3.40 STEP 2 Are VAT and other taxes considered as eligible cost? Published 2012/01/30

According to article 14.2 of Annex II “General Conditions” to the Grant Contract, among the other eligible costs there are: “taxes, including VAT, where the Regulation and/or Financing Agreement with the third country under which the Contract is financed do not exclude coverage of taxes and the Beneficiary (or, where applicable, its partners) can show it cannot reclaim. Notwithstanding, the Beneficiary (or its partners) will not have to show it cannot reclaim taxes in any of the cases set out in Article 14.7”.
In particular VAT and Taxes are never eligible for Applicants and partners coming from Mediterranean Partner Countries, since the Financing Agreement signed by the EC with each MPC state that these costs are not eligible regardless the fact that an organization can reclaim them or not. Therefore Applicants or Partners from MPC should indicate, in the budget, costs not including the VAT or other taxes (the possibility to obtain invoices without VAT has to be check by each MPC organization with the competent authority in its own country).
For Applicants or partners from the EU, VAT is eligible only if the organization cannot reclaim it (see also art. 14.7 of Annex II “General Conditions” to the Grant Contract:
“The Beneficiary (or, where applicable, its partners) will not have to show it cannot reclaim taxes in any of the following cases:
– where the amount of taxes per invoice is less than EUR 200, within a maximum
of EUR 2 500, representing not more than 5% of the Contracting Authority's
contribution;
– where the Beneficiary can demonstrate that the steps necessary for recovery of
taxes oblige it to incur costs in a country where it only performs the relevant
operations on an ad hoc and isolated basis; and that these costs for recovery (e.g.,
registration fees in the country or the costs for appointing a tax representative,
declaration fees, etc.) clearly exceed the amount of the taxes declared to the
Contracting Authority;
– where a country has been declared in crisis situation or in the need for emergency
and post-emergency assistance by the European Commission. This exception is
limited to the period in which the declaration is in force. The Beneficiary shall
be informed in writing thereof;
– Where the Action relates to the protection of fundamental rights of peoples, as provided for in the Special Conditions.
The Beneficiary shall certify that the concerned taxes have not been or will not be recovered from the local tax authorities and prove that the above requirements are met at the latest when submitting the final report”.