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Global Fund funding is made available based on the principle that grant funds are exempt from relevant taxation imposed by the host country concerned. The required tax exemption for Global Fund purposes mainly includes (but is not limited to): (a) customs duties, import duties, taxes or fiscal charges of equal effect levied or otherwise imposed on the “Health Products” imported into the host country under the Grant Agreement or any related contract (collectively “Custom/Import Duties”) and (b) VAT levied or otherwise imposed on the goods and services purchased using grant funds.

The obligation of the host country to provide tax exemption is mandatory and applies to the Global Fund programmes implemented partially or wholly by any Principal Recipient (PR) or Sub-recipient (SR) that is not a “Government Entity”. In administering the tax exemption, if needed, the PR should ensure an adequate follow-up of taxes paid and recovered at SR level.

The budget submitted to the Global Fund should be net of taxes on applicable unit costs. When tax exemption is obtained on a reimbursement basis (i.e. the PR has to pay the taxes first and then claim reimbursement), the first year’s budget may include a provision related to the cash flow needs if required. This should be requested in the budget and supported by precise cash flow forecasts related to tax payment and recoveries.

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