In recent years, we have presented a number of errors and shortcomings in the treatment of value-added tax (VAT) as an eligible cost in Cohesion spending in our annual reports. This review paper aims to complement the VAT-related observations in our annual reports and the views expressed in Opinion No 6/2018.
Using results and data from previous SoA audits, we analysed the relationship between VAT recoverability and eligibility. We provide an overview of the errors and inconsistencies that we found, and highlight cases of sub-optimal use of EU funds resulting from a broad interpretation of VAT recoverability, in particular in the case of public bodies receiving EU aid.
Based on our analysis and in line with our previous recommendations, we believe that the Commission and legislators should consider revising the rules on VAT eligibility. Efforts to simplify the rules should, however, support the principle of sound financial management of EU funds.
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