European Commission

In 2023, the EC decided to implement a simple and universal tax system for new actions funded under NDICI-Global Europe and the European Instrument for International Nuclear Safety Cooperation (INSC). As part of this simplification, the EU does not request tax exemptions from partner countries, except for taxes that are specifically and exclusively levied on EU financing. This new tax policy applies only to actions funded under NDICI-GE and INSC, and will not affect actions financed under previous Multi-Annual Financial Frameworks (MFFs) and European Development Funds (EDFs). Additionally, tax arrangements in place under existing Financing Agreements will remain valid. There will be no new Tax Framework Agreements (TFA) negotiated or signed for these new actions.

As for the countries (previously) covered by the Cotonou agreement, financing of new actions since 01/01/2021 is now also done through the NDICI-GE (not EDF), so the above text applies to them as well.

For actions financed under previous Multi-Annual Financial Frameworks (MFFs) and European Development Funds (EDFs). Based on the legislative set-up under the EU’s budget under the previous multiannual financial framework (MFF) 2014-2020 [Article 5 Regulation 236/2014], the Commission has been requesting tax exemptions in several partner countries.

Provisions on tax exemptions are heterogeneous and not all of them cover all taxes and customs duties. The provisions relating to tax exemptions mainly concern indirect taxes (VAT, customs duties or equivalent taxes) and there are few provisions on taxes on income or profits, which may be required from entities or persons implementing the project.

Moreover, under the European Development Fund (EDF), the ACP-EU Partnership Agreement stipulates that African, Caribbean and Pacific (ACP) countries should apply tax and customs arrangements to contracts financed by the EU which are no less favourable than those applied to the most favoured nation and lists a number of taxes to be exempted by partner countries and others that are eligible and must be paid. The taxes not included in the list are subject to the national legislation in force in the ACP country concerned [Article 31 Annex IV ACP-EU Partnership Agreement, as amended by Decision No 1/2014 of the ACP-EU Council of Ministers. See also Article 11 Regulation 2015/322]. The specific tax and customs arrangements under the ACP-EU Partnership continue to apply to the further implementation of financing decisions/implementing measures financed by the EDF.

This policy has been updated through the new Neighbourhood, Development and International Cooperation Instrument (NDICI) – Global Europe, which was adopted on 9 June 2021 and covers the period 2021-2027.

Moreover, the successor to the Cotonou agreement will include a change as well. 

Most recent review: 2023

In 2023, the EC decided to implement a simple and universal tax system for new actions funded under NDICI-Global Europe and the European Instrument for International Nuclear Safety Cooperation (INSC). Full details above.

The legal basis for ODA tax exemptions varies depending on the partner country:

• The ACP-EU Partnership Agreement has been the basis for tax exemptions with ACP countries before entry into force of Global Europe. The specific tax and customs arrangements under the ACP-EU Partnership continue to apply to the further implementation of financing decisions/implementing measures financed by the EDF.

• In some other countries, tax exemptions have been negotiated bilaterally and formalised in dedicated tax exemption agreements or included as a clause in overarching framework agreements. The model for the financing agreements concluded, with the aim of implementing specific Actions, with partner countries establish that the latter must ‘apply to procurement contracts, grants contracts and contribution agreements financed by the EU the most favoured tax and customs arrangements applied to States or international development organisations with which it has relations.’ The provisions of a specific financing agreement may supplement this regime. When a framework agreement provides for more detailed fiscal provisions, these provisions shall also apply.

The Cotonou Agreement as a basis for tax exemptions with ACP countries can be accessed here.

Beyond that, there is no public access to tax exemption agreements or relevant clauses in overarching framework agreements.