Contributions from a public entity to a service provider are not subject to VAT if they are defined as “State aid”. Contributions given without any connection to services or goods are not subject to tax.
Funding is not subject to VAT in the relationship between the public entity and the service provider, or between the service provider and the beneficiaries. If the public contribution only covers part of the service cost, the service provider must apply VAT to the amount paid by the beneficiaries.
Source: eutekne.info
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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