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How the EU budget is financed

By pooling resources from EU countries, the EU budget strengthens the EU’s economy and geopolitical standing. It improves the lives of the 450 million people living in the EU today.  

The EU budget is financed from the following sources: 

  • a proportion of each EU country’s gross national income, based on its wealth  

  • customs duties on imports from outside the EU 

  • a small part of the VAT collected by each EU country 

  • a contribution based on the amount of non-recycled plastic packaging waste in each EU country 

  • other revenue, such as contributions from non-EU countries to certain programmes, interest on late payments and fines, as well as any surplus from the previous year

These sources are known as the EU’s ‘own resources’. The EU is currently discussing new own resources to diversify and reform the EU budget’s revenue sources. In future, they could, for instance, be linked to greenhouse gas emissions or company profits. 

The EU budget is based on the principle that expenditure must be matched by revenue, meaning that annual revenue must completely cover annual expenditure. 

In addition, the European Commission is empowered by the EU Treaties to borrow from the international capital markets on behalf of the EU. Since 2021, the Commission has been raising funds on the capital markets to finance its post-COVID recovery plan, NextGenerationEU. These EU bonds will be repaid over a long period until 2058.