The Commission has been informed by the German Federal Government of Bundesrat Resolution 212/21, which notes that the value added tax (VAT) legislation defined by the European VAT Directive (2006/112/EC) is not coordinated with budgetary law, the law on subsidies and on State aid.

As a result, grants made by the public sector to promote projects in the general public interest with specific funding requirements are increasingly subject to VAT. Since in those cases only the amount after VAT has been deducted is available for the intended funding objectives, the realisation of funding projects is becoming increasingly difficult. The grants provided by the European Union’s Recovery Fund will also be affected by this development.

1. What is the Commission intending to do to prevent VAT being levied on public sector grants that promote projects in the general public interest, as noted in Bundesrat Resolution 212/21, and what is the timeline?

2. Will the Commission make use of its right of initiative to amend the VAT Directive?

3. If the Commission is not intending to take the necessary steps to solve the above-mentioned problems, what is the justification?