Specific cases

Exchange rate losses are not eligible costs and will not be compensated (article 14.6 of the General Conditions).

Similarly, exchange rate gains are not considered as project revenue and will not be deducted from the final balance. These rules also apply for the gains/losses resulting from the conversion between the EURO and other currencies used for the project.

All reports for any EC-funded project may only be submitted in EURO. The use of any other currency will result in the report being rejected. Black market rates of exchange cannot be applied. Hence, even in case of absence of a formal banking system, is it not possible to refer to the black market rates of exchange.

For those Partners in the EURO zone there is no need to convert currencies as the books of account and the report are in EURO. In case of books of account in a currency other than the EURO (outside the Euro zone), any conversion into EURO of the real costs borne by the Action in other currencies shall be done at the rate made up by the average of the rates published in InforEuro for the months covered by the relevant report, unless otherwise provided in the Grant Contract/Special Conditions.

The VAT on purchases made in the EU in the context of the project can in principle be reclaimed.

In case the purchases are made outside of the EU, the implementing organisation should apply for VAT exemption. When it is denied VAT exemption in the country of intervention or it did not obtain a reply to his request for exemption, the VAT costs may be reimbursed. The implementing organisation must be able to demonstrate that they requested the exemption from the relevant authorities.

The confirmation of the VAT status will normally be verified during an audit.

Bank charges are eligible costs. They can be included in the direct costs if they are directly linked to a specific project; otherwise they shall be considered as indirect costs (i.e. included in the 7%). Bank charges cannot include interest charges or exchange rate gains or losses.

Costs for intermediaries are eligible only in case of absence of a bank system in the country of operation, and if proved by receipts booked into the accounts.

The implementing organisation shall inform the Contracting Authority of the amount of any interest or equivalent benefits yielded by the pre-financing payment(s) received from the EC. Interests earned by the Grant Beneficiary shall be identified as such and reflected in the intermediate financial report if the pre-financing exceeds 250,000 EURO. To learn more please refer to article 15.9 of the General Conditions.

Under no circumstances can the interest from loans from a bank or other lending organisation or pre-existing debts be considered eligible costs.

Financial leasing (a purchase financed by debt) should be distinguished from operational leasing (rental). Only operational leasing is eligible for EC funding as this type of leasing does not include interest costs. The cost of financial leasing is not eligible, given that this is a type of debt which includes interest in the price.

If the partner organisation is operating in an area where no financial institutions are available or financial practices differ from traditional practices and the partner has great difficulty in providing the evidence of these 'financial institution' costs, the partner must inform the Contracting Authority without delay.



Sources and useful links:

• General Conditions