Commission Regulation (EC) No 16/2003 of 6 January 2003 laying down special detailed rules for implementing Council Regulation (EC) No 1164/94 as regards eligibility of expenditure in the context of measures part-financed by the Cohesion Fund
Date: 2003-01-06
Institutions: European Commission
Subjects: Cohesion Fund, co-financing, eligibility criteria, expenditure, management, project evaluation

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COMMISSION REGULATION (EC) No 16/2003

of 6 January 2003

laying down special detailed rules for implementing Council Regulation (EC) No 1164/94 as regards
eligibility of expenditure in the context of measures part-financed by the Cohesion Fund

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Article 2

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 1164/94 of 16
May 1994 establishing a Cohesion Fund (1), as last amended by
Regulation (EC) No 1265/1999 (2), and in particular Article
D(7) of Annex II thereto,

Whereas:

(1)

(2)

(3)

(4)

(5)

Under Regulation (EC) No 1164/94, the Cohesion Fund
may part-finance projects, preliminary studies and tech-
nical support measures. The conditions under which
such measures are eligible and to be implemented should
therefore be specified.

Until now the eligibility rules have been set out as a
standardised text in Annex IV to the decisions granting
aid.

To ensure that measures part-financed by the Cohesion
Fund receive uniform treatment, common rules should
be laid down on the eligibility of the relevant expendi-
ture. Those rules should specify the period of eligibility
and different categories of eligible expenditure.

Regulation (EC) No 1164/94 stipulates that the Commis-
sion may approve proposed projects only if they meet
criteria guaranteeing that they are of high quality and
compatible with the Community's policies, in particular
the rules on the award of public contracts and on
competition.

The rules set out below are to replace those in Annex IV
to the Commission decisions granting aid from the
Cohesion Fund for new projects approved by Commis-
sion decision after the entry into force of this Regula-
tion,

HAS ADOPTED THIS REGULATION:

CHAPTER 1

GENERAL PROVISIONS

Article 1

Scope

This Regulation lays down common rules for determining the
eligibility of expenditure under the measures provided for in
Article 3 of Regulation (EC) No 1164/94 which may be part-
financed by the Cohesion Fund.

(1) OJ L 130, 25.5.1994, p. 1.
(2) OJ L 161, 26.6.1999, p. 62.

Body responsible for implementation

The ‘body responsible for implementation’ referred to in Article
10(4) of Regulation (EC) No 1164/94 shall be the public or
private body responsible for organising the tenders for a
project. That body shall be designated in the Commission deci-
sion granting aid from the Cohesion Fund (hereinafter called
‘the Commission decision’).

Any change in the body responsible for implementation shall
be approved by the Commission.

Article 3

‘Implementation of a project’ and ‘period of implementa-
tion’

The implementation of a project shall cover all stages
1.
from preliminary planning to the completion of the approved
project, including the relevant publicity measures. Preliminary
planning shall include the study of alternatives.

A project may be restricted by the Commission decision

2.
to only one or several stages of implementation.

The implementation phase of a project shall cover the
3.
period necessary for
implementation to be
the stages of
completed, up to the point at which the project becomes fully
operational and at which the material objectives adopted by the
Commission decision have been completed.

Article 4

Transparency and documentary evidence

All expenditure incurred by the body responsible for imple-
mentation must be based on legally binding contracts or agree-
ments and/or documents.

Appropriate supporting documents must be produced.

Concession-holders and licensees for the implementation of a
project shall be subject to the same requirements as regards
inspection and monitoring as the bodies responsible for its
implementation.

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Article 5

Expenditure actually incurred

The start of the period of eligibility of expenditure related to
the new additional or extended physical components shall be
specified in the Commission decision approving the modifica-
tion. Expenditure incurred before that date shall not be eligible.

The expenditure to be taken into account for the payment
1.
of Community assistance must have actually been incurred
during the period of eligibility as defined in the Commission
decision,
in accordance with Article 8(2)(b) of Commission
Regulation (EC) No 1386/2002 (1), and must be directly related
to the project. The expenditure must relate to payments certi-
fied by the Member State and actually made by it or on its
behalf or, in the case of concessions, by the concession-holder
to which the body responsible for implementation has dele-
gated implementation of
the project, and supported by
receipted invoices or accounting documents of equivalent
probative value.

‘Accounting document of equivalent probative value’ means
any document submitted by the body responsible for imple-
mentation to prove that the book entry gives a true and fair
view of the transactions actually made, in accordance with stan-
dard accounting practice.

In the case of concessions, the certification by the respon-
2.
sible authority of the value of the work carried out in terms of
the progress indicators for the work in the concession contract
shall constitute an accounting document of equivalent proba-
tive value. That authority may be designated by the Member
States in accordance with Article D(4) of Annex II to Regula-
tion (EC) No 1164/94.

Article 6

Completed projects

An application for assistance in respect of a project materially
completed at
the time when the application is submitted
cannot be considered eligible.

Article 7

Initial time limit on eligibility

1.
Expenditure incurred shall be eligible for assistance as
from the date on which the Commission receives the complete
application.

An application shall be considered complete where it contains
the information required in Article 10(4) of Regulation (EC) No
1164/94.

The start of the period of eligibility shall be fixed in the
2.
Commission decision approving the project. Expenditure paid
before that date shall not be eligible.

3.
If a substantial modification of the material components
of a project is requested, expenditure relating to the new addi-
tional or extended physical components shall be eligible from
the date on which the Commission receives the request for
amendment.

Article 8

End of the eligibility period

The final date for eligibility shall relate to payments made by
the body responsible for implementation.

The final date of eligibility shall be fixed in the Commission
decision.

CHAPTER 2

ELIGIBLE EXPENDITURE

Article 9

Categories of eligible expenditure

Subject to the qualifications set out in Chapters 3 to 10, the
following categories of eligible expenditure shall be expenditure
relating to:

(a) planning and design;

(b) land purchase;

(c) site preparation;

(d) construction;

(e) equipment;

(f) project management;

(g) expenditure on publicity and information measures under-
taken pursuant to Commission Decision 96/455/EC (2).

Article 10

Other categories of expenditure

Other categories of expenditure may be eligible, provided that
they are specified in the Commission decision.

CHAPTER 3

VALUE ADDED TAX AND OTHER TAXES AND CHARGES

Article 11

Value added tax

1.
Value added tax (VAT) shall be considered eligible expen-
diture only if it is genuinely and definitively borne by the body
responsible for implementation. VAT which is recoverable, by
whatever means, shall not be considered eligible even if it is
not actually recovered by the body responsible for implementa-
tion or by the final beneficiary.

(1) OJ L 201, 31.7.2002, p. 5.

(2) OJ L 188, 27.7.1996, p. 47.

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2. Where the final beneficiary is subject to a flat-rate scheme
under Title XIV of Council Directive 77/388/EEC (1), the VAT
paid shall be considered recoverable for the purposes of para-
graph 1.

Under no circumstances may Community part-financing

3.
exceed total eligible expenditure excluding VAT.

Article 12

Other taxes and charges

in particular direct taxes and
Other levies, taxes or charges,
social security contributions on salaries and wages, arising from
Community part-finance shall constitute eligible expenditure
only if they are genuinely and definitively borne by the body
responsible for implementation.

CHAPTER 4

EXPENDITURE RELATING TO PLANNING AND DESIGN OF
MEASURES

Article 13

Eligibility of expenditure

Expenditure relating to planning, expertise and design shall be
eligible, provided that such expenditure is directly linked to one
or more projects and is specifically approved by the Commis-
sion decision, except in the cases set out in Articles 14, 15 and
34.

(b) expenditure must be based on a contract relating to one or
more specified projects; where a contract relates to several
projects, costs must be allocated in a transparent manner;

(c) expenditure must be directly linked to one or more of the

individual projects concerned;

(d) the contract must be limited in time and must not exceed

the time limit set for implementation of the project;

(e) the tasks to be implemented under that contract must not
cover general administrative functions as specified in Arti-
cles 27 and 28.

CHAPTER 5

PURCHASE OF LAND AND RIGHTS OF ACCESS

Article 16

Purchase of land not built on

The cost of the purchase of land not built on shall be eligible
only if the all following requirements are met:

(a) purchase of the land must be indispensable to the imple-

mentation of the project;

(b) the purchase of land shall not exceed 10 % of the eligible
expenditure for a project, except in cases duly justified by
the body responsible for implementation;

(c) a certificate shall be obtained from an independent qualified
valuer or duly authorised official body, confirming that the
purchase price does not exceed the market value;

(d) the purchase of land shall be approved by the Commission

Article 14

decision;

Compatibility of costs

(e) national rules laid down to avoid speculation shall be

complied with.

Where several projects are covered by a single works contract
or where the body responsible for implementation is carrying
out the functions on its own account, costs must be assigned
through a transparent and separate project-accounting system
based on accounting documents or documents of equivalent
probative value.

Expenditure on the purchase of land which, after completion of
the project, remains in forestry or agricultural use shall not be
eligible unless otherwise specified in the Commission decision.

Article 17

Article 15

The purchase of land containing developed facilities

Expenditure incurred by public authorities on planning
and design of measures

Where employees of a public authority are involved in the
activities referred to in Article 13, expenditure can be accepted
by the Commission as eligible only in duly justified cases where
all the following requirements are met:

(a) the employee must have temporarily left his or her statu-
tory employment
in the public authority and must be
employed under a formal decision by the authority respon-
sible for undertaking the tasks referred to in Article 13;

(1) OJ L 145, 13.6.1977, p. 1.

The purchase of land containing developed facilities may be
eligible, if specifically justified and approved in the Commission
decision.

Article 18

Purchase of land in public ownership or in the ownership
of the body responsible for implementation

Neither the cost of land already owned by the body responsible
for implementation nor the purchase of land owned by a public
administration shall be eligible.

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Article 19

Article 22

Compulsory purchase

Site preparation and construction

Articles 16, 17 and 18 shall apply to cases of compulsory
purchase. Specific charges relating to the compulsory purchase
order, such as expert's valuation, legal assistance and temporary
lease arrangements for the land concerned, shall be eligible.

Article 20

Rights of access

Expenditure on rights of access to the project site during imple-
mentation shall be eligible, if it is indispensable to the imple-
mentation of
the project and specifically approved by the
Commission decision to grant assistance.

This may include compensation for lost harvest and repair of
damage.

CHAPTER 6

PURCHASE OF BUILDINGS,

SITE

PREPARATION AND

CONSTRUCTION

Article 21

Purchase of real estate

1.
The cost of purchasing real estate, meaning buildings
already constructed and the land on which they are built, may
be eligible only where these are existing properties suited to
the specific operational needs of the project.

A certificate must be obtained from a qualified indepen-
2.
dent expert or an official body to confirm that the price does
not exceed the market value. This certificate must attest that
the building complies with national legislation, or must specify
the points which do not comply and which the body respon-
sible for implementation of the project intends to correct.

3. Within the preceding 10 years, the building must not
have received national or Community assistance which would
give rise to duplication where the Structural Funds are part-
financing a purchase or where the Cohesion Fund is financing
another project.

The real estate shall be used for the purpose and for the

4.
period specified in the Commission decision.

Expenditure on site preparation and construction which
1.
are essential for implementation of the project shall be eligible.

2. Where the body responsible for implementation is under-
taking site preparation or construction works, or parts thereof,
on its own account, costs must be assigned through a trans-
parent and separate project-accounting system based on
accounting documents or documents of equivalent probative
value.

Cases where public employees are involved shall be

3.
covered by Article 15.

4.
Eligible costs shall include only costs actually borne after
the date specified in Article 7(1) and relating directly to the
project. Eligible costs may include one or more of the following
categories:

(a) labour costs (gross wages and salaries);

(b) charges for using durable equipment during construction;

(c) cost of products used for

the implementation of

the

project;

(d) overheads and other costs, if specifically justified; they are
to be assigned fairly, in accordance with generally recog-
nised accounting standards.

Overheads may not be charged where the body respon-

5.
sible for implementation is a public authority.

6.

Costs must be assessed at market prices.

CHAPTER 7

PURCHASE, LEASE OF EQUIPMENT AND INTANGIBLE ASSETS

Article 23

Durable equipment that is part of capital expenditure of
the measures

1.
Expenditure on the purchase or construction of plant and
equipment that is to be permanently installed and fixed in the
project shall be eligible, provided that it is included in the
inventory of durable equipment of the body responsible for
implementation and that it is treated as capital expenditure in
accordance with standard accounting conventions.

5.
The cost of real estate already owned by the body respon-
sible for implementing the project and the purchase of real
estate owned by a public administration, shall not be eligible.

2. Without prejudice to Article 33, the lease of equipment
as referred to in paragraph 1 shall be regarded as part of the
operating costs and shall not be eligible.

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Article 24

Article 29

The purchase of intangible assets

Expenditure on subcontracted measures

The purchase and use of intangible assets, such as patents, shall
be eligible if they are necessary for the implementation of the
project.

Where measures are subcontracted, only duly justified expendi-
ture relating to financial and material monitoring, audits and
on-the-spot inspections of the project shall be eligible.

Article 25

Durable equipment used for

the implementation of

measures

1. Where the body responsible for implementation carries
out on its own account all or part of the site-preparation or
construction work, expenditure on the purchase or production
of durable equipment used during the implementation phase of
a project shall not be eligible. This concerns heavy construction
machinery as well as office and other types of equipment.

implementing the horizontal duties of
In the context of
management, implementation, monitoring and control, neces-
sary and duly justified subcontracted expenditure shall be
eligible, up to the limit laid down in Article 7(4) of Regulation
(EC) No 1164/94.

CHAPTER 9

FINANCIAL AND OTHER CHARGES AND LEGAL EXPENSES

that

equipment
specially purchased or
2.
Durable
produced for
implementing a project may be considered
eligible if it is without economic value or is scrapped after use,
and if the Commission decision includes a specific provision to
that effect.

is

Article 30

Financial charges

Article 26

Debt interest, charges for financial operations, exchange costs
and other purely financial costs shall not be eligible.

Durable equipment used for administrative purposes
relating to the implementation of measures

Expenditure on the purchase and leasing of durable
shall not be

1.
equipment used for administrative purposes
eligible.

2. Without prejudice to Articles 30 and 33, expenditure on
the purchase and leasing of equipment used by a public
authority in the pursuit of its monitoring and supervision work
shall not be eligible.

CHAPTER 8

COSTS INCURRED IN THE MANAGEMENT, IMPLEMENTATION,
MONITORING AND INSPECTION OF MEASURES

Article 27

General and administrative expenses

The general and administrative expenditure of the body respon-
sible for the implementation of measures shall not be eligible.

Article 31

Fines, financial penalties and expenditure on disputes

Without prejudice to Article 7 of Commission Regulation (EC)
No 1831/94 (1), legal costs, fines, financial penalties and expen-
diture on disputes shall not be eligible.

Article 32

Accountancy and audit fees

Accountancy and audit fees shall be eligible if they are directly
linked to the operation, are necessary for its preparation or
implementation and relate to administrative or
statutory
requirements.

Article 33

Special financing techniques

Article 28

Expenditure incurred by public authorities

Expenditure incurred by public authorities in the management,
implementation, monitoring and inspection of a measure or all
measures, in particular the salaries of established national or
local officials, shall not be eligible.

Without prejudice to Article 29, the cost of financing techni-
ques which do not imply an immediate purchase of equipment,
such as leasing, may be considered eligible if it is justified and
approved by the Commission decision, and provided that
transfer of ownership to the body responsible for implementa-
tion takes place before payment of the balance.

(1) OJ L 191, 27.7.1994, p. 9.

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Article 34

(c) the equipment has the characteristics required for the

operation and complies with the applicable rules.

Lawyers' fees, notarial fees, and costs of expert technical
or financial advice

Lawyers' fees, notarial fees, and costs of expert technical or
financial advice shall be eligible if they are directly related to
the operation and if they are necessary for its preparation or
implementation.

Article 39

Subcontracting

CHAPTER 10

OTHER TYPES OF EXPENDITURE

Article 35

Operating expenditure and running costs of assisted
projects

The operating costs of a project or group of projects shall

1.
not be eligible.

2.
By way of derogation from paragraph 1, training of oper-
ating personnel and testing of a project and its equipment may
be regarded as eligible expenditure for any necessary period
defined in the Commission decision.

Article 36

Publicity and information measures

Expenditure on publicity and information measures undertaken
pursuant to Decision 96/455/EC shall be eligible.

Article 37

Car parks

Without prejudice to the application of stricter national rules,
expenditure relating to the following subcontracts shall not be
eligible:

(a) subcontracting which results in an increase in the cost of
implementing the project with no commensurate added
value;

(b) subcontracting contracts concluded with intermediates or
consultants under which the payment
is defined as a
percentage of the total cost, unless such a payment is justi-
fied by the body responsible for implementation by refer-
ence to the real value of the works or services provided.

All subcontractors must undertake to provide the audit and
inspection bodies with all necessary information about their
subcontracting work.

CHAPTER 11

EXPENDITURE INCURRED IN RELATION TO MONITORING
COMMITTEES, AD HOC MEETINGS AND COMPUTERISED
MANAGEMENT AND MONITORING SYSTEMS

Article 40

Organisation of meetings of the Monitoring Committee

The Cohesion Fund shall not contribute to the construction of
indoor or outdoor car parking lots can unless they are indis-
pensable and are specifically approved by a Commission deci-
sion.

1. Without prejudice to Articles 27 and 28, expenditure
incurred in the organisation of the mandatory meetings of the
Monitoring Committee provided for in Article F of Annex II to
Regulation (EC) No 1164/94 shall be eligible on presentation
of supporting documents.

Article 38

Purchase of second-hand equipment

The expenditure referred to in paragraph 1 shall be
2.
admissible where it relates to one or more of the following
categories of costs:

The cost of purchasing second-hand equipment shall be eligible
under the following three conditions, without prejudice to the
application of stricter national rules:

(a) the seller of the equipment must provide a declaration
stating its origin, and confirming that at no point during
the previous seven years has it been purchased with the aid
of national or Community grants;

(b) the price of the equipment must not exceed its market
value and must be lower than the cost of similar, but new,
equipment;

(a) interpreting services;

(b) hire of meeting rooms;

(c) rental of audio-visual and other necessary electronic equip-

ment;

(d) provision of documentation and related facilities;

(e) fees for participation of experts;

(f) travel costs.

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Salaries and allowances of public authority employees
3.
paid for the organisation of the Monitoring Committees shall
not be eligible.

4.
Fixed equipment for monitoring purposes may be eligible
if specifically allowed by a Commission decision on technical
assistance.

Article 42

Computer systems for management and monitoring

The costs entailed in purchasing and installing computerised
management and monitoring systems shall be eligible up to the
limits laid down in the Commission decision.

Article 41

Meetings at the request of the Commission or the Moni-
toring Committee

Article 40 shall apply to the organisation of ad hoc meetings at
the request of the Commission or the Monitoring Committee.

Article 43

Entry into force

This Regulation shall enter
into force on the 20th day
following its publication in the Official Journal of the European
Communities.

It shall apply to new projects approved by a Commission deci-
sion under Article 10(6) of Regulation (EC) No 1164/94 after
its entry into force.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 6 January 2003.

For the Commission

Michel BARNIER

Member of the Commission