Value added tax (VAT) may only be an eligible expense if it is non-recoverable for the IRAP Unit. VAT which is recoverable, by any means, will not be eligible, even if it is not actually recovered. The IRAP unit will declare, as appropriate, whether it has the legal possibility to recover or deduct incurred VAT. The IRAP Unit is obliged to return the VAT financed within the Project if, during the period of project implementation or sustainability, there are premises enabling the Unit, or another entity, to recover or deduct it. Moreover, the IRAP Unit is obliged to return any VAT incorrectly defined as non-deductible or refundable and which was financed by the IRAP Unit.
VAT may only be eligible for part of the project. In this case, the Grantee is obliged to ensure a transparent project settlement system, so that there are no doubts as to the amount of eligible VAT.
If it is not possible to separately determine the amounts of VAT related to taxable and non-taxable activities, it is possible to apply the proportion indicator referred to in Article 90 sections 1 and 2 of the VAT Act to settlements. The proportion indicator is determined as a share of annual turnover on account of activities in connection with which a taxpayer is entitled to reduce the amount of output VAT in the total turnover generated on account of activities in connection with which the taxpayer is entitled to reduce the amount of output VAT and activities in connection with which the taxpayer is not entitled to such a right. The proportion is a determined as an annual percentage, on the basis of turnover achieved in the year preceding the tax year in relation to which the proportion is determined.
Corrections to settlements related to the change of the VAT ratio should be reported to the FNP immediately after the VAT adjustment for a given accounting year is reported to the Tax Office. In the case of an adjustment to the VAT structure ratio after submitted financial statements are approved, it is necessary to correct the statements and refund the funds within the scope of the ineligible part of the VAT.
