Principles of Project Finance

cial model must therefore show the tax calculation, in the profit and loss statement,

and the actual payments, in the cash flow calculations, at these different times.

§12.7.5 V

ALUE

-A

DDED

T

AX

In some countries (e.g., in the European Union), VAT will be payable by the

Project Company on the construction cost of the project, but the amount paid can

in due course be offset by VAT chargeable on sales by the Project Company once

it begins operations. The lenders often provide a separate VAT loan to deal with

this short-term financing requirement.

§12.7.6 W

ITHHOLDING

T

AX

The Project Company may be required to deduct local income taxes on pay-

ments of interest to lenders outside the country or on payment of dividends to

overseas investors. Although lenders may ...