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Tax & Legal Alert
Lithuania • Issue 122, 19 May 2010
Tax & Legal Alert
provides the latest information on
changes in Lithuanian legislation
most urgent to our clients.
In this issue:
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News on VAT and Excise duty
Interest rate for tax overdue
decreased
News from the EU
Other news
PricewaterhouseCoopers was awarded as the best transfer
pricing firm in the Baltic States
International Tax Review awarded PricewaterhouseCoopers as the Baltic
Transfer Pricing Firm of the Year 2010.
This year was the first time when the nominees from the Baltic States were
invited to participate in this nomination. According to International Tax
Review, the awards were mainly judged on the size, innovation and
complexity of the issues that the firms were facing while servicing their
clients.
PricewaterhouseCoopers European transfer pricing network was also
named as the European Transfer Pricing Firm of the Year. For details
Tax news
Contacts:
Kristina Kriščiūnaitė
Partner, Head of Tax Department
E-mail:
[email protected]
Tel: +370 5 239 23 00
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
PricewaterhouseCoopers, UAB
J. Jasinskio 16B, Vilnius
Tel: +370 5 239 23 00
www.pwc.com/lt
This Tax & Legal Alert is produced by
PricewaterhouseCoopers’ Tax department.
The increase of threshold for
advance VAT payments
On 21 April 2010, by the Order No. 454
of the Lithuanian Government, the
threshold for advance VAT payments
was increased. Starting from 1 May
2010, an obligation to pay advance VAT
payments for VAT payers arises when
the average VAT payable amount for
the three preceding months exceeds 10
million Litas.
Amendments to the Commentary
on the Law on VAT
On 14 April 2010, by letter No. (18.2-312)-R-3748 the Tax Authorities informed
that section 1 of the Commentary on Art.
62 part 2 of the Law on VAT was
amended.
The amendment is related to the
changes in the Law on Personal Income
Tax applicable from 1 January 2010.
According to the Law, allowable
deductions related to the income from
individual activities shall not exceed
50% of representation costs, however,
these allowable deductions shall also
not exceed 2% of income from individual
activities actually derived during the tax
period. Thus, analogically, the person
engaging in individual activities and
registered for VAT purposes shall
deduct not more than 50% of input VAT
related to representation.
VAT refund to Turkey
On 15 April 2010, by letter No. (18.2-312)-R-3780 the Tax Authorities have
added Turkey into the list of non-EU
countries whose taxable persons can
apply for VAT refund in Lithuania.
However, only Turkish transportation
companies can apply for input VAT
refund incurred on fuel, maintenance
services and spare parts in Lithuania.
Moreover, other taxable persons can
apply for input VAT refund incurred on
goods and services related to the
participation in fairs and exhibitions.
Computerised system for
monitoring movements of excise
goods within the Community
On 1 April 2010, in order to maintain
better control and to simplify operational
procedures, a new electronic
computerised system for monitoring and
controlling movements of excise goods
(EMCS) was launched in Lithuania and
within other EU member states. For
more information, please see the
website of the Tax Authorities.
Starting from 1 April 2010, the paperbased AAD is replaced with the an
electronic record e-AD, and for the
purpose of confirmation that the goods
arrived, electronic document e-RoR will
be used. Moreover, new draft rules
related to the electronic monitoring
system were issued:
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The rules on movement of excise goods under duty-Suspension arrangements;
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The rules on registration of excise Tax warehouses;
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The rules on registration / de-registration of excise goods’ recipients;
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The rules on registration / de-registration of excise goods’ senders.
It is important to point out that the system is currently not fully implemented in all EU
countries, thus, the accompanying documents for the movement of excise goods and
the confirmations about the receipt of goods in several countries are still prepared
according to old rules.
New edition of the Law on Excise Duties
On 1 April 2010, the amendment to the Law on Excise Duties No. IX-1987, and the
amendment of Art. 2 of the Law on Excise Duties No. XI-723 were adopted, both of
which came into effect on 20 April 2010.
The Law was amended due to the implementation of Council Directive 2008/118/EC
changing the paper-based movement of excise goods documentation system into an
electronic one. In addition, according to Directive 2004/74/EC, the excise duty relief on
orimulsion was abolished (52 Lt instead of 0 Lt excise tax for one tone of the product is
applied).
Moreover, the new edition of the Law specifies the taxation of electricity (the definitions
are harmonized with the Law on Electricity, the requirement to receive a permission for
the purchase of electricity exempt from excise duty or at a reduced excise duty rate for
certain entities is abolished). Rules for taxation of natural gas used as fuel were laid
3
down (the rate of LTL 758 for 1000 m of the product is applied). In addition, an
obligation to pay excise duty on natural gas used as fuel is defined for both the seller
and the purchaser, provided that the excise duty on such gas was not paid.
Regarding compulsory health insurance contributions (HIC) for
Lithuanian tax residents residing based on the temporary permit
On 30 April 2010, by letter No. KD-7258 the Tax Authorities explained that tax residents
residing in Lithuania based on a temporary permit are neither covered under the
compulsory health insurance scheme by the Lithuanian State nor they can be insured
independently. Hence, such individuals are not subject to compulsory HIC of LTL 72 per
month for the period when they were unemployed, did not perform any economic
activities or did not receive any income subject to compulsory health insurance
contributions.
Regarding benefits in kind
On 29 April 2010, the Tax Authorities explained that a monthly public transport travel
pass bought by the employer for the employee to come to work and return back home
will not be treated as a benefit in kind received by the employee. Such public transport
travel pass should be treated in the same manner as the company’s car provided only
for travelling to work and returning back home, which is not recognized as a benefit in
kind.
Late payment interest rate for tax overdue was decreased
On 7 March 2010, order No 1K-052 of the Minister of Finance came into force. This
order decreased the rate of late payment interest applied on tax overdue. The rate for
the second quarter of 2010 was decreased from 0,05% to 0,04% per diem.
Amended ruling “Regarding amounts and payment order of expenses
related to business trips”
On 28 April 2010 the order No 440 of the Government of the Republic of Lithuania
came into force amending the order No 1365 of the Government of the Republic of
Lithuania “Regarding amounts and payment order of expenses related to business trips”.
The amendments allow not to pay daily allowance to an employee if a business trip in
Lithuania does not last longer than one day and it is agreed so in the collective
agreement or in the rules of work order. Furthermore, the amended version of the order
includes provision that at least 50% of daily allowances should be paid to employee not
later than on the last working day before the business trip, unless an employment
contract or a collective agreement establish otherwise.
Updates of publications of the Tax Authorities
Updated publication „Guidelines on VAT for transport service providers
registered for VAT”
On 29 March 2010, by letter No. (18.2-31-2)-R-2949 the Tax Authorities updated the
publication „Guidelines on VAT for transport service providers registered for VAT“. The
publication was updated due to the new edition of the Law on VAT applicable from 1
January 2010, changing the rules of taxation of services.
The publication provides for examples of taxation of transport services or services
ancillary to transport services provided to taxable and non-taxable persons, passenger
transport, agent services. Moreover, it is explained when zero-rated VAT could be
applied. In addition, the VAT reporting principles for the mentioned services supplied
and purchased are provided.
Updated publication “Correction of mistakes made in VAT returns“
On 13 April 2010, by letter No. (18.2-31-2)-R-3688 the Tax Authorities updated the
publication “Correction of mistakes made in VAT returns“. The publication was updated
due to the change of the Law on VAT provision according to which starting from 2010,
tax payers have a right to adjust input VAT deduction for the current and five preceding
years.
The publication provides for examples when a decrease in refundable / increase in
payable amount or mistakes related to intra-Community supply or acquisition of goods
(and acquisition of services starting from 2010) is adjusted in the VAT return of the
period when the mistakes had to be reported.
If the payable amount is not decreased / refundable amount is not increased, it is
allowed to correct the mistakes in the VAT return of the period, when they are noticed.
The new VAT return form (applicable from 2010) shall be used for the adjustments.
Updated publication “Tax procedures at the State Tax Authorities”
On 1 April 2010 the Tax Authorities informed that the publication “Tax procedures at
the State Tax Authorities” was updated.
The publication explains the current tax procedures performed at the State Tax
Authorities and legislation related to these procedures. The publication is designed for
new tax payers; however, it may be also useful for other tax payers which would like to
become familiar with procedures of the Tax Authorities.
Accounting news
Amendments to methodological recommendations of 2
Accounting Standard „Balance Sheet“
nd
nd
Business
Referring to the adjustments of the 2 Business Accounting Standard (BAS) “Balance
sheet“, the methodological recommendations of this standard were amended and the
explanation of Articles 15, 16, 19 and 20 was supplemented. In addition to the
explanations of other articles, it is also explained what shall be stated in the additional
row 1.1.5. Non-current tangible assets for re-sale of the sample balance sheet forms
nd
presented in Annexes 1, 3 and 5 of the 2 BAS “Balance Sheet“.
Legal news
Draft legislation
The Lithuanian Government approved amendments to the Law on Commercial
Arbitration
If proposed amendments to the Law of Commercial Arbitration No. 10-807-02 are
accepted by the Lithuanian Parliament they will provide the conflict parties with more
autonomy on application of arbitration rules. According to the proposed amendments, it
would be possible to organize an arbitration in any place that the parties agree on, also
to choose the language of arbitration and the form of the ruling to be adopted by the
court, etc. Furthermore, the amendments foresee that agreements concluded by
electronic means of communication would be recognized as written agreements.
Moreover, according to the proposed amendments the Commercial Arbitration would be
able to decide not only on the law but also on the fact questions. The amendments also
intend to extend a range of questions to be decided in the Commercial Arbitration.
Amendments would enable the Commercial Arbitration to decide on questions
regarding the compensation of loss caused by the infringement of competition laws,
also to decide on part of disputes regarding patent law, labor law, consumption
agreements, etc. However, the amendments foresee that disputes which involve public
interest (for example, family matters) or implementation of Lithuanian State’s sovereign
rights (for example constitutional or administrative disputes) would still be excluded from
the jurisdiction of the Commercial Arbitration. Apart from the abovementioned
amendments, it is indented to grant the Commercial Arbitration with more rights such as
the right to decide on the application of interim measures and etc.
In conclusion, if the proposed amendments are adopted, dispute solution in the
Commercial Arbitration would become more flexible, thus, parties could be encouraged
to the apply to Commercial Arbitration.
Tax case-law
Regarding the classification of personal income
On 12 April 2010, the Supreme Administrative Court of Lithuania (SACL) resolved a
dispute in administrative case No. A-438-359/2010 between the Tax Authorities and
The Commission on Tax Disputes under the Government of the Republic of Lithuania
(the Commission) regarding a possibility to shift the payment of the personal income tax
(PIT) on the person’s class A income to an individual.
Having considered the circumstances of the case, the Commission decided that the Tax
Authorities had reasonably applied the principle of substance over form and a tax
calculation method necessary for its implementation in the case, thus additional taxes
have calculated correctly. However, the Commission noted that the Tax Authorities
unreasonably shifted the obligation to pay PIT on the person’s class A income received
from the legal entity to the natural person. The Commission noted that the legal
provisions on the obligations of the withholding agent are of mandatory nature.
Therefore, according to the Commission, in presence of legal relationships between the
withholding agent and the State budget, there are no ground to require the natural
person (resident) who is not involved in this relationship to pay PIT to the State budget.
The Tax Authorities disagreed and pointed out that in the cases where the withholding
agent failed to withhold, pay and file income tax returns while making payments to the tax
payer, the obligation to calculate PIT shall be shifted to the individual who shall pay to the
budget the difference between the amount of income tax calculated in his/her
annual income tax return for the tax period and the amount of income tax paid (withheld)
during the tax period.
In general, SACL has agreed with the opinion of the Tax Authorities and concluded that
in the cases where the circumstances of obtaining tax benefits are established after
applying of the principle of substance over form, the unpaid tax might be recovered
directly from the person who has received such tax benefit, i. e. without applying the
legal provisions under which the individual’s income is divided into class A and B.
Tax & Legal Alert
Lithuania • 19 May 2010
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