Tax & Legal Alert Contacts Issue No. 195 ▪ 11 November 2015

Tax & Legal Alert
Issue No. 195 ▪ 11 November 2015
Contacts
Nerijus Nedzinskas
Partner
Head of Tax & Legal Services
Email: [email protected]
Tel.: +370 5 239 23 50
Aušra Miltenytė
Email: [email protected]
Tel.: +370 5 239 23 71
Lina Surplienė
Email: [email protected]
Tel. +370 5 239 2372
Rokas Bukauskas
Head of PwC Legal in Lithuania
Email: [email protected]
Tel. +370 5 239 2341
PricewaterhouseCoopers, UAB
J. Jasinskio 16B, Vilnius
Tel: +370 5 239 23 00
www.pwc.com/lt
The Tax & Legal Alert is produced by PwC Lithuania Tax & Legal Services
Tax & Legal Alert
November 2015
Tax News
Accounting
News
Tax & Legal Alert
provides the latest information on
changes in Lithuanian legislation most
urgent to our clients.
In this issue:

Value Added Tax news

Customs News

VAT news from the EU

Personal Income Tax and Social
Insurance Tax

General Information

Accounting News

Legal News

Tax Case-Law

PwC Publications
Legal News
Tax Case-Law
Publications
Tax News
Value Added Tax (VAT)
Income from tickets purchased on a
voluntary basis not subject to VAT
The Tax Authorities provided an explanation to the
question raised by the Directorate of Anykščiai
regional park, whether the sale of tickets to visitors
of the State park is subject to VAT.
Due to the fact that the purchase of tickets is
voluntary, i.e. the admission to the park is allowed
to both visitors who bought tickets and who did not,
there is no direct connection between the admission
to the park and the consideration received for the
sale of tickets (which by its nature is considered to
be a donation). Thus, the consideration received for
the sale of these tickets is not subject to VAT.
Letter No. (18.3-31-2) RM-22827 issued by the Tax
Authorities on 23 October 2015.
Tax Authorities additionally explained
cases when reverse-charge mechanism
is applicable for construction services
The Tax Authorities provided additional
explanations on the application of reverse-charge
mechanism to construction services. In addition,
the Tax Authorities prepared a list of services
provided by a taxpayer that are considered to be
construction services, as approved by the Ministry
of Environment.
The Tax Authorities note that even in cases when
there is no indication on the invoice that reversecharge mechanism is applicable, the purchaser pays
the full amount (with VAT) to the seller for the
services acquired, and the seller pays this amount of
VAT to the budget, the obligation for the purchaser
to withhold and pay the VAT to the budget for the
services acquired remains, where reverse-charge
VAT should have been applied based on the VAT
Law.
There is no obligation to correct an invoice issued in
cases when the seller and the purchaser considered
the services supplied as not subject to reversecharge mechanism, when in fact they were
construction services (and visa-versa).
In cases when a foreign taxable person that is not
established in Lithuania supplies goods with
installation for which according to Order No. 216 of
the Finance Minister adopted on 3 July 2002
reverse-charge mechanism has to be applied, the
purchaser of such goods (VAT payer) still has to
withhold and pay VAT on such acquisition, but
according to Art. 95 Part 3 of the VAT Law. The
seller would not be obliged to register for VAT
purposes in Lithuania.
In cases when a foreign taxable person, not
registered in Lithuania as a VAT payer supplies
construction services, the place of supply is
Lithuania, and the services are supplied to the
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Tax & Legal Alert
November 2015
Tax News
Accounting
News
Lithuanian taxable person (VAT payer), the seller is
obliged to register as a VAT payer, due to such
activities performed in Lithuania.
Letter No. (18.3-31-2) RM-22827 issued by the Tax
Authorities on 20 October 2015.
Comment of Aušra Miltenytė, PwC Senior
Manager
Even though the Tax Authorities direct
companies to the Ministry of Environment to
consult regarding construction services, the
Ministry of Environment indicate in their
written explanations that they are not in power
to explain legal acts. It seems that the only
institution who would be in power to explain
the application of Art. 96 Part 1 Point 3 of the
VAT Law would be courts, as the Tax
Authorities have no competence regarding the
attribution of services to construction services
and the Ministry of Environment has no
official authority to do so. In addition, having
looked at the list of construction works which
has recently been published by the Tax
Authorities (and agreed with the Ministry of
Environment) it is obvious that the chaos in
application of reverse-charge mechanism to
construction services is still growing bigger.
Instead of explaining principles of application
of reverse-charge mechanism, the Tax
Authorities attempt to prepare a very detailed
list of specific services that are considered to be
construction services.
Legal News
Tax Case-Law
Publications
However, this approach is doomed to downfall
as none of the authorities would be able to list
all the possible types of construction services. It
seems that it would be more beneficial, if the
Tax Authorities together with the Ministry of
Environment prepared a description of
essential criteria with references to legal acts,
according to which companies would be able to
determine themselves the VAT treatment of
their services. For now, the only option for
financial officers would be to collaborate with
engineering, construction specialists of the
suppliers of services that would be able to
explain the nature of services and at the same
time help answer the questions of VAT
treatment. News
Customs
Customs News
Thresholds for obligatory submission of
Intrastat statements for 2016
The thresholds for obligatory submission of
Intrastat statements on sales and on acquisitions as
well as on obligatory submission of statistical value
for sales were reduced. The threshold for obligatory
submission of statistical value for acquisitions
remains the same as for 2015.
The thresholds for obligatory submission of
Intrastat statements for 2016 are the following:

threshold for obligatory submission of arrivals
Intrastat statements is EUR 280 k;

threshold for obligatory submission of
dispatches Intrastat statements is EUR 200 k;

threshold for obligatory submission of statistical
value of arrivals is EUR 3 M;

threshold for obligatory submission of statistical
value of dispatches is EUR 7 M.
Order No. DĮ-201 approved by the Director of the
Department of Statistics on 29 October 2014.
VAT news from the EU
New working papers published by VAT
Committee
The VAT Committee published guidelines from the
104th meeting held on 4-5 June 2015. The working
papers (No. 857, 849, 855) respectively represent
the Committee’s opinion regarding the concept of
fixed establishment, treatment of
consulting/negotiation in securities, transportation
of goods in distance selling.
Combined nomenclature version for
2016
On October 30, 2015 the European Commission
published amended Regulation EEC 2658/87 on
the tariff and statistical nomenclature, applicable
starting from 1 January 2016.
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Tax & Legal Alert
November 2015
Tax News
Accounting
News
EU Member States signed an agreement
on the automatic exchange of
information on tax rulings
EU Member States signed an agreement on the
automatic exchange of information on cross-border
tax rulings. Currently it is not clear, whether it will
be required to exchange information on binding
rulings only, or also on non-binding rulings.
Currently the Member States may share the
information on their own initiative.
In that respect the European Commission will have
to introduce a directive, and the Member States will
have to transpose the new rules into national law
before the end of 2016. The new directive should
come into effect starting from 1 January 2017.
Personal Income Tax and Social
Insurance Tax
The updated publication regarding
taxation of prizes, winnings and gifts,
application of the Tax Exempt Amount
as well as deduction of expenses
incurred for PIT purposes
The Tax Authorities provided the following updated
publications: “Taxation of prizes, winnings and
gifts”, “Application of Tax Exempt Amount in 2015
and the subsequent years”, “Deduction of payments
made to the third tier pension funds from the
taxable income”, “Deduction of the paid life
insurance premiums from the taxable income” and
Legal News
Tax Case-Law
Publications
“Deduction of payments for vocational trainings or
studies from the taxable income”. The updates were
provided in connection to the introduction of the
euro starting from 1 January 2015.
Press release issued by the Tax Authorities on 24
September 2015, press release issued by the Tax
Authorities on 8 October 2015, press release issued
by the Tax Authorities on 30 September 2015, press
release issued by the Tax Authorities on 30
September 2015 and press release issued by the Tax
Authorities on 30 September 2015.
Starting from 1 January 2016 daily
allowances, increased expense
reimbursements and other specific
types of non-taxable payment amounts
will have to be declared
Order No. VA-145 regarding the rules on
submission of the Annual tax return on income
attributable to class A (form FR0573) and its
supplements (FR0573A and FR0573U) was
replaced. The new order provides with the updated
Appendices ‘Non-taxable non-declarable amounts
of payments attributable to the class A’ and ‘Codes
of the payments attributable to the class A’.
The order sets that employers will have to declare
the following expenses paid to the employees
starting from 1 January 2016: daily allowances paid
to the employees sent on business trips, increased
expense reimbursements paid for employees
working during the trips, under outdoor conditions,
their work is related to driving or is of movable
nature.
Besides, prizes or gifts, paid to the individual
starting from 1 January 2016, will have to be
declared even if the total value in the taxable period
does not exceed EUR 200.
The order also sets other non-taxable payments
attributable to class A which will have to be declared
in the Annual tax return provided that they are paid
starting from 1 January 2016.
Appendix ‘Codes of the payments attributable to
Class A’ was also supplemented with additional
payment codes which should be used when
declaring non-taxable payments made starting from
1 January 2016.
Order No. VA-74 approved by the Head of Tax the
Authorities on 1 October 2015.
Starting from 1 January 2016, all
Compulsory health insurance
contributions will be administrated by
the Social Security Authorities
The amendment to the Law on Health Insurance
was adopted which states that starting from 1
January 2016, all Compulsory health insurance
contributions will be administrated by the Social
Security Authorities.
At the moment, a part of the Compulsory health
insurance contributions are being administrated by
the Tax Authorities.
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November 2015
Tax News
Accounting
News
Legal News
Tax Case-Law
Publications
Please note that Compulsory health insurance
contributions payable to the Tax Authorities for the
year 2015 and previous years as well as liabilities
accumulated previously will have to be paid to the
Tax Authorities even if the specified period has
ended.
Press release issued by the Tax Authorities on 8
October 2015.
For more information regarding the amendments
related to Compulsory health insurance
contributions starting from 1 January 2016, please
see the publication for June 2015.
Order “Form FR1118 of a Request of the Tax
Authorities to a taxpayer to use non-cash and
settlements form FR1200 of a Decisions regarding
cancellation of a Request of the Tax Authorities to a
taxpayer to use non-cash settlements and the
approval of rules for filling the forms” was changed.
Press release issued by the State Social Insurance
Fund Board under the Ministry of Social Security
and Labour on 30 October 2015.
General Information
Declarations of sponsorship provided
were changed
Due to the changes in the Lithuanian Law on
Charity and Sponsorship, which came into force on
1 January 2015 and allow Lithuanian entities to
provide sponsorship to non-profit organizations
established in the European Economic Area, annual
declarations on sponsorship provided (forms
FR0477 and FR0478) were supplemented with new
annexes.
Please see 21 May 2015 Tax & Legal Alert issue No.
189 for more information on changes in the Law on
Charity and Sponsorship.
Amendments to the rules regarding the
request of the Tax Authorities to a
taxpayer to use non-cash settlements
The main changes:

Uncertainties applying provisions of article 1042
of the Law on Tax Administration regarding the
requirement to use non-cash settlements were
resolved.

Broader rights to apply the enforcement method
of fulfillment of tax obligation provided by
article 1042 of the Law on Tax Administration
were conferred on the Tax Authorities.

The illustrative and non-exhaustive list of facts
that constitute grounds for assuming that a
taxpayer using non-cash settlements might hide
income or otherwise engage in tax evasion was
expanded. When applying article 4.2.4, in case
the taxpayer not paying taxes or not paying on
time lends amounts in cash, it is necessary to
observe the principle of rationality – to assess
whether the amounts lent are not insignificant
compared to the tax arrears that are already
present.

The procedure of appeal was made more precise.

The procedure of provision of documents was
simplified.

The form which provides that a person can be
held liable for administrative infringement for
failure to comply with the requirements of the
Tax Authorities and other officers, was changed.
Letter No (32.44-31-3) RM-22029. (18.10-31-1)
RM-22580 issued by the Tax Authorities on 15
October 2015.
Accounting
news
Amendments to 38th BAS "Accounting
and financial statements of unlimited
civil liability legal persons and small
partnerships"
The main changes:

The purpose of the standard was clarified.

Provisions regarding the preparation of
statement of changes in equity for unlimited
civil liability legal persons were removed.
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Tax & Legal Alert
November 2015
Tax News

Accounting
News
Provisions regarding the specification of articles
of financial statements were changed and
explanation that the forms of financial
statements are mandatory was provided.

Due to new
BAS “Liquidation of entities”,
provisions regarding liquidation were aligned.

Considering the provisions of the Law on
Financial Statements of Entities and forms of
financial statement provided in other BASs, the
beginning of financial statements was aligned.

Other editorial amendments were done.
28th
Legal News
Tax Case-Law
Publications
Legal News
Proposal to change the procedure for
investigation of retail companies unfair
practice
Intentions to tighten consumer credit
market
Draft law proposes to extend the rights of the
Competition Council in relation to investigating
unfair practice of retail companies.
It is proposed to tighten the requirements for
consumer credits by determining additional
obligations for the consumer credit grantors and
additional rights for consumer credit borrowers.
Amendments will be applied for the financial
statements of 1 January 2016 and subsequent
periods.
Proposed amendments determine obligation for
consumer credit grantors to evaluate
creditworthiness of the consumers not only based
on the information provided by the consumer, but
also on the information, gathered from registers,
information systems and other databases.
Updated publication regarding the
features of individual enterprise
taxation
Consumers would also be able to refuse the granted
credit within 2 calendar days without any
consequences.
The Tax Authorities prepared updates to the
publication “Features of individual enterprise
taxation”.
It is sought to prohibit the consumer credit grantors
to pay out funds to the consumers according to the
agreements during night time (i.e. from 10 p.m. to 8
a.m.).
The publication was updated in connection to the
introduction of the euro starting from 1 January
2015.
Letter No (18.10-31-1) RM-22580 issued by the Tax
Authorities on 22 October 2015.
Draft law also determines regulatory requirements
for peer to peer lending.
If amendments were approved, they would come
into force on 1 December 2015.
Draft Law Amending Law on Consumer Credit No.
XIIP-3370 (2).
Competition Council would have the right to give
mandatory instructions to retail companies,
suppliers, other persons and public administration
bodies to provide documents, including those
containing commercial secrets and other
information, necessary to perform its functions and
to question individuals, related to investigated
violations.
It is also sought to determine rights for the
Competition Council to extend the investigation
term 2 times for no longer than 3 months. The
Competition Council at the moment may only
extend the term once, for 1 month period.
Also, the law would not be applicable for the
relationships between retailers, having significant
market power and suppliers, the total income of
which during the last financial year exceeds 40
million euros.
If amendments were approved, they would come
into force on 1 December 2015.
Draft Law Amending Law on Unfair Practice of
Retail Companies No. XIIP-2694 (2).
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November 2015
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Accounting
News
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Publications
Amendments regulating bankruptcy
procedure have been adopted
results of his activities but not on the duration of the
bankruptcy proceedings.
Amendments establish a term during which the
general manager of the company is obliged to file a
petition to the court in order to initiate a
bankruptcy procedure. It must be done within 5
days from the moment the company becomes
insolvent but not later than within 40 days the
shareholders of the company fail to take measures
in order to restore solvency of the company.
The amendments shall come into force on 1 January
2016.
Failure to comply with these requirements shall
incur administrative and civil liability for the person
(-s), responsible for filing the petition. The creditors
of the company shall be entitled to a compensation
of any damages, incurred due to failure to comply
with this requirement.
Ethyl alcohol, used for cleaning
medicine production equipment, should
be exempted from excise duties
In addition, auction procedure would be applicable
not only to immovable assets, but also to assets the
value of which exceeds 250 basic social benefits.
According to new auction procedure, in case of 2
consecutive unsuccessful auctions, assets could be
sold according to the procedure set by the meeting
of the creditors in the same particularity and extent
as it was offered in the auction. In some cases the
asset may be sold not at an auction.
Amendments also define that the remuneration for
the bankruptcy administrator shall depend on the
Law Amending Enterprise Bankruptcy Law No. XII1962.
Tax Case-Law
On 15 October 2015 the European Union Court of
Justice (further – the EUCJ) ruled in case C-306/14
(Biovet AD), where it was decided that ethyl alcohol,
used by an undertaking for cleaning or disinfecting
equipment and facilities used in the production of
medicine, shall be exempted from excise duties.
The EUCJ explained that disinfection is inherent in
the production process for medicine, thus, ethyl
alcohol, used for that purpose, must be regarded as
being used „for production of medicine“, which
benefits from excise duty exemption.
Input VAT deduction is allowed on
construction of public areas attracting
visitors to its location where taxable
activity is performed
On 22 October 2015 the EUCJ ruled in Lithuanian
case C-126/14 (Sveda). This case concerns the right
to deduct input VAT on the costs incurred on the
construction of a Baltic mythology recreational trail,
the usage of which is free of charge.
According to the EUCJ, a taxable person has a right
to deduct input VAT paid for the acquisition or
production of capital goods, directly intended for
the free of charge use by the public, and together
enables to carry out economic activities, when there
is a direct link between the taxable transactions and
expenses incurred. Therefore, input VAT deduction
is allowed, when the assets are used to attract
visitors to a location where the person carries out
VAT taxable activities.
Exchange of bitcoins into traditional
currency is VAT exempt
On 22 October 2015 the EUCJ ruled in Lithuanian
case C-264/14 (David Hedqvist), stating that
exchange of traditional currency for units of the
“bitcoin” virtual currency and vice versa, constitute
the supply of services. Though “bitcoin” is not a
security, but currency “bitcoin” has no other
purpose than to be means of payment, thus, the
exchange of it is treated as VAT exempt services.
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Tax & Legal Alert
November 2015
Tax News
Accounting
News
Failure to end transit procedure leads to
a customs debt
On October 2015 the EUCJ ruled in case C-319/14
(B&S Global Transit Center), where the following
situation was analyzed. The goods placed under
transit procedure were dispatched from an office of
departure in the Netherlands to offices of
destination in other EU Member States. However,
the office of dispatch did not receive the necessary
return copies not electronic confirmations of receipt
as a proof that the procedures have been correctly
ended.
Legal News
Tax Case-Law
Publications
The questionnaire was prepared based on the
questionnaire of the global annual CEO survey. The
results of global survey are presented in the World
Economic Forum in Davos each year.
Please find the report on PwC website.
14 October 2015 article in business newspaper
“Verslo žinios“.
The EUCJ stated that such an infringement in case
the company provides proof that the goods were
dispatched out of the EU (bill of ladings), is treated
as removal of goods from customs supervision and
results in a customs debt.
Publications
Report on the 4th annual survey of
Lithuanian companies’ CEOs published
A report on annual survey of Lithuanian companies’
CEOs was published by PwC and business
newspaper “Verslo žinios”. It presents the insights
and forecasts by Lithuanian business leaders.
77 top level executives from the biggest (TOP500)
Lithuanian companies have provided their insights,
remarks and experience during the annual survey
carried out in September 2015.
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Tax & Legal Alert
November 2015
Tax & Legal Alert
Lithuania • 11 November 2015
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advice specific to their situation. No liability is accepted for acts or omissions taken in reliance upon the contents of this alert.
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