ICTY: REQUEST FOR GUIDANCE ON PROPER DISPOSITION

UNCLAS THE HAGUE 001878

SIPDIS


DEPARTMENT FOR S/WCI - SCHEFFER/WARRICK, S/SA -O'BRIEN, DRL
- KOH/BARKIN, L - MATHESON, L/EUR - LAHNE, INR/WCAD -
DONAHUE/MORIN, EUR/SCE - COUNTRYMAN


E.O. 12958: N/A
TAGS: PREL PHUM BK HR SR NL ICTY
SUBJECT: ICTY: REQUEST FOR GUIDANCE ON PROPER DISPOSITION
OF VAT REFUND


REF: 98 THE HAGUE 3665



1. SUMMARY AND ACTION REQUEST: This is an action request;
see paragraph five below. The Finance Section of the
International Criminal Tribunal for the Former Yugoslavia
(ICTY) has recently renewed its 1998 request for advice as to
the proper disposition to be made of a refund (in the amount
of NLG 190,165) from the Dutch tax authorities of value-added
tax (VAT) paid on goods and services purchased with USG funds
and donated to the ICTY. Embassy requests guidance. END
SUMMARY.



2. In 1994, the USG proposed a donation in kind of a
computer system -- computer hardware and software and all
necessary support, including installation, maintenance, and
training -- for the Office of the Prosecutor (OTP) of the
ICTY. In 1995, the USG DOJ used a contract with CACI
International Inc., a U.S. corporation, to purchase computer
goods and services. CACI, in turn, subcontracted with Borsu
Systema, a Dutch corporation, to provide some of those goods
and services in The Netherlands. The goods and services were
then contributed by the USG to the ICTY pursuant to the 1994
proposal of an in-kind donation of a computer system.



3. Borsu Systema, the aforementioned Dutch subcontractor,
charged VAT for the goods and services it provided. As a
consequence, since 1996, the Embassy has been engaged in
efforts to recover the VAT paid on those goods and services.
In 1998, the Finance Section of the ICTY notified the Embassy
that the Dutch Government had deposited into the ICTY's bank
account a VAT refund (in the amount of NLG 190,165) for VAT
that had been paid on goods and services purchased with USG
funds and donated to the ICTY. The ICTY asked whether the
USG agreed to the money being deposited in the ICTY's
account. Per reftel, Embassy sought guidance as to whether
the refunded VAT could be retained by the ICTY. Embassy also
requested guidance as to whether there were any legal or
other constraints that would restrict the purposes for which
the funds could be used.



4. On 18 May 2000, Embassy received a letter from the
Finance Section of the ICTY, renewing its request for advice
as to whether the Tribunal could keep the refunded VAT in the
amount of NLG 190,165, or whether it must pay it back to the
USG.



5. ACTION REQUEST: Embassy seeks guidance as to whether the
refunded VAT may be retained by the ICTY. If the ICTY may
retain the funds, please advise whether there are any legal
or other constraints that would restrict the purposes for
which the funds could be used. Finally, if ICTY may not
retain the funds, please provide instructions for the ICTY to
transfer the funds back to the USG.



6. A copy of the ICTY letter to the Embassy has been faxed
to the Department (S/WCI - Warrick).
SCHNEIDER