Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 2/6/2013

February, 2013 

Please enjoy the February edition of the Tax, Legal and Accounting Newsletter.

Kind regards,
KPMG in Lithuania

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Tax administration

Double Taxation Avoidance Treaties with India and Mexico came into effect.

As of 1 January 2013, double taxation avoidance treaties with India (a Treaty of Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Income and Capital of the Government of the Republic of Lithuania and the Government of the Republic of India) and Mexico (a Treaty of Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Income and Capital of the Government of the Republic of Lithuania and the Government of the United States of Mexico) came into effect.

The court explained the concept of ungrounded exaction of taxes.

In its decision of 29 January 2013, the Supreme Administrative Court of Lithuania noted that the exaction of taxes is deemed to be ungrounded when, besides other conditions, the exaction is obvious, i.e. approved by decisions of relevant competent institutions and is actually implemented. The actually implemented exaction shall be understood as write off of funds from the tax payer‘s account and transfer of these funds to the state budget.

The mere fact that that funds of a tax payer have been frozen (have been subject to asset seizure) in the account and have not been available for disposal, does not mean that the tax amounts have been exacted.

Consequently, an obligation for the tax administrator arises to calculate interest only on the unduly actually written off funds of a tax payer in the account of a credit institution if these funds are not repaid in due time after the filing of a tax payer‘s request regarding repayment of the unduly exacted amounts.


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Personal income tax (PIT)

Approval of the residence place of residents of Lithuania.

By letter (No. (32.42-31)-1-RM-655), dated 28 January 2013, the state tax inspectorate informed that in the cases when a resident of Lithuania who generates income in the foreign state with which Lithuania has concluded a double taxation avoidance treaty and seeking that the tax reliefs set forth in the treaty should be applied to his income generated in the foreign state, shall file with the Lithuanian tax administrator a form prepared by the tax administrator of the foreign state approving the residence status. If a resident of Lithuania does not file the mentioned form but requests to approve his residence place, the Lithuanian tax administrator has to complete and issue a certificate approving the residence place of the Lithuanian resident - form FR0254 (DAS-4).

A new wording of the commentary of Par. 1, Art. 16 of the Law on PIT was adopted.

The commentary of Par. 1, Art. 16 of the Law on PIT (Letter No. (32-42-31-1)-RM-418), dated 17 January 2013, regulating the procedure of calculation of taxable income, was reworded. The new wording provides standard schemes for calculation of taxable income.

The commentary of Par. 1, Art. 17 of the Law on PIT was amended.

By Letter No. (32-42-31-1)-RM-418) of the state tax inspectorate, dated 6 February 2013, the commentaries of Subpar. 30 and 29, Par. 1, Art. 17 of the Law on PIT were amended. The amendments set forth that in the case when only the nominal value of shares and their number are changed, without changing (increasing or decreasing) the amount of the authorised capital of the entity, and in exchange to the shares held by the participants shares of the new nominal value of the entity are granted, the shareholding held by the participant remaining unchanged, then the issue date of the shares with the new nominal value is not deemed to be a new acquisition date the shares. In case of sale, the moment of the acquisition of shares would be deemed to be the primary acquisition of the shares but not the change in the nominal value and the number of the shares.

The commentary of Par. 34, Art. 2 of the Law on PIT was amended.

Par. 34, Art. 2 of the Law on PIT specifies that labour related income includes the income amount received by an owner of an individual enterprise from the individual enterprise and by a general partner of a partnership from the partnership, by a member of a small partnership from the small partnership, on which state social insurance contributions are calculated and paid in accordance with the Law on State Social Insurance of the Republic of Lithuania.

The amendment of the commentary specifies that for income tax purposes only the actually withdrawn amount shall be treated as labour related income and levied with income tax accordingly, even though the amount declared for the purpose of social insurance contributions is higher. As the Law on the Social Insurance provides for the maximum amount („ceiling“) on which social insurance contributions may be calculated, the maximum income amount received by an owner of an individual enterprise, a member of a partnership, which may be treated as labour-related, shall not exceed the mentioned „ceiling“.


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Corporate income tax (CIT)

The commentary of the Law on Corporate Income Tax regarding taxation of income of a controlled foreign entity was supplemented.

The commentary of Par. 3, Art. 39 of the Law on Corporate Income Tax, which sets forth taxation of income of a controlled foreign entity, was supplemented with new cases including schemes.

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Value added tax (VAT)

As of 1 March 2013, import VAT will be set off (paid) to the state tax inspectorate’s account.

As of 1 March 2013, at the moment of the placement of goods into free circulation, import VAT on the goods will be set off (paid) to the state tax inspectorate account, if the goods have been declared at the customs by filing the single administrative documents or by technical means of automatic data processing.

Import VAT will also be set off to the state tax inspectorate’s account when after the placement of goods into free circulation the data of the customs declaration, where the calculated import VAT was set off, are adjusted.

Import VAT will also be set off (paid) to the state tax inspectorate’s account, when the taxpayer is directly represented by a customs mediator.

These new amendments will enable a taxpayer to save working capital. Furthermore, the customs will not require to pay a pledge or provide a guarantee ensuring the payment of import VAT to the customs.

The amendment of the commentary of Article 57 of the Law on VAT regarding VAT deduction was prepared.

The commentary was supplemented with a new item which sets forth the cases when taxable persons not registered as VAT payers in the Republic of Lithuania as well as foreign taxable persons, that have supplied/provided goods/services subject to VAT, are entitled to VAT deduction.

The commentary of Art. 79 of the Law on VAT related to issuance of VAT invoices was amended and supplemented with new paragraphs.

Having revised the provisions of Art. 79 of the Law on VAT according to the Council Directive 2010/45/EU, related to issuance of VAT invoices, the commentary of this article was amended substantially and supplemented with new paragraphs. Par. 1 of Art. 79 was supplemented with provisions regarding an obligation to issue VAT invoices, compensation (subsidies) of the costs incurred, receipt of money and other cases as well as the provisions when insurance and financial services specified in Art. 27 and 28 of the Law on VAT are provided. Furthermore, the commentary of Par. 2 related to the term of issuance of VAT invoices was supplemented with new notes and cases.

Other significant amendments and supplements to the commentary of Art. 79 were made: the commentary of new Par. 6 of Art. 79 regarding combined VAT invoices was prepared; the commentary regarding the form of VAT invoices (Par. 11, Art. 79) was updated as from 1 January 2013 VAT invoices may be both written and electronic; besides commentaries of new paragraphs 13-14 of Art. 79 related to the issue of simplified VAT invoices were prepared. It should be noted that Art. 83 of the Law on VAT regulating the issue of credit and debit documents was supplement with Par. 4 and a commentary of it was prepared. This paragraph is related to the issue of credit and debit documents using simplified references of VAT invoices.

The commentary of Art. 31 of the Law on VAT related to letting of property immovable by its nature was supplemented.

The commentary of Par. 2, Art. 31 was amended and supplemented with Par. 2 which explains that in the case, when along with the immovable property other assets located in it (equipment, engineering network etc.) are also let, i.e. a „mixed“ transaction of letting services is concluded, then it is considered for VAT purposes that the transaction consists of several elements and, based on the EJC practise, the cases and conditions, which would allow to identify whether one, two or more transactions are concluded (VAT application depends on this fact), are presented.

The commentary of Art. 88-1 of the Law on VAT regarding a report on supply of goods and (or) services to other member states was prepared.

The commentary specifies that the rules for completion, filing and adjustment of a report on supply of goods and (or) services to other member states (form FR0564 Version 03) set forth the data to be filed with the local tax administrator which should be followed when filing this report. Par. 2 of Art. 88-1 and its commentary emphasizes that the report on supply of goods and (or) services to other member states shall be filed in the same manner as a VAT return by the taxpayers which are deregistered from the VAT payers register or are in liquidation.

Par. 3, Art. 92 of the Law on VAT and the commentary of this paragraph regarding filing of form FR0608 were amended.

Art. 92 of the Law on VAT specifies obligations of taxable persons who are not identified for VAT purposes related to payment of VAT. Par. 3 of this article and its commentary define the taxable persons who are not VAT payers but should file form FR0608 and pay the calculated payable VAT to the state budget, as well as other related provisions.


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Land tax

Explanations of the amendments of the Law on Land Tax were adopted.

On 23 January 2013, the state tax authorities (Letter no. (32.42-31-1)-RM-552) informed that the new wording of the Law on Land Tax, which came into effect as of 1 January 2013 sets forth that the taxable value of a land plot is the average market value of the land plot.

The document specifies that forest land is not subject to land tax, therefore the average market price shall be calculated for the land plot excluding the value of the forest land.

The mass evaluation of land aimed at the calculation of the taxable value of land should be performed at least every five years. Consequently, the established average market value of land shall be effective for 5 years (2013 to 2017).

It should be noted that the complaints regarding the established average market value of land and the applications to treat the value estimated by individual estimation as the taxable value of the land in the taxable period of 2013 may be filed within 6 months of the beginning of the taxable period, i.e. until 1 July 2013.

Please be aware that as of 2013 the land tax rates shall be established by each municipality individually.

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Miscellaneous

The amendments of the Law on the Legal Status of Foreigners came into effect.

On 1 January 2013, the amendments to the Law on the Legal Status of Foreigners came into effect. The amendments provide for more favourable conditions for arrival and work of highly skilled foreigners (non-EU citizens) in Lithuania: a shorter period (up to 2 months) for issuance of temporary residence permits of highly skilled persons was established, a concept of high professional qualification was defined, besides, such foreigners are exempt from an obligation to obtain a permit for work in Lithuania.

The foreigners, who intend to perform highly skilled professional work and seek to obtain a residence permit in Lithuania, shall comply with the following conditions: the average salary should not be lower than 2 average gross monthly salaries in the country’s economy; the foreigner should file a document evidencing that he complies with the established conditions to perform the regulated professional activity as set forth in the labour contract; and if the professional activity is not regulated – a document evidencing high professional qualification. Furthermore, a decision of the Lithuanian Labour Exchange regarding compliance of the foreigner with the needs of labour market will be needed.

As of 2013, the amendments related to the status of long-term EU residents, conditions for issuance and repeal of visas came into effect; a list of the grounds for exemption from the obligation to obtain a work permit specifying that such permit is not obligatory to a foreigner, who has acquired the status of a long-term resident in another member state of the EU and has a residence permit issued in that state, as well as in other cases, was supplemented.


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The newsletter has been prepared in accordance with legislation effective as at 6 February 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.


 

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