The European research programmes distribute billions of tax-payer’s money to Universities, Research Centers, Industry and other actors. The funding is subject to the Financial Regulation of the Communities and the Rules for participation for FP6. Contracts are typically grants, limited to a contribution to certain costs (co-financing). Profit is excluded.

The 250 pages heavy financial guidelines February 2005 include all rules and references. Click to download 1.4 MB .pdf

The grant can be paid in two forms:
• a lump sum payment (fixed rate, typical for Marie Curie Fellowships).
• Reimbursement of eligible costs (typical for IP, STRP, NOE, etc rates of reimbursement depends on activity and cost model of the contractor).

The planned costs are presented in the proposal and become part of the EC contract (in Annex I). The total financial contribution is fixed in the contract (Art. 5) and paid according to the periods agreed during negotiation of the Contract (see below).

Full Cost with actual overhead rate (FC)

• All eligible direct and indirect costs are charged by the contractors.
• Refund rate: 50% (35% for demonstration, 100% training and management).
• All legal entities can use FC if they are capable of calculating their overhead.

Full Cost with flat overhead rate of 20% (FCF)

• All eligible direct costs and a flat rate for the indirect costs (20% of the direct costs minus sub-contracting).
• Refund rate: 50% (35% for demonstration, 100% training and management).
• Used by private/commercial institution which are not able to calculate their real overhead.

Additional cost (AC)

• Only additionalcosts can be charged as direct costs. Flat rate for the Overhead (20% of the direct costs minus sub-contracting).
• Refund rate of eligible additional costs 100%
• Only for public bodies which cannot calculate full project costs. Typically used by Universities

To be eligible for refund costs must be

• actual (“real, not estimated”), economic (best value for money) and necessary for the project.
• incurred during the duration of the project (exc: costs of final reports)
• recorded in the accounts (or third parties)
• excluding non-eligible costs
• not give rise to profit (be careful with receipts or contributions in kind for the project)

“…Working time to be charged must be recorded throughout the duration of the project by any reasonable but reliable means (including time sheets). A simple estimation of hours worked is not sufficient. There must be a system that allows the time of anyone working on the project to be followed and audited (a name on a deliverable is not sufficient for an audit)…” from “Frequently Asked Questions on Project Management in Fp6” - March 2005, pdf 278 KB.

Non eligible costs are:

• any identifiable indirect taxes, including VAT or duties;
• interests owed;
• provisions for possible future losses or charges
• exchange losses;
• costs declared, incurred or reimbursed in respect of another Community project;
• costs related to return on capital;
• debt and debt service charges;
• excessive or reckless expenditure;
• any cost which does not meet the conditions to be an eligible cost (Art.II.19.1).

Example: You buy consumables for your project. Only the net costs are eligible. The VAT (Mehrwertsteuer, TVA) is non-eligible, (as long as it is identifiable on the bill).

Travel expenses: if it is the common practice to reimburse travel costs to the personnel based on a claim, then the VAT is part of the eligible travel costs, because it is not identifiable in the claim (the employee does not charge VAT on his claim).

The  financial helpdesk has produced a short leaflet on VAT in FP6 projects.

Management costs

The costs for the management of the project - including the costs of the audit certificates (if external: as subcontracting) - can be charged to the project. The total costs for the management(sum of all partners all years) cannot exceed 7% of the EC contribution.

 

Public money in research projects (EU framework programme, SNF) is not liable to VAT. No VAT must be paid to the the Swiss tax services as a consequence of a new practical guide communicated to clarify the existing legislation. See official documents available in French and German.

Eligible costs that originally incurred in Euro shall be reported in Euro.

Eligible costs that were in CHF shall be reported using either the real exchange rate (if the EC contribution is kept in Euro and costs in CHF are debited directly) or using the official exchange rate from the European Central Bank of the first day of the month following the reporting period.