Value Added Tax (VAT) and Responsibilities

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Value added tax (VAT) is a tax on goods and services purchases, commonly found in the EU and Asia. Learn about VAT implications, payment, and responsibilities for departments handling grants and awards.

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VALUE ADDED TAX 1.10.13

WHAT IS VALUE ADDED TAX (VAT)? A tax on the purchase of a good or service Usually seen in the European Union, but also in Asia Generally between 15%-25%

DO WE HAVE TO PAY THIS TAX? No, but it may be difficult to avoid You can try to get a refund at the airport Best option is to buy item through the internet when you get back Note: The UW does not have a VAT number

RESPONSIBILITIES - DEPARTMENT Check award documentation to see if VAT is or is not allowable. For any awards from NIH or other DHHS agencies (CDC, HRSA, etc.), the VAT would not be allowed because the foreign component of those awards is significant. VAT would need to be paid from non- sponsored funds. See sample NIH language below: Customs and Import Duties: Allowable under grants to domestic organizations when performance will take place entirely within the United States, its possessions, or its territories, or when foreign involvement in the project is incidental to the overall grant-supported project. Charges may include consular fees, customs surtaxes, value- added taxes, and other related charges. Consular fees, customs surtaxes, value-added taxes, and other related charges are unallowable on foreign grants or the foreign component of a domestic grant.

RESPONSIBILITIES DEPARTMENT, CONTD. Review prior purchases that include VAT and transfer any unallowed VAT off of the grant. Since OMB does not address these particular taxes, for other federal sponsors, review the particular terms and conditions to see if VAT is addressed. If no, then apply the general principles of allowability: reasonable, allocable, and consistent treatment.

RESPONSIBILITIES CENTRAL OFFICES Communicate the policy to campus and advise them on what they need to do to ensure they are only charging allowable costs to their grants Field questions (EIO/GCA Compliance/UW Tax Office)