can lead to clawbacks, compliance issues, or missed reclaim opportunities.

If you’re unsure where your business stands or you’re trying to avoid common traps  speak to a professional (like myself). All consultations go through the office. No blog post replaces tailored advice, but it’s a good place to start. Let’s get it right from the beginning

-Lisa