Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 4/17/2012

April, 2012 

Tax and Legal Newsletter

Tax administration

A double taxation treaty was signed with Mexico.

On 23 February 2012, a capital and income double taxation avoidance treaty was signed between Lithuania and Mexico. The treaty will come into force once ratified.

 

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Corporate income tax (CIT)

New versions of the corporate income ta x returns as well as the regulations for their completion have been approved.

On 29 February 2012, by Order No. VA-26 of the Head of the State Tax Authorities under the Ministry of Finance, new versions (3) of the corporate income tax return (hereinafter – „a CIT return“) as well as the regulations for their completion have been approved. The new versions shall be used for calculation and declaration of CIT payable for the taxable period starting 2011 and subsequent taxable periods.

The main amendments to the regulations for completion of tax returns are as follows:

    • Form PLN204 was supplemented with fields for declaration of the losses taken over from or transferred to other group entities.
    • in form PLN204 separate fields were included for declaration of income earned and costs incurred through permanent establishments;
    • Annex PLN204B was removed and the information related to profit (loss) earned from securities and derivative financial instruments shall be recorded in fields of form PLN204.

New regulations for completion of form FR0528 regarding reporting of controlled transactions were approved.

On 5 March 2012, by Order No. VA-26 of the Head of the State Tax Authorities under the Ministry of Finance, new wording of the regulations for completion of form FR0528 Reporting on Transactions between Associated Persons and Business Operations (hereinafter - the Reporting form) was approved.

The main provisions of the new wording of the regulations are as follows:

    • When calculating the value of 300 thousand Litas (the value of one controlled transaction (business operation) or several homogeneous controlled transactions (business operations) which presuppose an obligation to file the Reporting form) the following shall not be included: dividends paid (received), support granted (received), transfer of tax losses, advance payments. Furthermore, the value of the stock, goods, products or other assets returned shall not be taken into consideration.
    • An obligation to file the Reporting form arises when the amount of the loans granted (received) to associated persons is equal or exceeds 300 thousand Litas for at least one day of the taxable period.
    • The Reporting form shall not be filed by state or municipality enterprises which had transactions with municipalities or other state or municipal companies.
    • When a tax payer has an obligation to file the Reporting form, all controlled transactions, including the ones which are below 300 thousand Litas) shall be declared.
    • The value of the transactions, which are subject to an excise duty, shall be declared including the excise duty, if it is a constituent part of the price agreed by the parties.
    • In case of real estate rent, only the rent fee shall be declared if the public utilities to be compensated are specified separately in the invoice.
    • When for corporate income tax purposes „implicite“ interest on interest free loans is calculated, such interest shall not be declared in the Reporting form.

The commentary of the Law on CIT was supplemented with a new provision regarding treatment of interest as allowable deductions.

According to the provisions of Par.1, Art. 17 of the Law on CIT, for calculation of CIT for 2010 and subsequent years, allowable deductions shall include all expenses for the benefit of employees where the benefit received by the employees is subject to personal income tax. However, Par. 3 of Article 40 of the Law on CIT sets forth special taxation provisions in cases when a loan is granted by controlling persons. Consequently, where interest received by an individual for a loan granted to a controlling entity is subject to personal income tax, the interest for the controlled borrowed capital should be treated as non-allowable deductions when the ratio of the borrowed and fixed capital of 4:1 is exceeded.

 

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Personal income tax (PIT)

Important! The deadline for filing of a personal income tax return (PIT return) and a personal property return is 2 May

As of 14 March, preliminary PIT returns have been formed in the electronic declaration system of the State Tax Authorities.

By 2 May, income and property shall be declared by state politicians, civil servants, members of the European Parliament, other persons specified in Art. 2 of the Law on Property Declaration of the Republic of Lithuania as well as their family members. A PIT return shall be filed by self-employed persons, i.e. the ones who have registered individual activities with the State Tax Authorities or have acquired a business certificate regardless whether they received income or not. Income shall also be declared by farmers and their partners.

As of this year, the property and income returns shall also be filed by members of the councils and (or) boards of credit institutions, heads of administration and their deputies as well as their family members; members of councils and (or) boards, managers and their deputies, editors-in-chief and their deputies, editors and their deputies of mass media and their family members as well as the individuals who donated over 40 Litas to a participant(s) of a political campaign in previous year.

Income may also be declared by the individuals who wish to use a tax relief and get a refund of part of the costs incurred.

Rates of daily allowances for business trips have been amended

As of 9 March 2012, new rates of daily allowances and rent of accommodation for the persons going to business trips abroad came into effect. The new rates were approved by Order No. 1K-070 of the Minister of Finance dated 1 March 2012.

A possibility is provided to suspend individual activities for the period when the person is on maternity, paternity leave and (or) receives maternity/paternity benefits

As of 9 March 2012, new wording of the Regulations for Registration/Deregistration of Permanent Residents of Lithuania with the Tax Payers’ Register came into force. The main update of the regulations is a possibility to suspend individual activities for the period when the person is on maternity, paternity leave and (or) receives maternity/paternity benefits.

The following possibilities are provided:

    • Advocates, assistants of advocates, notaries and bailiffs may temporary suspend their individual activities by filing a free form application with the local tax authorities along with the decision of the Lithuanian Bar Association, the Lithuanian Chamber of Notaries, Lithuanian Chamber of Bailiffs with regards to temporary suspension of activities where the terms and reasons for the suspension of such activities are specified. Such a possibility relates to the period of maternity, paternity leave and (or) receiving of maternity/paternity benefits.
    • For other residents their individual activities may temporary be suspended during the period when the person is on maternity, paternity leave and (or) receives maternity/paternity benefits based on the information on the period of suspension of individual activities provided electronically by the Social Insurance authority (SODRA) to the State Tax Authorities.

In both cases form FR0792 shall not be filed with the administrator of the register.

 

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Value added tax (VAT)

The determination of the moment since when a building or construction is deemed to be new was adjusted

After amendments to the technical regulations, the tax authorities provided their opinion in the commentary of Par. 1, Art. 32 of the Law on VAT when the period of 24 months should be started to calculate. Until 30 September 2010, the period was calculated from the date of signing the statement on its recognition as suitable for use. As of 1 October 2010, the start of the period is considered to be the date of signing of a construction completion statement or a declaration on construction completion (or the approval if needed).

A commentary of Art. 28 of the Law on VAT regarding VAT non-taxable financial services was updated

A commentary to Art. 28 of the Law on VAT regarding VAT non-taxable financial services was updated and supplemented with case-law of the European Union Court of Justice and its application in Lithuania. New explanation of the State Tax Authorities also include VAT application on various specific services related to financial services. For example, it has been explained that the provision of additional services of physical, technical, administrative or similar nature is not deemed to be a provision of financial services and is VAT taxable unless it changes the legal or financial status of the financial transaction.

Furthermore, the commentary was amended that the option to levy the non-taxable financial transactions with VAT shall apply only in cases when the services are provided to Lithuanian VAT payers. When such services are provided to taxable persons of member states of the European Union or third countries (non-EU), the regulations of taxation of financial services with VAT effective in those countries shall apply as the place of supply and taxation place shall not be Lithuania.

The regulations for accounting of goods and services of taxable persons who provide services of movable property maintenance were approved

By Order No. VA-23 of the Head of the State Tax Authorities under the Ministry of Finance, dated 27 February 2012, the Regulations for Accounting of Goods delivered for Provision of Services and the Services Provided (Including the Goods Used) were approved. The regulations will come into force as of 1 January 2013 and virtually will return back an obligation that was effective before 2010 to perform accounting related to movable property maintenance.

The regulations shall apply to taxable persons (not only VAT payers) that provide services of evaluation of goods, maintenance (repairs, supervision, adjusting), processing and recycling and the goods used for provision of these services belong to a tax payer of another member state and they were brought to Lithuania.

In the accounting a detailed information on the goods (name of the owner of the goods, VAT payer‘s code, dispatching country, name of the goods, quantities, delivery dates, name of the goods dispatched, quantities, dates of dispatching, recipient of goods, recipient country etc.) and the services provided (name, taxable value, date). Accordingly, the data of all related VAT invoices shall be registered. In case of processing and recycling – calculation of goods used (calculations, rates of output etc.) shall be registered as well.

 

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Legal practice

KThe Constitutional Court has critically evaluated the procedure of assigning maternity, paternity and maternity (paternity) benefits

By ruling of 17 February 2012, the Constitutional Court declared that respective provisions of the Law on Sickness and Maternity Social Insurance and related legal acts regulating the procedure of assigning of maternity, paternity and maternity (paternity) benefits are in conflict with the provisions of the Constitution of the Republic of Lithuania which regulate an obligation of the state to take care of families raising and educating children at home (Article 39 of the Constitution).

The Constitutional Court declared that the provisions of the mentioned legal acts (former and current wordings) are (were) in conflict with the Constitution to the extent that according to these provisions a benefit is not assigned or a difference between the benefit and the income received during the benefit period, is assigned if in the period, for which the benefit is assigned, the person has got (actually received) insured income which have not been generated from labor activities of that period.

The Supreme Court of Lithuania has clarified the issue of termination of a labor contract without a warning when the employee outraged his labour duties

A ruling in the civil case No. 3K-3-117/2012 of the Lithuanian Supreme Court dated 19 March 2012 emphasized that an employee shall follow not only provisions of the labor contract or internal regulations but also work with integrity, honestly, comply with laws and work discipline, protect employer’s property, follow the principles of reasonableness, good faith and justice, shall not breach rights of the employer and the legally binding interests. These provisions, even without a detailed specification, should be perceived by any employee.

Breach of these requirements by deliberate actions may be evaluated by the employer as an outrage of work discipline. The factor that, due to such actions of an employee the employer has not suffered any material damage, does not change the evaluation of the circumstances as it is not necessary to identify whether the employer suffered actual pecuniary damage in order to qualify the offense as gross violence.

For the purpose of evaluation of illegal deliberate self-willed actions as an outrage of work discipline, the consequences of such actions also include non-pecuniary consequences, such as loss of confidence in the employee. The employer, having evaluated the whole of the circumstances, shall decide whether there are grounds for non-confidence in this employee, should he safeguard himself against illegal behavior of the employee in future. If the whole of the circumstances reveals indifference of the employee for his actions performed and disobligation of the employer‘s interests, the loss of confidence resulting in the employer‘s choice to terminate labor relations may be recognised by court as a reasonable measure chosen by the employer to protect his interests.

 

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The newsletter has been prepared in accordance with legislation effective as at 30 March 2012 which is subject to change retroactively or prospectively and any such change might affect the contents of the newsletter. We accept no obligation to update you should law or understanding change the contents of the newsletter in the future.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Contact

Birutė Petrauskaitė

Birutė Petrauskaitė

Head of Tax and Legal

+370 5 2102600

Vita Šumskaitė

Vita Šumskaitė

Senior Manager, Tax

+370 5 2102600

Inga Šutaitė

Inga Šutaitė

Lawyer

+370 46 480 012