What Direct Costs Are Eligible in Horizon Europe Beyond Personnel Costs?

By Julien Sudre, founder of Grant360, grant writer with more than a hundred applications written, and provider of Horizon Europe project management services. Updated 15 October 2026.

Direct costs in Horizon Europe include subcontracting, travel and subsistence, equipment, other goods and services, and certain specific cost categories such as financial support to third parties and internally invoiced goods and services. Each category has its own eligibility and calculation rules. Classifying a cost correctly is as important as demonstrating that it was necessary for the project.

For beneficiaries managing grants based on actual costs, a sound budget is not simply a list of planned expenditure. It is a financial plan that connects activities in Annex 1, the estimated budget in Annex 2, procurement decisions, accounting records and financial reporting.

This guide explains the main non-personnel direct cost categories under the Horizon Europe Model Grant Agreement, with practical examples and common pitfalls. It primarily concerns actual-cost grants: lump-sum actions follow different financial reporting and payment rules. Always check the signed Grant Agreement, its Data Sheet and any call-specific provisions.

For the wider budgeting context, read our guides to Horizon Europe funding rates and cost categories and building a coherent Horizon Europe project budget. When external organisations perform project tasks, use the dedicated guide to subcontracting in Horizon Europe.

What makes a direct cost eligible under Horizon Europe?

A direct cost is eligible when it meets the general conditions in Article 6.1 and the specific rules of its budget category. For actual costs, it must generally be:

• Actually incurred by the beneficiary or, where applicable, an affiliated entity.
• Incurred within the action duration, subject to limited exceptions such as certain final reporting costs.
• Declared in an eligible budget category under Article 6.2 and Annex 2.
• Necessary for implementing the action described in Annex 1.
• Identifiable and verifiable in the organisation's accounts and supporting records.
• Compliant with applicable national law and the beneficiary's usual accounting practices.
• Reasonable, justified and consistent with sound financial management.

These conditions are cumulative. An invoice alone does not establish eligibility: the beneficiary must also be able to explain why the expenditure was needed, how it was incurred and how the declared amount was calculated.

The detailed interpretation is set out in the European Commission's Annotated Grant Agreement (AGA), particularly Articles 6 and 20.

How are Horizon Europe direct costs classified?

The standard budget structure separates personnel (A), subcontracting (B), purchases (C) and other cost categories (D). Indirect costs are recorded separately under category E.

Category What it covers Example A — Personnel Eligible costs of people working on the action Researcher or project manager time B — Subcontracting External implementation of action tasks Outsourced testing that constitutes a project task C.1 — Travel and subsistence Eligible travel, accommodation and subsistence Consortium meeting or field visit C.2 — Equipment Normally eligible depreciation and project-use share Laboratory instrument C.3 — Other goods, works and services Supporting purchases needed for the action Consumables, translation, conference registration D — Other cost categories Specific categories activated by the grant Cascade funding or internally invoiced services

The classification depends on the nature of the transaction, not merely on the supplier or invoice description. For instance, buying a translation service is usually a purchase under C.3; entrusting an external organisation with a substantive action task may be subcontracting under B.

How do direct costs differ from indirect costs?

Direct costs can be attributed to the action and must be declared under the applicable category. Indirect costs represent overheads that cannot be directly attributed in the same way. Under the standard Horizon Europe actual-cost model, indirect costs are calculated using a 25% flat rate on the eligible direct-cost base, excluding subcontracting, financial support to third parties and specified categories that are excluded from that base, including internally invoiced goods and services.

For example, if a beneficiary declares €100,000 in eligible personnel costs, €20,000 in eligible travel and purchases, and €30,000 in subcontracting, the simplified indirect-cost base is €120,000, yielding €30,000 in indirect costs. The €30,000 subcontracting expenditure does not generate an additional 25% overhead allowance.

The applicable funding rate is a separate question: a 25% indirect-cost calculation does not mean the EU reimburses every eligible cost at 100%.

Which travel and subsistence costs can be charged to a project?

Travel, accommodation and subsistence costs are eligible when they are necessary for the action, comply with the beneficiary's applicable travel rules and are adequately documented. Typical examples include consortium meetings, fieldwork, conferences and stakeholder engagement activities that genuinely serve the project.

Useful supporting records include the travel authorisation, agenda, evidence of attendance, tickets, accommodation invoices and an explanation of the mission's relevance to the action. The precise records depend on the beneficiary's procedures and the type of expenditure.

What about trips combining project work and personal activities?

Only the eligible project-related portion should be charged. Where a traveller extends a mission for personal reasons, the beneficiary should document the allocation and ensure that the EU grant does not bear additional private costs.

Entertainment and hospitality expenditure requires particular care. Do not assume that a dinner, reception or social programme is eligible simply because it takes place during a project event; assess its purpose and the specific AGA rules.

Are conference registration fees travel costs?

Conference registration fees are normally classified under C.3 — Other goods, works and services, while transport, accommodation and subsistence are generally classified under C.1. Separating these items makes financial reporting more accurate.

Can Horizon Europe reimburse the full purchase price of equipment?

The standard rule is reimbursement of eligible depreciation, not automatically the full acquisition price. The amount must reflect the equipment's depreciation during the action and the proportion of its actual use for the project, in accordance with applicable accounting rules.

Consider an instrument costing €100,000, depreciated over five years, used for two years of the action at 60% project use. Under a simplified straight-line calculation:

€100,000 × (2 ÷ 5) × 60% = €24,000

The potentially eligible depreciation would be €24,000, assuming the relevant conditions are satisfied. This is an illustration, not a substitute for the beneficiary's accounting records: the actual depreciation start date, useful life, use and other relevant rules must be verified.

When can equipment be declared at full cost?

Certain calls and grants activate alternative equipment-cost options. Full-cost treatment is an exception that must be supported by the applicable Grant Agreement provisions, not assumed because equipment is expensive, specialised or intended for a prototype.

Before budgeting a major purchase, check Article 6.2.C.2, the Data Sheet and the call conditions. Also determine whether the item is truly equipment, a consumable or another type of project-specific expenditure. The word prototype alone does not settle its accounting treatment.

What evidence should be retained for shared equipment?

Keep acquisition documents, depreciation schedules, accounting entries and evidence supporting the project's share of use, such as instrument logs, booking records or another reliable allocation method. A physical EU sticker is not a general substitute for these records and should not be presented as a universal audit requirement.

What falls under other goods, works and services?

Category C.3 covers supporting goods and services purchased to implement the action, rather than outsourcing the implementation of an action task. Depending on the project, examples include:

• Laboratory consumables and materials.
• Translation, design, printing and communication services.
• Conference registration and eligible event-related services.
• Eligible publication and open-science-related services, subject to applicable rules.
• Certain intellectual-property protection costs.
• A mandatory Certificate on the Financial Statements (CFS), where applicable.

Purchases must meet the best value for money or lowest price requirements, as appropriate, and avoid conflicts of interest. Beneficiaries subject to public procurement law must also comply with that law. A competitive tender is not automatically required for every small purchase, but the choice of supplier must be defensible under the applicable rules and procedures.

When is a Certificate on the Financial Statements required?

For standard Horizon Europe actual-cost grants, a CFS is generally required when the requested EU contribution to costs for a beneficiary reaches €430,000, subject to the conditions in the Grant Agreement. The relevant figure is the EU contribution, not simply the total project budget or direct costs. The assessment is made at beneficiary level, including separately for affiliated entities where applicable.

Beneficiaries benefiting from a qualifying low-risk Systems and Processes Audit may have a higher threshold (typically €725,000). Check the specific grant's Data Sheet and Article 24, because the contractual terms govern the obligation. A mandatory CFS is generally submitted with the final financial report, and its eligible cost may be budgeted under C.3.

What is the difference between subcontracting and purchasing services?

Subcontracting occurs when an external party carries out an action task; purchasing services generally supports a task that the beneficiary remains responsible for implementing. This distinction is particularly important because subcontracting is treated differently in both the technical annex and the indirect-cost calculation.

Question Purchase of services (C.3) Subcontracting (B) What is acquired? A supporting good or service Implementation of an action task Where is it reflected? Relevant project budget and records Action-task description and subcontracting arrangements in Annex 1, as applicable Procurement standard Best value for money or lowest price, as appropriate Best value for money or lowest price, as appropriate Included in 25% overhead base? Generally yes No Example Translation of a project report Outsourced implementation of a defined research or testing task

A contractor's location, independence or ownership of intellectual property is not a reliable standalone classification test. Contractual intellectual-property arrangements must be assessed against the Grant Agreement's obligations, including beneficiaries' responsibilities regarding results and access rights.

Must subcontracting be planned in the Grant Agreement?

As a rule, subcontracted action tasks should be identified in Annex 1 and the corresponding costs reflected in the budget. Some changes can be addressed through the grant's applicable approval or amendment mechanisms; they should not simply be ignored until the final report.

Subcontracting should also remain justified in the context of the consortium's capacity and the action's objectives. There is no universal percentage ceiling applicable to all Horizon Europe grants, but extensive outsourcing may prompt scrutiny.

When is financial support to third parties eligible?

Financial support to third parties (FSTP), often called cascade funding, is eligible only where the call and Grant Agreement allow it. It enables beneficiaries to provide funding to external recipients under defined conditions, for example through open calls for pilots, experiments or innovation activities.

The project must respect the specified framework for eligible recipients, activities, selection procedures, support amounts and other conditions. The selection and payment process should be transparent, documented and auditable.

Do not confuse the amount passed on to third parties with the EU reimbursement rate applicable to the beneficiary. The action's funding rules and specific grant conditions determine the EU contribution; a blanket statement that every cascade-funding scheme is reimbursed at 70% or 100% would be misleading.

FSTP is excluded from the standard 25% indirect-cost base.

How do internally invoiced goods and services work?

Internally invoiced goods and services are resources provided within a beneficiary's organisation and charged using an eligible unit-cost methodology based on its usual cost-accounting practices. Examples may include access to an internal technical facility, shared research infrastructure or an internally provided analytical service.

This category is not a way to charge an arbitrary internal transfer price. The method must be transparent, consistent with the relevant Horizon Europe rules and supported by records of units used and the calculation methodology. The eligible unit cost may include certain underlying cost components, subject to the rules against double charging.

No additional 25% flat-rate indirect costs are calculated on this category. This avoids applying an overhead allowance to amounts that may already include relevant indirect components.

Before using internal invoicing, finance teams should check whether the organisation's cost-accounting system can support the required calculation and audit trail. An internal invoice by itself is not necessarily sufficient, nor is one always mandatory.

How can beneficiaries avoid common direct-cost errors?

The most effective control is to make eligibility checks part of procurement and project delivery, rather than leaving them until financial reporting.

Common risk Practical control Wrong budget category Decide whether the transaction is a purchase, subcontract, equipment cost or specific category before committing expenditure Missing project justification Record the connection to the relevant task, deliverable or project activity Weak procurement evidence Retain quotations, evaluation notes, approvals or other evidence required by applicable rules Incorrect equipment claim Reconcile depreciation and documented project use Unjustified end-of-project spending Verify actual need, delivery, timing and eligible use within the action Incomplete travel records Keep the purpose, participants and relevant travel evidence together Duplicate charging Reconcile direct-cost declarations with internal invoicing and overhead treatment Late discovery of CFS obligation Monitor cumulative requested EU contribution and plan certification early

What should be checked before each financial report?

Use this short review sequence:

1. Confirm the category: Is the expenditure correctly classified under the Grant Agreement?
2. Check the project link: Can the responsible team explain why the cost was needed?
3. Verify timing and amount: Was it incurred within the eligible period, and is the calculation correct?
4. Check procurement and approvals: Is the supplier selection compliant and documented?
5. Reconcile the accounts: Does the declaration match supporting financial records without double charging?
6. Review exceptions: Are special equipment rules, subcontracting changes, FSTP conditions or CFS obligations relevant?

These controls should be coordinated between the project manager, scientific or technical leads, procurement staff and finance team. Financial compliance is a shared operational responsibility.

Frequently asked questions about Horizon Europe direct costs

Can a cost be eligible if it was not individually listed in the original budget?

Potentially, yes. The estimated budget is not always a fixed line-by-line spending authorisation. However, the cost must fall within an eligible category, support the action and comply with any requirements for amendments, prior approval or changes to Annex 1. Significant changes should be assessed before expenditure is committed.

Are all costs incurred before the project end date eligible?

No. Timing is only one eligibility condition. The cost must also be necessary, properly classified, reasonable and supported. Conversely, the Grant Agreement provides limited exceptions for certain final reporting costs incurred after the action period.

Can the same expense be charged to two EU-funded projects?

No double funding is permitted. Where a shared resource supports multiple projects, the beneficiary needs a defensible allocation method so that the same underlying expenditure is not claimed twice.

Does the 25% indirect-cost rate apply to all direct costs?

No. Subcontracting, FSTP and certain other categories, including internally invoiced goods and services, are excluded from the standard calculation base. Always use the applicable Grant Agreement provisions.

Do lump-sum Horizon Europe projects follow the same reporting rules?

No. Lump-sum grants generally base payments on the completion of work packages under the agreed conditions rather than reimbursement of individual actual-cost items. Good financial management remains important, but this article's cost-declaration examples are designed primarily for actual-cost grants.

What is the most important principle for managing direct costs?

Every declared cost should have a clear connection between the project's work, the procurement or spending decision, the financial calculation and the supporting evidence. Correct classification helps avoid errors; consistent documentation makes the claim verifiable.

For project managers, the best approach is to build these checks into everyday delivery: review the cost category before procurement, retain evidence as activities happen, and reconcile costs before each reporting period. That turns financial compliance from a last-minute audit exercise into a manageable project routine.

Official references and further reading

• European Commission — Annotated Grant Agreement (AGA), version 2.0, 1 April 2025: Articles 6.1, 6.2, 20 and 24 provide the principal eligibility, documentation and certification framework.
• European Commission — Funding & Tenders Portal: consult the applicable call documents and the signed Grant Agreement.
• Austrian Research Promotion Agency (FFG) — Certificate on the Financial Statements: practical explanation of the standard Horizon Europe CFS threshold.
• FFG — Internal invoicing in Horizon Europe: practical explanation of unit costs and records.

This article provides general guidance, not an interpretation of a specific signed Grant Agreement. Grant-specific provisions and subsequent official updates take precedence.