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Tax & Legal Alert
Lithuania • Issue 125, 24 August 2010
Tax & Legal Alert
provides the latest information on
changes in Lithuanian legislation most
urgent to our clients.
In this issue:

Reduced VAT on heating

Amendments to the Commentary
on the VAT Law

Amendments to the methodical
recommendations of the BAS

Tax Case-Law
Tax news
Contacts:
Application of reduced VAT on
heating of residential premises
extended
Kristina Kriščiūnaitė
Partner, Head of Tax Department
E-mail:
[email protected]
Tel: +370 5 239 23 00
On 2 July 2010 by Law No. XI-1002
Art.19 of the VAT Law was amended.
According to the amendment, the
application of 9% VAT rate on supply of
heating to residential premises (including
thermal energy transmitted through the
hot water supply system), hot water
supply or cold to hot water heating and
thermal energy used for heating was
extended until 31 August 2011. The
amendment comes into force on 1
September 2010.
Nerijus Nedzinskas
E-mail:
[email protected]
Tel: +370 5 239 23 50
Egidijus Kundelis
E-mail:
[email protected]
Tel: +370 5 239 23 57
Daiva Šoliūnaitė
E-mail:
[email protected]
Tel: +370 5 239 23 09
Amendments to the Commentary
on the VAT Law
On 10 July 2010 by letter No. (18.2-312)-R-6789 the Tax Authorities
supplemented the official Commentary of
Art. 7 and Art. 58 of the VAT Law. The
Tax Authorities explained cases of VAT
treatment when State and municipal
functions are transferred to a private
entity under a public-private partnership
or concession contracts. Supplements
explain in which cases activities,
transactions and transfer of infrastructure
and other fixed assets must be subject to
VAT.
PricewaterhouseCoopers, UAB
J. Jasinskio 16B, Vilnius
Tel: +370 5 239 23 00
www.pwc.com/lt
Moreover, it is noted that the
remuneration which a public entity pays
to a private entity for creation of property,
infrastructure and other objects or for
property repairs, management, operation,
This Tax & Legal Alert is produced by
PricewaterhouseCoopers’ Tax department.

maintenance, etc. during the contract
period is considered as remuneration for
services rendered and therefore is
subject to VAT.
When a public entity covers the costs of
the concessionaire incurred due to
operating loss, this income is not subject
to VAT.
Explanation regarding VAT rate
application for transportation of
goods
On 14 July 2010 by letter No. (18.3-31-2)R-6954 the Tax Authorities explained
provisions of Art. 45 Part 1 of the VAT
Law when goods are transported on the
route a Member State - Lithuania – a nonEU country by separate carriers and a
forwarder is responsible for the entire
shipment. The application of the VAT rate
of transportation services is explained in
cases where the export procedure is
initiated in:


A member state. If export procedure
has already been formalized for
goods being transported and
transportation services are directly
related to the export of goods, for
such services (which take place in
Lithuania according to Art. 13 of the
VAT Law) zero-rated VAT is applied.
Lithuania. Transportation services
provided on the route another
Member state - Lithuania before the
procedure of the export starts are not
considered as directly related to
export, thus, the standard VAT rate has to be applied to such services.
Explanation regarding the payment of VAT and VAT registration
obligation due to acquisition of services from foreign taxable persons
On 22 July 2010 by letter No. (18.2-31-2)-R-7264 the Tax Authorities explained that if a
Lithuanian taxable person (including those operating according to business certificate)
acquires intermediation services from foreign taxable persons, it has to calculate and
pay output VAT on the taxable value of the intermediation services purchased to the
State budget according to Art. 95 Part 2 of the VAT Law. This obligation exists even if
the taxable person is not registered for VAT purposes. In this case, according to Art.711 Part 1 of the VAT Law, it is necessary to submit a VAT registration application. The
application must be submitted before the actual acquisition of services.
If an obligation to register for VAT purposes occurs due to acquisition of services from
foreign countries, the taxable person must calculate and pay output VAT from the date
of such acquisition. This should be done despite the fact that income received from the
operating activities subject to VAT has not exceeded LTL 100 000 over the past twelve
months.
Without being registered for VAT purposes the taxable person is not entitled to any VAT
deduction.
Explanation regarding the lease termination fee
On 21 July 2010 by letter No. (18.10-31-1)-R-7207 the Tax Authorities explained that in
lease termination cases performed on purpose for economic benefits, contract
termination fees may be considered as allowable deductions under Art.17 Part 1 of the
CIT Law, if the termination fee was an obligatory termination clause.
Amendments to the rules of the Tax Authorities regarding the order of
consultancy and responses to applications for rulings
On 27 July 2010 by Order No. VA-81 of the Head of the Tax Authorities rules of the Tax
Authorities regarding the order of consultancy and responses to applications for rulings
were amended.
According to the amendments, additional type of consultations to the taxpayers was
introduced, namely consultations during seminars, where they will be provided with
answers to straight-forward queries. Moreover, the procedure of written and repeated
requests was restricted and a requirement to register for verbal advice in advance was
introduced.
Amendments to the rules on registration of excise warehouses
On 28 July 2010 by Order No. VA-84 of the Head of the Tax Authorities the
amendments to the rules on registration of excise warehouses and related application
forms were passed. According to the amendments, in order to register as an owner of a
warehouse and receive an authorization to establish a warehouse, the following
documents should be submitted:



application form FR0644 for registration of an excise warehouse owner and /
or authorisation of the establishment of an excise warehouse;
form FR0644P1 declaring activities to be carried out in the excise warehouse;
appendixes 1 and 2 of the additional data form FR0644P2.
Furthermore, the requirement to indicate the EORI (Economic Operators Identification
and Registration) code and the Combined Nomenclature code in the application form is
included. These codes are assigned by the Lithuanian Customs Authorities.
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News from the EU
New Invoicing Directive adopted
On 13 July 2010 the Council of the European Union formally adopted the new Invoicing
Directive No. 2010/45/EU which should come into force on 1 January 2013 at the latest.
The new Directive contains changes including a harmonised time limit for invoices
issued in respect of intra-Community supplies of goods and services, some changes to
the content of an invoice and to the treatment of electronic invoicing and archiving of
invoices, plus a simplification measure regarding the issuance of invoices for exempt
financial services. As regards the latter, the general rule will be that a taxable person is
released from issuing invoices for exempt financial services except for cross-border
supplies of services where the recipient is liable to pay VAT. Member States may
however still impose the obligation to issue an invoice for such services.
Accounting news
Amendment of Article 28 of the methodical recommendations of the 15th
BAS “Investments into Associates”
The explanation of Article 28 of the methodical recommendations of the 15th BAS
“Investments into Associates”, approved on 29 June 2009 by Order No. VAS-8 of the
Director of the Audit and Accounting Office, was amended and supplemented by a
practical example.
Approval of methodical recommendations of the 41st BAS “Splitting up
of Entities”
Referring to Order No. VAS-6 issued on 22 February 2010 by the Director of the Audit
and Accounting Office “Regarding the Approval of the 41st BAS “Splitting up of Entities”,
the methodical recommendations of the standard were approved.
Amendment to the methodical recommendations of 4th BAS “Statement
of Changes in Equity”
Referring to Order No. VAS-2 issued on 10 February 2010 by the Director of the Audit
and Accounting Office “Regarding the amendments of the 4th BAS “Statement of
Changes in Equity”, the methodical recommendations of this standard were reviewed,
amended and supplemented.
In order to explain the preparation of the Statement of Changes in Equity more
thoroughly, the methodical recommendations were supplemented with examples of
content of each row as well as it was explained what data should be presented in each
of the rows of the statement. Aiming to explain the principles of preparation of the
Statement of Changes in Equity, the data of different rows of the statement was corelated.
Tax Case-Law
Regarding a requirement to pay output VAT on non-taxable activities
As it was mentioned in Tax & Legal Alert edition of 19 April 2010 (No. 121), on 10
March 2010 the Commission of Tax Disputes under the Government of the Republic of
Lithuania (the Commission) decided the case No. S-79(7-22/2010), which resolved a
dispute whether output VAT collected from the final purchasers should be paid to the
budget when activity on which VAT is not due is performed, regardless the fact that the
income earned was not supported by any VAT invoice, cash register receipt or any
other accounting document, but by a payment document.
The Commission disagreed with the opinion of the Tax Authorities that a payment
document shall be considered as an accounting document according to the provisions
of the Law on VAT, i.e. as the document based on which the purchaser is legally
entitled to deduct the VAT. Therefore, the case specifies that in the absence of a

document based on which the purchaser claims the right to deduction of input VAT on a
particular acquisition, there is no risk for loss of the tax income for the budget, therefore,
there is no reason and evidence to require the taxpayer to pay the extra VAT (which
should not have been charged) to the State budget.
However, the Tax Authorities appealed against the decision of the Commission to the
Vilnius Regional Administrative Court (the Court). The Tax Authorities indicated that a
person (seller) who supplied VAT-exempt goods or VAT-exempt services and indicated
the VAT amount in an accounting document and, thus, received the VAT from the
purchaser of goods or services, is legally obliged to pay the output VAT to the State
budget.
On 22 July 2010 the Court adopted the decision in this case, in which the Court agreed
with the opinion of the Tax Authorities and concluded that the decision of the
Commission is unfounded. According to the Court, the payment of VAT shall not rely on
the nature of the document in which the VAT was indicated. The Court noticed that the
obligation for any person who has specified output VAT in a document recording a
supply of goods and/or services on which VAT was not chargeable, the obligation to
pay the specified amount of VAT into the budget is of the mandatory nature, despite the
fact that such supply of goods and/or services was not supported by any VAT invoice or
cash register receipt. Thus, the decision of the Commission was abolished by leaving
the Tax Authorities requirement to pay output VAT received on non-taxable activities.
This Court’s decision may yet be appealed to the Supreme Administrative Court of
Lithuania.
Tax & Legal Alert
Lithuania • 24 August 2010
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described. Before taking (or not taking) any action, readers
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