Personal income tax (PIT)
Monthly and annual forms of the income tax return on A class income, the rules of submission of their annexes were amended and the Commentary of Art. 24 of the Law on PIT was adjusted accordingly.
Forms FR0572 and FR0573 of the annual and monthly income tax return on A class income and their annexes A and U as well as the rules of completion and submission of the forms and their annexes were amended
As of now, in case of late submission of a monthly return or when it is being adjusted, the code of the municipality, in which the legal seat or residence place of the taxable person is during the period of submission of the return, shall be indicated.
Furthermore, the rules for completion and submission of form FR0573 of the annual return of A class payments, income withheld and paid on these payments as well as annexes FR0573A and FR0573U were amended. The amendments are related to the adjustment of the return and its annexes which is specified in point 75 of the updated rules. Furthermore, the rules were supplemented with point 751 where, having adjusted form FR0573, an obligation to adjust forms FR0572 of a respective month(s) as well is specified.
Taking the above amendments into consideration, the State Tax Inspectorate (the STI under FM) updated the commentary 24 of the Law on PIT.
The State Tax Inspectorate provided replies to most frequently asked questions related to the declaration of income before and after the adoption of the euro.
On 17 March, the STI under FM announced a document with replies to most frequently asked questions regarding the impact of the planned adoption of the euro on the declaration of income of residents and payment of PIT. The essence of the replies is that income declared in Litas before the adoption of the euro shall be declared in euro after the adoption.
A new commentary of Art. 17 of the Law on PIT regarding taxation of interest on securities and income received from tax havens was prepared.
The STI under the FM prepared a new commentary of Subpar. 19, 20, 21, 22 of Par. 1 and Par. 2 of Art. 17 of the Law on PIT. The commentary provides explanations regarding taxation of interest on securities and income received from tax havens.
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State social insurance (SSI)
The rules for submission of the data on the insured and policyholders (SI notifications) were amended.
As of 1 May 2014, the amended rules for submission and adjustment of the data on the insured and policyholders comes into effect. The amendment sets forth that the SD (social insurance) notifications (except for 6-SD notification) shall be filed only electronically and signed by an electronic signature. The 6-SD notification may be filed by the policyholders in territorial divisions directly or by registered mail.
Furthermore, when filing notifications on employment, it is enough to indicate the ID code. The persons, who have no ID code granted in Lithuania, shall further use the SD number in the notifications.
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Corporate income tax (CIT)
The commentary regarding the change of the method of calculation of advance corporate income tax was amended and supplemented.
In the amended and supplemented commentary of Par. 2, Art. 47 of the Law on CIT, an explanation regarding the change of the calculation method of the advance corporate income tax chosen by the entity in the beginning of each year is provided. The commentary sets forth that an entity may change the calculation method chosen in the manner specified in the rules for completion of form FR0430 of the advance corporate income tax return, i.e. once a tax period by filing an application not later than the first day of the 10th month of the current tax year.
The commentary of the Law on CIT regarding attribution of investment income to non-taxable investment income was amended and supplemented.
In the amended and supplemented commentary of Par. 5, Art. 12 of the Law on CIT, relevant cases of the treatment of investment income of investment companies as non-taxable investment income, except for dividends and other distributed profit, illustrated by practical examples, are provided. The commentary also sets forth that income of investment companies from the transfer of movable and immovable property acquired for administrative needs and other income related to use of such assets shall not be treated as investment income.
The commentary of the Law on CIT regarding non-taxable distributable profit received from investments of pension/investment fund to securities was amended and supplemented.
In the amended and supplemented commentary of Par. 1, Art. 32 of the Law on CIT, an explanation, in what cases dividends received by pension and investment funds for the fund’s assets invested in securities (shares) or distributed profit shall not be subject to taxation in accordance with provisions of Section VII of the Law on CIT, is provided.
Explanation of the provisions of the Law on CIT regarding calculation of taxable profit of non-profit entities.
On 18 March 2014, the STI under MF provided an explanation of the issues related to the calculation of profit and recording of income and related costs in the annual corporate income tax return form PLN204N characteristic to non-profit entities, illustrated by examples.
The explanation is available here.
Publication Taxation Peculiarities of Non-profit Organisations was prepared.
On 1 April 2014, the STI under FM issued publication Taxation Peculiarities of Non-profit Organisations where issues of PIT, CIT, VAT and real estate tax relevant to non-profit organisations are discussed.
The publication is available here.
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Value added tax (VAT)
The commentary of Par. 2, Art. 41 regarding export of goods outside the territory of the European Community of the Law on VAT was supplemented.
The commentary of Par. 2, Art. 41 regarding export of goods outside the territory of the European Community of the Law on VAT was supplemented with paragraph 5. It sets forth that a zero rate VAT may be applied to goods acquired in the Republic of Lithuania and when goods are acquired by diplomatic representative offices, consular offices of the Republic of Lithuania and other states established in third states. Furthermore, a practical case which explains the new provision is provided.
Par. 1 and 2 of Art. 81 of the commentary regarding documentation of payment of the Law on VAT was amended and supplemented.
Par. 1 and 2 of Art. 81 of the commentary regarding documentation of payment of the Law on VAT was amended and supplemented. The supplement specifies that a VAT payer supplying agricultural products, the supply of which is documented by a VAT invoice, has the right to choose application of the special procedure of the taxation moment, under which an obligation to calculate VAT on agricultural products supplied occurs when the buyer of the agricultural products pays a consideration for the products.
Regarding updated return FR0617K.
Please be informed that return FR0617K (a report on purchase of agricultural products and/or services from farmers who are subject to the compensational VAT rate scheme) to be completed electronically was updated. The updated form shall be effective for the tax period starting on 1 January 2014.
The rules for the management of the VAT invoice registers were amended.
The rules for the management of the registers of VAT invoices were amended. The major amendment is related to the storing of VAT invoice registers in a computerised form. It is set forth that such registers may be kept (stored) in computer media in cases when the taxable person may ensure that the mentioned registers will remain authentic and accessible during the whole storing period.
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As of 1 April increased excise duties for ethyl alcohol and alcohol beverages came into effect.
Please be reminded that as of 1 April 2014 increased rates for beer, wine and other fermented beverages, intermediary products and ethyl alcohol came into effect. More detailed information on the amendments could be found in the updated commentary of Art. 23, 24, 25 and 26 of the Law on Excise Duties regarding approval of excise duties for ethyl alcohol and alcohol beverages.
More functions and operations related to excise duty administration are transferred to Mano VMI.
We have already informed in our Newsletter of March 2014 that the persons seeking to register with the STI excise duty information system (hereinafter EDIS) may do this via Mano VMI choosing the services of EDIS users management.
As of now, when using Mano VMI an application to issue/ change/ supplement/ cancel a certificate of a registered beneficiary of excise duty taxable goods may also be submitted. Accordingly, as of now, a tax payer shall also be informed on registration and deregistration of a registered beneficiary, change (supplement) of the data, documents or data to be filed via Mano VMI.
Furthermore, filing of an application to issue a confirmation that the payment of excise duties in the Republic of Lithuania for the excise duty taxable goods supplied to the Republic of Lithuania for commercial purposes is also transferred to Mano VMI. The tax payer will be able to get a notification on the preparation of such confirmation or filing of additional information also via Mano VMI. The confirmation may be collected at the Excise Duty Administration Department of the STI under FM directly or it may sent by mail.
It should be noted that Orders Concerning the rules for submission of an intention to get refund of excise duties (No. VA-40) and Concerning marking of the documents of transportation of excise duty taxable goods and establishment of additional requirements for them (No. VA-67) including all amendments and supplements became null and void.
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Art. 33, 39 and 93 of the Law on Tax Administration regarding recovery of tax underpayments were amended.
As of 1 October 2014, the amendments of Art. 33, 39 and 93 of the Law on Tax Administration regarding recovery of tax underpayments came into effect. The essence of the amendments is that recovery of tax underpayments of tax payers is taken over by the administrator of the state asset managed in a centralised way
The rules regarding disclosure of information on tax payers which is not treated as confidential were amended.
By Order of the Head of the STI under FM of 24 March The approval of the rules of disclosure to third persons of the information on tax payers which is not treated as confidential were amended. It was supplemented with a new subparagraph (18.16) which sets forth that the STI under FM will announce in its website information on legal entities for which the STI under FM intends to initiate or has already started bankruptcy proceedings and is looking for a bankruptcy administrator.
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Five double taxation avoidance and tax evasion prevention treaties were ratified.
On March 27, Seimas of the Republic of Lithuania ratified double taxation avoidance and tax evasion prevention treaties signed in 2013 with the Republic of Cyprus, United Arab Emirates, Turkmenistan, Kingdom of Morocco and the State of Kuwait.
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Lithuania along with 33 states announced a statement on early adoption of the Common Reporting Standard.
In our Newsletter of March, the standard in automatic exchange of information of financial accounts developed by the OECD was mentioned. Lithuania along with 33 states and their territories announced their intention to implement this standard according to an ambitious but realistic plan (available here):
- New accounts would be those opened from 1 January 2016. Accounts opened before this date will be treated as pre-existing.
- The due diligence procedures for identifying high-value pre-existing accounts will be required to be completed by 31 December 2016, while the due diligence for low-value pre-existing accounts - by 31 December 2017.
- The first exchange of information in relation to new accounts and pre-existing high value accounts will take place by the end of September 2017.
- Information about pre-existing low value accounts will either first be exchanged by September 2017 or September 2018 depending on the possibilities of financial institutions.
The European Parliament (EP) supported the amendments to the Parent-Subsidiary Directive.
In our Newsletter of December we have mentioned a proposal of the European Commission regarding the amendments to the Parent-Subsidiary Directive. On 2 April the EP supported this proposal and Commissioner Algirdas Šemeta expressed approval of such EP decision.
Please be reminded that the essence of this directive is to combat tax avoidance when entities exploit differences in the way intra-group payments are taxed in different states and conclude transactions with associated entities aiming at tax avoidance as the primary or sole goal. The amendments to the Directive will allow tax administrators to adjust such transactions according to the real economic substance.
The proposal of the amendment to the Directive is available here. The report of Commissioner Algirdas Šemeta is available here.
The OECD announced public discussion draft on digital economy.
The Organisation of Economic Cooperation and Development (the OECD) announced a new discussion draft on the challenges posed by digital economy. The draft overviews development of digital economy and its relationship with tax base erosion and profit shifting (BEPS). In the draft the challenges posed by the digital economy relate to other items of the BEPS action plan which would allow for a reduction in the BEPS effects.
One of major suggestions of the draft is the change to the definition of a permanent establishment, by which significant digital activity would create a permanent establishment in the economies of other states, or limitation of the exemption when ancillary or preparatory functions do not create a permanent establishment. Another alternative is to change the tresholds based on which it is evaluated whether a permanent establishment is created or not.
Furthermore, a suggestion has been made to impose a withholding tax at source when customers tpurchase digital goods or services. However, implementation of such a tax would be complicated.
The draft also overviews the aspects of the value added tax. It is stated that based on the experience of the European Union the most viable way to collect VAT is to require the entity to be registered for VAT purposes in the same country where its clients are located.
The draft is in the initial stages of consultation and the OECD invites all interested persons to provide their comments until April 14.
The full text of the project is available here.
The European Union adopted amendments to the Savings Taxation Directive.
After long negotiations the Council of Ministers of the European Union (EU) adopted amendments to the Savings Taxation Directive. The aim of the Directive is to tackle cross-border tax evasion by creating an information exchange system to allow the sharing of bank account data of individuals in the Member States. The major aspects of the Directive are as follows:
- Currently, 26 Member States apply the automatic exchange of information;
- Austria and Luxembourg are allowed to apply a withholding tax (at the rate of 35%) for a transitional period of time instead of engaging in the automatic exchange of information;
- Luxembourg has announced that it will participate in the automatic exchange of information from 2015;
- The EU has effective savings taxation agreements with 5 neighbouring third countries: Switzerland, Andorra, Monaco, Lichtenstein and San Marino;
- In February 2014, G20 Ministers of Finance endorsed the essential elements of the new global standard for automatic exchange of information between tax administrations. The EU will align the Savings Directive with the Global Standard.
More information on the Directive is available here, and here.
The European Commission has set out recommendations for amendments to insolvency procedures.
On 12 March the European Commission set out recommendations for the regulation of insolvency procedures. The Member States are requested:
- To facilitate the restructuring of businesses in financial difficulties at an early stage, before starting formal insolvency proceedings, and without lengthy or costly procedures to help limit recourse to liquidation;
- To allow debtors to restructure their business without needing to formally open court proceedings;
- To give businesses in financial difficulties the possibility to request a temporary stay of up to four months (renewable up to a maximum of 12 months) to adopt a restructuring plan before creditors can launch enforcement proceedings against them;
- Facilitate the process for adopting a restructuring plan, keeping in mind the interests of both debtors and creditors, with a view to increasing the chances of rescuing viable businesses;
- Reduce the negative effects of a bankruptcy, in particular by discharging their debts within a maximum of three years.
More information on these recommendations is available here .
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Lithuania strives for membership of the OECD already in 2015.
As announced on 1 April in the sitting of the Government, Prime Minister Butkevičius stated that the membership in the OECD is a priority area of the Government‘s activities. An agreement has been signed concerning further cooperation of Lithuania and the OECD. According to the plans of the OECD Lithuania has been invited to initiate negotiations regarding the membership in 2015, however, before that compliance with the legal and economic requirements shall be fulfilled.
The accounting rules for persons involved in individual activities were amended.
On 1 May 2014, the accounting rules for persons engaged in individual activities (except for persons who have acquired business certificates) came into effect. The amendments are mainly related to use of cash registers ad completion of data in the documents issued for buyers.
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40 Business Accounting Standard (BAS) Adoption of Euro was approved.
On 28 March 2014, 40 BAS was approved. It sets forth the requirements for accounting of the recalculation of the values expressed in Litas to the values expressed in Euro, accounting of cash in hand in the period of the circulation of both Euro and Litas and presentation of related information in financial statements.
It should be noted that expenses related to the preparation and adoption of euro, if they comply with the definition of costs as well as their value may be reliably estimated, shall be recognised as operating costs of the reporting period when they were incurred unless these costs are related to generation of economic benefit in future reporting periods.
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The newsletter has been prepared in accordance with legislation effective as at 10 April 2014 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.