Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 12/9/2012

December, 2012 

Tax, Legal and Accounting Newsletter

 

Personal income tax (PIT)

The Law on PIT was supplemented with the provisions related to the services of agriculture and forestry according to a service receipt.

This amendment to the Law is related to the provisions of the Law on the Services Related to Agriculture and Forestry under a Service Receipt to be applied as of 1 April 2013.

Art. 17 of the Law on PIT was supplemented with Par. 55 which sets forth that the income received as remuneration for services provided under a service receipt, when the total amount of such income during the taxable period does not exceed LTL 6,000, is not subject to personal income tax.

In accordance with the tax payment procedure, the income received as remuneration for the services provided under a service receipt, shall be attributed to B class income which shall be declared, the tax on it calculated and paid by the individual himself. The tax shall be paid only on the amount exceeding the non-taxable income, i.e. exceeding the amount of LTL 6,000.

The amendment to the Law shall be applicable for the calculation and declaration of income of 2013 and subsequent tax periods.

The list of type codes for the certificate of B class income paid to individuals (FR0471) was amended.

Significant amendments:

• The meaning of the income type specified by code 02, which shall also be used for specification of income of members of small partnerships received from these partnerships related to labour relations or equivalent relations in their essence, was supplemented;

• Code 26 of income type shall be used for declaration of payments made from the profit of small partnerships (dividends) to their members, residents of Lithuania;

• Code 27 of income type (income of a member of an unlimited civil liability entity from taxable profit) and code 28 of income type (income of a member of an unlimited civil liability entity from a non-taxable profit) shall be used for the payments made to residents of Lithuania during the year 2012 and to non-residents until 31 August 2012.

The commentary of Art. 12 of the Law on PIT was amended.

The commentary to the Law on PIT specifies what income received from a legal entity shall be treated as income from the distributed profit.

Income from distributed profit also includes income of members of unlimited civil liability legal entities received from these entities, except for the part of income attributed to labour related income.

Furthermore, the commentary explains that the amounts paid from the entity‘s profit to other persons than the participants of the entity (e.g. bonuses to employees) shall not be treated as a profit distribution. The same concerns the payments when the entity‘s authorised capital formed from contributions of participants is reduced.

In case of reduction of the authorised capital, it is deemed that firstly the part of the authorised capital, which has been increased from the entity‘s funds (profit or reserves), is paid, and then the part made of the participants contributions.

The publication Benefit in Kind has been updated.

On 27 November, the State Tax Inspectorate informed that the publication Benefit in Kind has been updated. The publication explains in detail what income is treated /is not treated as benefit in kind and what taxation rules shall apply in this case.

The commentary of the Law on PIT regarding taxation of income of non-residents of Lithuania was updated.

The commentary of Subpar. 2, 5 and 8, Par. 4, Art. 5 of the Law on PIT was supplemented with an explanation when income of a non-resident of Lithuania received from a Lithuanian source shall be deemed as non-taxable income and what is the procedure of taxation, also the examples are provided.


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Value added tax (VAT)

The commentary of Par. 1, Art. 28 and Art. 7 of the Law on VAT was supplemented.

The commentary of the mentioned provisions of the Law on VAT was supplemented with an explanation regarding the cases which shall not be considered as a penalty for a breach of a contract and thus shall be treated as provision of services from the perspective of the Law on VAT.

The amount of money paid by the debtor to the creditor for prematurely duly performed obligation specified in the contract is not deemed to be a penalty.

For example when the client pays back a loan to the bank before the maturity and has to pay certain fee according to the terms of the agreement, such fee shall not be deemed to be a penalty. In such a case the amount paid to the bank according to its essence shall be treated as remuneration for services, i.e. a fee for premature termination of the mentioned agreement. Such remuneration shall not be subject to VAT.

The commentary of Art. 80 of the Law on VAT was amended and supplemented.

The commentary of Art. 80 of the Law on VAT which sets forth the references for VAT invoices was amended and supplemented. The amendment and supplement to the commentary are related to Council Directive 2010/45/EU regarding implementation of simplified VAT invoicing.

The provisions of the commentary will come into effect as of 1 January 2013.


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Corporate Income Tax (CIT)

The commentary to Subpar. 8, Art. 12 of the Law on CIT was supplemented.

The commentary of the mentioned provisions of the Law on CIT was supplemented with an explanation regarding the cases which shall not be considered as a penalty for a breach of contract and consequently may not be treated as non-taxable income of the entity.

The amount of money paid by the debtor to the creditor for prematurely duly performed obligation specified in the contract is not deemed to be a penalty.

For example when the client pays back a loan to the bank before the maturity and has to pay certain fee according to the terms of the agreement, such fee is not deemed to be a penalty. In such a case the amount paid to the bank according to its essence is deemed to be a fee for termination of the mentioned agreement.

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Tax administration

The commentary of Art. 88 of the Law on Tax Administration was amended and supplemented.

The commentary explains that seeking to prove that, having paid the tax underpayment immediately, the financial position of the taxpayer would become critical or the taxpayer would face huge difficulties in fulfilling his financial liabilities, the taxpayer shall have all the evidencing documents.

Such documents may include agreements, letters of intent, business plans and other documents.

The commentary also explains what is the basis and procedure of exemption of the taxpayer from all or part of the calculated interest, increased interest and delay interest of the tax loan.


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Labour law

As of 1 December 2012, the amendments of the provisions of the Labour Code came into effect.

The following amendments to the Labour Code (LC) came into effect:

• Par. 4, Art. 47 of the LC, which sets forth that the employer shall present all information relating to labour relations to the representatives of the employees and consult them not only before taking decisions regarding the reorganisation of the company but also regarding transfer of business or its part when this could have a significant impact on the work organisation or legal status of the employees, was supplemented.

• The provision which sets forth, that a person may be appointed to a position included on the list of competitive positions under a fixed-term employment contract only in the case set forth in the provisions of the competitions, was eliminated from Par. 3, Art. 101 of the LC.

• One type of employment contracts – a contract on the supply of services was repealed (Subpar. 5, Par. 1, Art. 108 of the LC became void).

• The provision, that a legitimate reason to terminate labour relations may not be the intention to have children, was introduced (Subpar. 4, Par. 3, Art. 129 of the LC).

• Art. 138 of the LC was supplemented with Subpar. 2 which sets forth that in case of transfer of business or its part (irrespective of the legitimate groundings), the employment contract may not be terminated or its terms may not be changed (i.e. the employment relations shall be continued under the same conditions in the company, institution or organisation of the successor as previously. The employee shall be informed on the transfer of business in writing with a 10 working days notice.

• Compensation for unused vacation shall be paid to the employee in full but no more than for three working years if the employee could have actually used the vacation and the collective agreement does not provide otherwise. Furthermore, it is set forth that employees who have unused vacation for more than three working years as at 1 December 2012 are entitled to use such vacation until 1 December 2015. If the contract is terminated before 1 December 2015, a monetary compensation shall be paid for all unused annual vacation.


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The newsletter has been prepared in accordance with legislation effective as at
7 December 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.


 

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