Ruling: No right to deduct VAT from expenditure on the implementation of a municipal investment

Your commune submitted an application for aid for the implementation of the operation entitled: “…”, under the sub-measure “Support for the implementation of operations under the community-led local development strategy”, excluding grant projects and operations in the field of starting a business covered by the Development Program of Rural Areas for the years 2014-2020 and obtained funding for the implementation of the operation in question. In the application for co-financing of the project in question, it was assumed that VAT would be an eligible cost, because even though your municipality is an active VAT payer, it is not entitled to deduct VAT in connection with the implementation of the project. VAT may be eligible only if it is non-refundable, i.e. it cannot be recovered by the beneficiary. Your commune does not provide taxable sales to the extent related to the project in question, therefore it is not possible to deduct VAT.

Source: sip.lex.pl

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