Music Moves Europe - Online and Offline Distribution - EAC/S19/2018

Deadline: Sep 10, 2018  
CALL EXPIRED

1. INTRODUCTION – BACKGROUND

1.1. Overall EU policy context for culture

The European Union's role in the culture area is specified in Article 167 of the Treaty of the Functioning of the EU. The European Commission’s activities in this area are framed in particular by the European Agenda for Culture, which aims to reinforce the role and position of culture in an increasingly globalised world. The role of the Commission is to help address common challenges, such as the impact of the digital shift, changing models of cultural governance, and the need to support the innovation potential of the cultural and creative sectors. The Commission is also committed to promoting cultural diversity, protecting cultural heritage, easing obstacles to the mobility of cultural professionals, and supporting the contribution of cultural and creative industries to boosting growth and jobs across the EU, in line with the principles of the European Agenda. The international dimension of culture is at the core of this Agenda. EU cooperation on culture will be strengthened further in the future under a New European Agenda for Culture.1

Since 2014 Creative Europe has served as a consolidated framework programme insupport of Europe's cultural and audiovisual sectors. It has supported the implementation of actions in line with the EU’s cultural policy. In the context of the preparations of the next Multiannual Financial Framework (MFF) post-2020, discussions on the future EU programme for culture have started.2

1.2. About the music sector in Europe

Music constitutes an important pillar of European culture. There is the economic significance of the sector – it employs more people than film and generates more than 25bn EUR revenue annually. It is also an essential component of Europe’s cultural diversity and it has the power to bring positive changes to many levels of society.

 

Over the past decade, Europe's music sector has been heavily influenced by the digital shift and increased competition from global players. It has been experiencing significant challenges that have led to fundamental changes in the way music is created, produced, distributed, consumed and monetised. The music industry is adapting to use the opportunities offered (e.g. new business models, extending audience reach, new way of interacting) paving the way for other content industries. A part from the many opportunities, important challenges remain, for instance, the repartition of revenue and the fair remuneration of artists in this new digital environment. The so-called “value gap” has become a subject of much discussion at national and European level in the past few years.

Europe is a strong global player all along the music value chain, including online distribution. Streaming revenues grow extremely rapidly, compensating declines in physical formats and downloads. Europe is home to the world’s biggest music markets (e.g. Germany, UK, France and Italy); its music industry can be considered one of the most creative and diverse in the world. However, the European music ecosystem is a fragmented, diverse and complex landscape with structural differences between its main operator groups or sub-sectors (such as classical and amateur music sub-sector, live music sub-sector, recorded music sub-sector, digital distribution sub-sector, etc.). There is also a great deal of national fragmentation along with language barriers, which hamper promotion and visibility of music repertoire across national borders within Europe and beyond. Non-English music repertoire from Europe struggles to cross European borders and obstacles exist to internationalising the careers of artists. The United States and the United Kingdom enjoy a better access to the European music market, for historical, cultural and linguistic reasons, but also because they host the majority of major music labels, international promoters, and distribution services. The dominance of English music repertoire crossing borders through live performances, radio and online services in Europe and powerful American-led corporations3 seem to hamper promotion and visibility of European acts. Concentration and distorted competition are key challenges for the music ecosystem in Europe.

There is a need to support the competitiveness and the diversity of the music sector and to promote musical creation.

1.3. EU support for music – Music Moves Europe

In late 2015, therefore, the European Commission started a dialogue with representatives from the music sector in Europe with the aim to identify key challenges and possible ways to tackle them, including EU support. “Music Moves Europe” has since become the framework for these discussions and more broadly for EU initiatives and actions to promote the diversity and competitiveness of Europe’s music sector, in terms of policy and funding. One important outcome of that dialogue is the AB Music Working Group report in 2016. The report revealed the need to support music creation, promote musical diversity and to explore the opportunities offered by music online and offline distribution more effectively.

Against this background, in the context of the EU budgetary procedure for 2018, the European Parliament secured a budget of 1.5m EUR for a Preparatory Action “Music Moves Europe: Boosting European music diversity and talent” with the aim to test suitable actions for more targeted EU funding for music post-20204. The focus should be on four strands of action: offline and online distribution, artist and repertoire development, professionalisation and education, export of European music outside Europe.

The European Commission has been supportive to the process leading to the inclusion of this Preparatory Action in the 2018 EU budget considering that it comes at a timely moment when the Commission is preparing its proposals for new funding instruments post-2020. The implementation of this Preparatory Action is an opportunity to test new ideas on how to complement the existing forms of EU support for music under the Creative Europe programme, notably the co-financing of music cooperation projects, platforms, networks, and the European prize for music as well as policy action impacting on the music sector (e.g. in the context of the Digital Single Market).

To implement the Preparatory Action, the Commission will launch four calls (two calls for proposals and two calls for tenders) in the spring 2018 as follows:

1. (a)  Music Moves Europe - Online and offline distributions

2. (b)  Music Moves Europe - The feasibility study for the establishment of a European

   Music Observatory, and a gap analysis of funding needs for the music sector

3. (c)  Music Moves Europe - Training Scheme For Young Music Professionals

4. (d)  Music Moves Europe - Study on a European Music Export Strategy

In parallel, the Commission has committed to have a regular dialogue with the European music sector on these and other themes, starting in 2018

The present call for proposal relates to (a) above and focuses on the innovative and sustainable distribution models that support European music diversity.

1.4. About the distribution in the music sector

Based on small and medium businesses with a strong potential for growth and job creation, the music sector has been strongly influenced by the digital shift. It is characterised by emerging powerful digital players, the development of new business models and new consumption patterns, and most specifically, by the rise of music streaming.

Digital music distribution is continuously shifting from models based on ownership to models based on access. Streaming is close to become the primary digital revenue stream over downloads. The European music sector faces a great deal of national fragmentation along with language barriers, which hamper promotion and visibility of music repertoire across national borders within Europe and beyond. Non Anglo-Saxon music repertoire from Europe, as showed in a past study5, struggles to cross European borders and obstacles to internationalizing the careers of artists. In this context, language barriers seem to remain a great obstacle when it comes to circulation of European music, regardless the genre or the type of work (live performances or recorded works).

 

Due to digitisation, on the one hand, there is a much greater amount of content available. However, due to the concentration on the market, especially in distribution, brought about by digitisation, the challenge is to ensure the visibility and promotion of marginal cultural works. The availability of diverse music on online music streaming platforms does not necessarily lead to more diverse consumption. The crucial question is to ensure that all European music is not only available but that it is also promoted in a visible way.

In the live music market, there is also concentration, with Ticketmaster/Live Nation Entertainment controlling a large share of the festival and event ticket sales market worldwide. There again, the challenge is to make sure that this concentration is not detrimental to European musical diversity.

This call aims at identifying and supporting online or offline distribution projects, initiatives and start-ups to promote diversity and increase the circulation of cultural content across Member States, including the live music sector.

As actions and policy initiatives at national level often prove neither sufficient nor suitable to encompass the global nature of the industry and of the consumption schemes, there is a need and a demand for an EU intervention in this area.

 

2. OBJECTIVE(S) – ACTIVITIES – BENEFICIARIES – RESULTS

2.1. Objectives

General objective

The Commission aims at giving a boost to the European music sector, building increasingly on Europe’s key assets in this field; creativity, diversity and competitiveness. One of the key actions to achieve this is to boost cross-border circulation of music repertoire and mobility of musicians in Europe.

The general objective of this call is to support European music diversity by identifying and supporting existing innovative methods promoting the online and offline distribution models, as well as newly generated ideas, through the selection of 10 grant proposals that enhance the cross-border circulation of music repertoire in order to overcome the existing barriers imposed by the international hits or other obstacles such as visibility, language and market fragmentation in the music sector, as explained in the background section above.

Specific objectives

The call aims at supporting minimum viable products or existing innovative methods, including those at idea stage. The proposals should demonstrate their contribution to the general objective by covering at least one of the following specific objectives:

1. At consumer level, increase availability of European repertoire beyond mainstream hits.

2. Improve editorial and algorithmic curation to increase the discoverability of European music on digital platforms.

3. Promote visibility of diverse genres of European music on streaming, physical sales, radio, television, or live performances and festivals.

4. Enhance the presence of local language music on international platforms.

 

 

2.2. Activities

The proposal should include relevant activities that are necessary for the accomplishment of the above objectives. The following, not exclusive activities promoting diversity and local repertoire may be supported:

•   European music curators and/or European music algorithms;

•   Recommendations with advanced use of technology, big data, artificial intelligence, human curation, or the combination thereof;

•   Compilation and promotion of playlists of European musical diversity;

•   Dedicated discovery tools to help find diverse European music and testing of innovative technologies likely to increase the online discoverability of European music (artificial intelligence, big data, augmented reality, life soundtracks, etc.);

•   Services increasing visibility of indie or local repertoire on international platforms;

•   Measures ensuring that talents get access to proper distribution channels and can reach out to the market place;

•   Visibility and promotion activities.

All activities should contribute to the attainment of the objectives. The activities may address online or offline distribution channels, including but not limited to broadcasting and live performances, or the combination thereof.

2.3. Beneficiaries

The following, non-exhaustive types of individual organisations or consortiums may apply to this call: music companies, music service providers, broadcasters, digital service providers, retailers, concert and festival organisers, clubs and music venues.

2.4. Expected results

The call intends to support projects that deliver an increased presence of European local and diverse music offer in all segments of the music markets (online, TV, radio, physical sales, and live).

 

3. TIMETABLE

 

a) Publication of the call
07/05/2018

b) Deadline for submitting applications
10/09/2018 13:00 CET

c) Evaluation period
September-October 2018

d) Information to applicants
November 2018

e) Signature of grant agreement
November 2018

 

6 Stages b), c) d) (or equivalent) and e) to be repeated in case of a two-stage submission procedure.

 

4. BUDGET AVAILABLE

The total budget earmarked for the co-financing of projects is estimated at EUR 300.000.

The maximum grant will be EUR 30.000 per supported proposal.

The Commission expects to fund around 10 proposals.

The EU grant is limited to a maximum co-financing rate of 90% of eligible costs. The appropriations for the subsequent years will be confirmed at a later stage.

The Commission reserves the right not to distribute all the funds available.

 

 

 

5. ADMISSIBILITY REQUIREMENTS

• Applications must be sent no later than the deadline for submitting applications referred to in section 3.
• Applications must be submitted in writing (see section 14), using the application form https://ec.europa.eu/programmes/creative-europe/calls_en7.

Failure to comply with those requirements will lead to the rejection of the application.

 

6. ELIGIBILITY CRITERIA 

6.1. Eligible applicants

The following applicants are eligible:

In order to be eligible, projects must be presented by applicants meeting the following criteria:

- be a public or private organisation with legal personality

- non-profit organisations (private or public)

- associations

- be a single entity active in the music sector or a consortium of which most of its members should be active in the music sector;

- natural persons are not eligible except self-employed persons or equivalent (i.e. sole traders) where the company does not possess legal personality separate from that of the natural person

- have their registered legal office in one of the countries which are eligible under the Creative Europe programme; The updated list of non-EU countries that participate in the Creative Europe programme can be found at https://eacea.ec.europa.eu/sites/eacea- site/files/06022017-eligible-countries.pdf

 

For British applicants:

 Please be aware that eligibility criteria must be complied with for the entire duration of the grant. If the United Kingdom withdraws from the EU during the grant period without concluding an agreement with the EU ensuring in particular that British applicants continue to be eligible, you will cease to receive EU funding (while continuing, where possible, to participate) or be required to leave the project on the basis of Article II.17.2 of the grant agreement.

By way of exception, an application may be submitted by one applicant, whether established specifically or not for the action, provided that:

•   it is formed of several legal entities complying with the eligibility, non-exclusion and selection criteria set out in this call for proposals, and implementing together the proposed action;

•   the application identifies the said entities.

For the purpose of declaring eligible costs as specified under section 11.1, the entities composing the applicant shall be treated as affiliated entities.

In order to assess the applicants' eligibility, the following supporting documents are requested:

• -  private entity: extract from the official journal, copy of articles of association, extract of trade or association register, certificate of liability to VAT (if, as in certain countries, the trade register number and VAT number are identical, only one of these documents is required);

• -  public entity: copy of the resolution, decision or other official document establishing the public-law entity ;

• -  natural persons: photocopy of identity card and/or passport; certificate of liability to VAT, if applicable (e.g. some self-employed persons)

6.2. Eligible activities

Types of activities eligible under this call for proposals:

•   Organisation of sponsor or reward shows;

•   Development of editorial and algorithmic curation;

•   Organisation of live performances;

•   Elaboration and implementation of distribution activities;

•   actions aiming at the creation and improvement of networks between creators and intermediaries.

The following activities are not eligible under this call for proposals:

•  studies, analyses, mapping projects; Implementation period

Activities may be implemented according to the followings:

•   activities may not be started before the result of the selection is announced;

•   activities must start at the latest in two months after the signature of the financing

  decision;

•   activities are to be completed by 31 December 2019;

•   the maximum duration of projects is 12 months.

  Applications for projects scheduled to run for a longer period than that specified in this call for proposals will not be accepted.

 

7. EXCLUSION CRITERIA

7.1. Exclusion

The authorising officer shall exclude an applicant from participating in call for proposals procedures where:

(a) the applicant is bankrupt, subject to insolvency or winding-up procedures, where its assets are being administered by a liquidator or by a court, where it is in an arrangement with creditors, where its business activities are suspended, or where it is in any analogous situation arising from a similar procedure provided for under national laws or regulations;

(b) it has been established by a final judgment or a final administrative decision that the applicant is in breach of its obligations relating to the payment of taxes or social security contributions in accordance with the law of the country in which it is established, with those of the country in which the authorising officer is located or those of the country of the performance of the contract;

(c) it has been established by a final judgment or a final administrative decision that the applicant is guilty of grave professional misconduct by having violated applicable laws or regulations or ethical standards of the profession to which the applicant belongs, or by having engaged in any wrongful conduct which has an impact on its professional credibility where such conduct denotes wrongful intent or gross negligence, including, in particular, any of the following:

1. (i)  fraudulently or negligently misrepresenting information required for the verification of the absence of grounds for exclusion or the fulfilment of selection criteria or in the performance of a contract, a grant agreement or a grant decision;

2. (ii)  entering into agreement with other applicants with the aim of distorting competition;

3. (iii)  violating intellectual property rights;

4. (iv)  attempting to influence the decision-making process of the Commission

   during the award procedure;

5. (v)  attempting to obtain confidential information that may confer upon it undue

   advantages in the award procedure;

 

(d) it has been established by a final judgment that the applicant is guilty of any of the following:

1. (i)  fraud, within the meaning of Article 1 of the Convention on the protection of the European Communities' financial interests, drawn up by the Council Act of 26 July 1995;

2. (ii)  corruption, as defined in Article 3 of the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, drawn up by the Council Act of 26 May 1997, and in Article 2(1) of Council Framework Decision 2003/568/JHA, as well as corruption as defined in the law of the country where the contracting authority is located, the country in which the applicant is established or the country of the performance of the contract;

3. (iii)  participation in a criminal organisation, as defined in Article 2 of Council Framework Decision 2008/841/JHA;

4. (iv)  money laundering or terrorist financing, as defined in Article 1 of Directive 2005/60/EC of the European Parliament and of the Council;

5. (v)  terrorist-related offences or offences linked to terrorist activities, as defined in Articles 1 and 3 of Council Framework Decision 2002/475/JHA, respectively, or inciting, aiding, abetting or attempting to commit such offences, as referred to in Article 4 of that Decision;

6. (vi)  child labour or other forms of trafficking in human beings as defined in Article 2 of Directive 2011/36/EU of the European Parliament and of the Council;

(e) the applicant has shown significant deficiencies in complying with main obligations in the performance of a contract, a grant agreement or a grant decision financed by the Union's budget, which has led to its early termination or to the application of liquidated damages or other contractual penalties, or which has been discovered following checks, audits or investigations by an authorising officer, OLAF or the Court of Auditors;

(f) it has been established by a final judgment or final administrative decision that the applicant has committed an irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95.

(g) for the situations of grave professional misconduct, fraud, corruption, other criminal offences, significant deficiencies in the performance of the contract or irregularity, the applicant is subject to:

1. (i)  facts established in the context of audits or investigations carried out by the Court of Auditors, OLAF or internal audit, or any other check, audit or control performed under the responsibility of an authorising officer of an EU institution, of a European office or of an EU agency or body;

2. (ii)  non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics;

3. (iii)  decisions of the ECB, the EIB, the European Investment Fund or international organisations;

4. (iv)  decisions of the Commission relating to the infringement of the Union's competition rules or of a national competent authority relating to the infringement of Union or national competition law.

5. (v)  decisions of exclusion by an authorising officer of an EU institution, of a European office or of an EU agency or body.

 

7.2. Remedial measures

If an applicant declares one of the situations of exclusion listed above (see section 7.4), it should indicate the measures it has taken to remedy the exclusion situation, thus demonstrating its reliability. This may include e.g. technical, organisational and personnel measures to prevent further occurrence, compensation of damage or payment of fines. The relevant documentary evidence which illustrates the remedial measures taken must be provided in annex to the declaration. This does not apply for situations referred in point (d) of section 7.1.

7.3. Rejection from the call for proposals

The authorising officer shall not award a grant to an applicant who:

1. is in an exclusion situation established in accordance with section 7.19;

2. has misrepresented the information required as a condition for participating in the procedure or has failed to supply that information;

3. was previously involved in the preparation of calls for proposal documents where this entails a distortion of competition that cannot be remedied otherwise.

The same exclusion criteria apply to affiliated entities.

Administrative and financial penalties may be imposed on applicants, or affiliated entities where applicable, who are guilty of misrepresentation.

7.4. Supporting documents10

Applicants must provide a declaration on their honour certifying that they are not in one of the situations referred to in articles 106(1) and 107 FR, by filling in the relevant form attached to the application form accompanying the call for proposals and available as annex I in this call.

This obligation may be fulfilled in one of the following ways:

a) for mono beneficiary grants

(i) the applicant signs a declaration in its name and on behalf of its affiliated entities;

b) for multi beneficiary grants

(ii) the coordinator of the consortium signs a declaration on behalf of all applicants and their affiliated entities.

 

 

8. SELECTION CRITERIA

8.1. Financial capacity12

Applicants must have stable and sufficient sources of funding to maintain their activity throughout the duration of the grant and to participate in its funding. As the maximum value of the grants is set at 30,000 euros, the applicants' financial capacity will be assessed on the basis of a declaration on the honour by the grant applicant (see Annex I of the Application form).

On this basis, if the RAO considers the financial capacity to be weak, s/he may:

• request further information;
• propose a grant without pre-financing;
• propose a grant with a pre-financing paid in instalments;
• propose a grant with a pre-financing covered by a bank guarantee (see section 11.7 below);
• where applicable, require the joint and several financial liability of all the co- beneficiaries;

If the application.

RAO considers the financial capacity to be insufficient s/he will reject the

8.2. Operational capacity13
Applicants must have the professional competencies necessary to complete the proposed

action.

In particular, they should possess the following capacities:

•   Applicants must have stable and sufficient sources of funding to maintain their activity throughout the period during which the action is being carried out and to participate in its funding.

•   Applicants must have the professional competencies necessary to complete the proposed action. In particular, they should demonstrate:

  • o Previous experience of at least three distribution activities relevant to the proposal, addressing music diversity (e.g. events organisation, curation, use of technological innovation for online distribution) over the last two years;

In this respect, applicants have to submit a declaration on their honour, and the following supporting documents:

•   Curriculum vitae or description of the profile of the people primarily responsible for managing and implementing the operation;

•   Short activity report of the three distribution activities that were selected to prove operational capacity.

In the case of legal entities forming a consortium, as specified in section 6.1, the above requirements apply to the consortium as a whole.

 

 

9. AWARD CRITERIA

Eligible applications/projects will be assessed on the basis of the following criteria:

9.1. Relevance (0-40 points)

The relevance of the project and its expected contribution to the objectives of the call, including:

•   Expected impact at European level (transnational impact) in terms of outreach of new audience;

•   Innovative ways to achieve objectives set out under section 2.1.

  9.2. Quality of the activities (0-40 points)

  The quality of the overall design of the activities proposed and methodology for achieving the objectives, including:

•   sustainability (the extent to which the actions will be carried out also after the end of the project);

•   the promotion and visibility of the expected results;

•   the transferability of the expected results;

•   cost efficiency of the proposed actions.

9.3. Management of the project (0-20 points)

The extent to which the applicant demonstrates its ability to organise, coordinate and implement the various aspects of the proposed activities

A minimum threshold of 60% will be applied to each one of the award criteria listed above for the qualitative evaluation. Applications falling below those thresholds shall be rejected.

 

10. LEGAL COMMITMENTS

In the event of a grant awarded by the Commission, a grant agreement, drawn up in euro and detailing the conditions and level of funding, will be sent to the applicant, as well as the information on the procedure to formalise the agreement of the parties.

The 2 copies of the original agreement must be signed first by the beneficiary on behalf of the consortium if applicable and returned to the Commission immediately. The Commission will sign it last.

 

 

11. FINANCIAL PROVISIONS

11.1. Eligible costs

Eligible costs shall meet all the following criteria:

•   they are incurred by the beneficiary;

•   they are incurred during the duration of the action, with the exception of costs relating to final reports and audit certificates;

  • o The period of eligibility of costs will start as specified in the grant agreement.

  • o If a beneficiary can demonstrate the need to start the action before the agreement is signed, the costs eligibility period may start before that signature. Under no circumstances can the eligibility period start before the date of submission of the grant application.

•   they are indicated in the estimated budget;

•   they are necessary for the implementation of the action which is the subject of the grant;

•   they are identifiable and verifiable, in particular being recorded in the accounting records of the beneficiary and determined according to the applicable accounting standards of the country where the beneficiary is established and according to the usual cost accounting practices of the beneficiary;

•   they comply with the requirements of applicable tax and social legislation;

•   they are reasonable, justified, and comply with the requirements of sound financial management, in particular regarding economy and efficiency.

The beneficiary's internal accounting and auditing procedures must permit direct reconciliation of the costs and revenue declared in respect of the action/project with the corresponding accounting statements and supporting documents.

Eligible costs may be direct or indirect.

11.1.1. Eligible direct costs

The eligible direct costs for the action are those costs which:

with due regard for the conditions of eligibility set out above, are identifiable as specific costs directly linked to the performance of the action and which can therefore be booked to it directly, such as :

(a) the costs of personnel working under an employment contract with the beneficiary or an equivalent appointing act and assigned to the action, provided that these costs are in line with the beneficiary’s usual policy on remuneration.

Those costs include actual salaries plus social security contributions and other statutory costs included in the remuneration. They may also comprise additional remunerations, including payments on the basis of supplementary contracts regardless of the nature of those contracts, provided that they are paid in a consistent manner whenever the same kind of work or expertise is required, independently from the source of funding used;

 

 

The costs of natural persons working under a contract with the beneficiary other than an employment contract or who are seconded to the beneficiary by a third party against payment may also be included under such personnel costs, provided that the following conditions are fulfilled:

1. (i)  the person works under conditions similar to those of an employee (in particular regarding the way the work is organised, the tasks that are performed and the premises where they are performed);

2. (ii)  the result of the work belongs to the beneficiary (unless exceptionally agreed otherwise); and

3. (iii)  the costs are not significantly different from the costs of staff performing similar tasks under an employment contract with the beneficiary;

The recommended methods for calculation of direct personnel costs are provided in Appendix.

2. (b)  costs of travel and related subsistence allowances, provided that these costs are in line with the beneficiary’s usual practices on travel;

3. (c)  the depreciation costs of equipment or other assets (new or second-hand) as recorded in the beneficiary’s accounting statements, provided that the asset:

   1. (i) is written off in accordance with the international accounting standards and the beneficiary’s usual accounting practices; and

   2. (ii) has been purchased in accordance with the rules on implementation contracts laid down in the grant agreement, if the purchase occurred within the implementation period;

      The costs of renting or leasing equipment or other assets are also eligible, provided that these costs do not exceed the depreciation costs of similar equipment or assets and are exclusive of any finance fee;

      Only the portion of the equipment’s depreciation, rental or lease costs corresponding to the implementation period and the rate of actual use for the purposes of the action may be taken into account when determining the eligible costs. By way of exception, the full cost of purchase of equipment may be eligible under the Special Conditions, if this is justified by the nature of the action and the context of the use of the equipment or assets;

4. (d)  costs of consumables and supplies, provided that they:

   (i) are purchased in accordance with the rules on implementation contracts laid down in the grant agreement; and

   (ii) are directly assigned to the action;

5. (e)  costs arising directly from requirements imposed by the Agreement (dissemination of information, specific evaluation of the action, audits, translations, reproduction), including the costs of requested financial guarantees, provided that the corresponding services are purchased in accordance with the rules on implementation contracts laid down in the grant agreement;

6. (f)  costs entailed by subcontracts, provided that specific conditions on subcontracting as laid down in the grant agreement are met;

7. (g)  costs of financial support to third parties, provided that the conditions laid down in the grant agreement are met;

8. (h)  duties, taxes and charges paid by the beneficiary, notably value added tax (VAT), provided that they are included in eligible direct costs, and unless specified otherwise in the grant agreement.

11.1.2. Eligible indirect costs (overheads)

Indirect costs are costs that are not directly linked to the action implementation and therefore cannot be attributed directly to it.

A flat-rate amount of 7% of the total eligible direct costs of the action, is eligible as indirect costs, representing the beneficiary's general administrative costs which can be regarded as chargeable to the action/project.

Indirect costs may not include costs entered under another budget heading.

Applicants’ attention is drawn to the fact that if they are receiving an operating grant financed by the EU or Euratom budget, they may not declare indirect costs for the period(s) covered by the operating grant, unless they can demonstrate that the operating grant does not cover any costs of the action.

In order to demonstrate this, in principle, the beneficiary should:

a. use analytical cost accounting that allows to separate all costs (including overheads) attributable to the operating grant and the action grant. For that purpose the beneficiary should use reliable accounting codes and allocation keys ensuring that the allocation of the costs is done in a fair, objective and realistic way.

b. record separately:

•   all costs incurred for the operating grants (i.e. personnel, general running costs and other operating costs linked to the part of its usual annual activities), and

•   all costs incurred for the action grants (including the actual indirect costs linked to the action)

If the operating grant covers the entire usual annual activity and budget of the beneficiary, the latter is not entitled to receive any indirect costs under the action grant.

 

11.2. Ineligible costs

1. a)  return on capital and dividends paid by a beneficiary;

2. b)  debt and debt service charges;

3. c)  provisions for losses or debts;

4. d)  interest owed;

5. e)  doubtful debts;

6. f)  exchange losses;

7. g)  costs of transfers from the Commission charged by the bank of a beneficiary;

8. h)  costs declared by the beneficiary under another action receiving a grant financed from the Union budget. Such grants include grants awarded by a Member State and financed from the Union budget and grants awarded by bodies other than the Commission for the purpose of implementing the Union budget. In particular, beneficiaries receiving an operating grant financed by the EU or Euratom budget cannot declare indirect costs for the period(s) covered by the operating grant, unless they can demonstrate that the operating grant does not cover any costs of the action.

9. i)  contributions in kind from third parties;

10. j)  excessive or reckless expenditure;

11. k)  deductibleVAT

11.3. Reimbursement of costs actually incurred16

The grant will be defined by applying a maximum co-financing rate of 90% to the eligible costs actually incurred and declared by the beneficiary.

11.4. Balanced budget17
The estimated budget of the action must be attached to the application form (see annex

III Budget template). It must have revenue and expenditure in balance. The budget must be drawn up in euros.

Applicants for whom costs will not be incurred in euros should use the exchange rate published on the Infor-euro website available at:

http://ec.europa.eu/budget/contracts_grants/info_contracts/inforeuro/inforeuro_en.cfm]

The applicant must ensure that the resources which are necessary to carry out the action are not be entirely provided by the EU grant.

Co-financing of the action may take the form of:

•   the beneficiary's own resources,

•   income generated by the action,

•   financial contributions from third parties.

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