Personal income tax (PIT)
Form FR0572 of the monthly return of income tax on A class income was reworded.
By Order No. VA-78 of the Head of the State Tax Inspectorate under the Ministry of Finance (hereinafter referred to as the STI under MF) of 8 November 2013, Form FR0572 (version 4) of the monthly return of income tax on A class income as well as its annexes FR0572A and FR0572U and the regulations (hereinafter referred to as the Regulations) of filling in of the return and its annexes were amended. Version 4 of return form FR0572 shall be submitted while declaring A class income of 2014 and further tax periods and adjusting the data of the years of 2009 to 2013. Version 4 of the return shall be filed with the tax administrator not earlier than as of 2 January 2014.
- Annex of return FR0572U was supplemented with field U21 to be used for the date of birth of a non-resident of Lithuania. This field shall be filled in notwithstanding whether the non-resident of Lithuania receiving payments is a resident of an EU member state or not.
- Annexes of FR0572A and FR0572U of the return were supplemented with fields A4.1 and U5.1 to be used for specifying what kind of the identification code (personal code, VAT payer‘s code, the series and number of the identity document) of a resident or non-resident of Lithuania is indicated in field A4 of Annex FR0572A and field U5 of Annex FR0572U.
- Annex 1 of the Regulations The List of A Class Payment Codes was updated taking into account the adjustments of the Law on Personal Income Tax related to taxation of interest in 2014.
Form GPM308 of the annual income return was amended.
By Order No. VA-77 of the Head of the STI under FM of 8 November 2013, Form GPM308 of the annual income return and the regulations of its filling in were amended. Form GPM308 of the annual income return was updated to version 2 to be used while declaring income of residents received in the tax period of 2013 and adjusting version 01 of Form GPM308 submitted for previous tax periods.
- Form GPM 308 was supplemented with new Annex GPM 308M Income from Individual Activities by Months. This Annex is to be used for declaration of income from individual activities by months. This Annex shall be completed only at a choice of the resident engaged in individual activities. If the Annex is not filled in, it will be presumed that the income received each month is of the same amount. This Annex was worked out for the purpose of the calculation of state social insurance contributions in order to facilitate the declaration procedure, i.e. a respective statement shall no longer be filed with the social insurance authorities (SODRA).
- Annexes GPM308P and GPM308N of the annual income tax return were supplemented with codes of income types to specify various types of interest and income received under services receipts.
- The list of codes of foreign states was supplemented with the codes of Macedonia and Serbia.
Interest for non-equity securities acquired before 31 December 2013 shall not be subject to taxation.
On 12 December 2013, the Seimas adopted an amendment of the Law on Personal Income Tax which sets forth that interest paid on non-equity securities, issued before 31 December 2013 and started to be redeemed not earlier than after 366 days of their issue, shall be treated as non-taxable income.
A commentary of the Law on Personal Income Tax (PIT) regarding income attribution to classes was supplemented.
A commentary of Art. 23 of the Law on PIT was supplemented with an explanation regarding attribution of income of individuals to A and B classes. The commentary also includes new paragraphs and practical cases.
A commentary of the Law on PIT regarding tax-exempt amounts (TEA) and additional tax-exempt amounts (ATEA) was reworded.
A commentary of Art. 20 of the Law on PIT, which specifies to whom, when and what amount of TEA and ATEA shall be applied, was reworded. Practical cases which illustrate calculation of TEA and ATEA are provided.
Be attentive when being engaged in activities under a business certificate.
When providing services under a business certificate, one should be attentive whether the business certificate acquired actually covers the services provided by the individual.
Along with its name, each business certificate has brackets where a class of the Statistical Classification of Economic Activities (the NACE) is indicated. It should be noted that if a phrase „is included into“ („įeina į“) is specified in the brackets, the holder of the business certificate may be engaged only in the activity (-ies) specified in the name of the business certificate. If such a phrase is not indicated, the holder of the business certificate may be engaged in other types of activities along with the activity specified in the name.
For example, a business certificate for Housekeeping Activities (catering at parties, apartment cleaning, furniture and carpet cleaning, childcare, vegetable gardening, tree gardening, wood chopping, garbage collection) (is included into the NACE classes 01.61; 02.20; 38.11; 56.21; 81.21; 81.30; 88.91; 96.01) grants the right to be engaged only in the activities specified in the name of the business certificate (in the brackets), however, it does not allow to be engaged in other activities specified in the NACE classes, notwithstanding that these classes are mentioned in the business certificate (the business certificate provides for a possibility to be engaged in wood chopping but does not allow to be engaged in other wood handling activities specified in class 02.20 of the NACE.
If an individual performs activities, which are not included into the activities specified in the business certificate, income received from such activities shall be subject to taxation according to the rules regulating taxation of income from individual activities.
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Corporate income tax (CIT)
As of 2014, carry-forward of tax losses shall be limited.
On 13 December 2013, the Seimas adopted amendments to Par. 4, Art. 30 of the Law on CIT with regards to carry-forward of tax losses. According to the reworded article, entities may carry forward tax losses, but not exceeding 70 percent of the taxable profit of a tax period, when calculating payable corporate income tax of 2014 and subsequent tax periods.
A commentary of the Law on CIT with regards to an investment project was amended.
Commentaries of Par. 1, 2, 4 and 5 of Art. 461 of the Law on CIT, where provisions regarding reduction of taxable profit when implementing an investment project, were amended. The amendments are related to the expansion of the list of non-current assets, related to an investment project, by additional groups and the actual practice.
A commentary of the Law on CIT with regards to business trip costs was amended and supplemented.
In the amended and supplemented commentary of Par. 1, 2 and 3 of Art. 21 of the Law on CIT, actual cases of recognition of business trip costs as well as practical examples were provided.
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Value added tax (VAT)
Publication A Guide of a Natural Person on Value Added Tax was updated.
The STI under MF has updated publication A Guide of a Natural Person on Value Added Tax. The amendments to this publication are related to new provisions of the Law on VAT with regards to the right of a non-VAT payer to VAT deduction.
Publication A Guide of a Natural Person on Value Added Tax (in the Lithuanian language) could be found here.
Regarding registration of a controlled or controlling persons for VAT purposes.
The STI under MF has prepared an explanation when an obligation to be registered for VAT purposes occurs for natural persons and legal entities controlled by them, that are engaged in economic activities, or when they should be deregistered for VAT purposes.
Taking into account provisions of the Law on VAT natural persons should be registered for VAT purposes when they meet three main criteria:
- A natural person is engaged in economic activities himself, and
- Directly or indirectly controls two or more legal entities, and
- The total remuneration received or to be received by the person himself and the legal entities controlled by him for the goods supplies/or services provided in the territory of the country during the last 12 months exceeded LTL 155 thousand or last year they have acquired and intend to acquire during the current calendar year goods from other EU member states, the total value of which exceeds LTL 35 thousand.
It should be noted that when the above mentioned criteria are met, not only natural persons but also legal entities controlled by them should be registered for VAT purposes.
Furthermore, the explanation of the STI under MF specifies the mentioned three criteria in more detail and provides practical cases. The explanation could be found here.
As of 1 January 2014, the rules of non-levying import VAT on goods imported or supplied to another EU member state became more stringent.
The rules with regards to non-taxation of goods imported and supplied to another member state by import VAT were amended.
Having made the control of application of a VAT relief specified in Art. 35 more stringent, the customs will provide information to the STI on the delivery of goods to another buyer and/or to another member state than indicated in customs clearance documents. If the STI identifies that import VAT application was not grounded, the control of import VAT will be transferred to the STI, except for the cases when it is identified that the importer has not been registered for VAT purposes in Lithuania.
Furthermore, it is set forth that a customs officer shall check an importer‘s VAT payer‘s registration by automatic data processing technical means (before the effective date of this law it was sufficient to provide VAT payer‘s registration certificate) and the data of VAT payer‘s registration of a purchaser of goods shall be checked in the data base of VAT payers of EU member states or, if possible, using the VAT related information exchange system (VIES).
As of 1 May 2014, an importer, to which a VAT relief specified in Art. 35 of the Law on VAT was applied, shall have to inform the customs on the new circumstances and provide the required documents not later than the next working day when:
- the goods are intended to be delivered to another person and/or another member state than specified in the customs clearance documents;
- goods (part thereof) have not been supplied to another member state within the term established.
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State social insurance (SSI)
The Government agreed to postpone mandatory SSI payments of members of small partnerships for a year.
According to a proposal of the Ministry of Social Security and Labour, the Government agreed to extend the procedure of payment of SSI contributions for one year which is currently effective and applied to owners of individual enterprises, members of general partnerships and members of small partnerships.
Currently, legal regulation provides for an alternative for the above mentioned persons to pay or not to pay SSI contributions on the income withdrawn for personal needs. As of 1 January 2015, the mentioned persons shall pay SSI contributions at least on the minimal monthly salary.
The social insurance authorities (SODRA) will notify insurers on employees who have additional accrual for pension.
As of the beginning of the year, insurers will have to calculate additional 1 percent contribution for the employees who accumulate pensions according to the formula 2+1+1. This contribution is calculated on the income on which SSI contributions are calculated and shall be withheld from the funds of the insured persons and transferred to SODRA.
Information on the employees, who accumulate for pension according to the formula 2+1+1, will be provided by SODRA to the insurers by the internet via the electronic system of insurers services (EDAS).
When employing a new employee and having filed 1-SD notification, insurers will get an EDAS message specifying that the employee has chosen to pay additional 1 percent contribution for pension accumulation.
As to the SODRA data, pension accumulation according to the formula 2+1+1 has been chosen by 408,000 participants.
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A term for filing of the Safety and Health Questionnaire was extended.
The State Labour Inspectorate informs that the term for filing of information with the State Labour Inspectorate by the entities, who have employees working under an employment contract, on the compliance of the employees with the safety and health requirements prescribed by legal acts, was extended until 1 July 2014.
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The EU corporate income tax regulations with regards to taxation of intra-group transferred amounts are toughened.
On 25 November, the European Commission presented measures against loopholes of EU legal acts regarding corporate income tax due to which differences of taxation of intra-group transferred amounts effective in various EU countries allowed avoidance of taxation.
The toughened Parent-Subsidiary Directive (Council Directive 2011/96/EU) would allow member states to disregard transactions, concluded between certain companies for aggressive planning purposes, which are not grounded from the economic point of view. Consequently, a subsidiary would not be able to avoid taxation of dividends paid to an intermediate subsidiary in another member state if it is identified that the subsidiary was set up against actual economic sense, just only for the purpose that the dividends paid in the member state to the parent company established in a non-EU member state are not subject to taxation.
The proposal also aims at avoidance of double non-taxation cases which occur due to mismatch of tax rules when evaluating hybrid tax arrangements. It sets forth that, when loan recipients (subsidiaries) treat the payable amounts as allowable deductions (interest on simple loans), the parent companies in other member states treating such amounts as dividends would not be able to use a tax relief.
It is expected that member states will implement the updated provisions of the Directive regarding actions against misapplication before 31 December 2014. Updating of a directive is one of the strict measures, specified in the Commission action plan (IP/12/1325), to be implemented in a coordinated manner against tax avoidance and evasion both in the EU and worldwide.
Country-by-country tax reporting initiatives are gaining momentum.
As we have already mentioned in our October newsletter, the Organisation for Economic Cooperation and Development (the OECD) has initiated a discussion on Base Erosion and Profit Shifting (BEPS) plan’s Art. 13, concerning the country-by-country reporting of taxes paid by multinationals in all respective jurisdictions, where they operate in. This plan was not only explicitly supported by G20, the European Commission (EC) and other governmental bodies, but is gaining momentum, too.
The European Commission is planning to expand the transparency directives, which currently apply to the extractive, logging and financial sector companies, to apply to all large corporations and groups. On 10 December, the European Parliament’s Economic and Monetary Affairs Committee voted in favour of this initiative.
The Dodd-Frank Financial Reform and Consumer Protection Act has also imposed a requirement for all extractive industry (oil, gas and mineral) companies, which report to the Securities and Exchange Commission (SEC), to report country-by-country payments. The requirement has come into force on 30 September 2013. Furthermore, a bill has been proposed to the US Congress in December, which would extend this reporting requirement to all multinational companies.
Finally, in the OECD conference on transfer pricing and the BEPS plan, which took place on 12-13 November 2013, the discussions did not focus on whether tax reporting will be introduced but on what data should be reported and in what way. Consequently, there is no doubt that reporting of tax data and sharing between relevant institutions will be enforced.
More detailed description of these and other initiatives could be found in the KPMG UK publication here.
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The newsletter has been prepared in accordance with legislation effective as at 18 December 2013 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.