Details

  • Type: KPMG information, Regulatory update
  • Date: 2/10/2014

February, 2014 

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

Kind regards,
KPMG in Lithuania

Personal income tax (PIT)

The rules for the completion and submission of FR0573 form of the annual return of A class payments and its annexes were amended.

Form FR0573 of the annual return of A class payments and the withheld and paid income tax as well as its annexes FR0573A and FR0573U and the rules for their completion and submission were reworded.

Major amendments:

    • Annex FR0573U was supplemented with field U21 for the date of birth of a non-resident of Lithuania;
    • Annexes FR0573A and FR0573U were supplemented with fields A4.1 and U4.1 for the classification of the identification code of a resident or non-resident (personal code, VAT payer‘s code, identity document number);
    • new codes of interest payments were established and an obligation for the persons who withhold tax to declare any type of interest payments for the persons withholding tax, irrespective whether the interest payments are treated as taxable or non-taxable income;
    • Any payments (not only annual) paid to members of the Board or Supervisory Council – non-residents of Lithuania shall be marked by code 44;
    • An obligation was set forth for employers to declare the amounts of health, life insurance and pension contributions paid to the benefit of employees, not exceeding 25 percent of the employment related income calculated for the employee during a tax period;
    • participants of a cooperative company, deriving income from agricultural activities, shall declare the income paid from profit distribution of the company.

New version 4 of form FR0573 shall be used for declaring A class payments of 2014 and subsequent tax periods. This form shall be filed with the tax administrator by 17 February 2015.


New publication on taxation of income of individuals applicable as of 1 January 2014.

The STI under FM has issued a publication where the procedure of taxation, declaration and payment of income types applicable as of 1 January 2014 was provided in a structurised and concise manner in a form of table. The publication is available here.


Taxation of income received from the purchase-sale transactions of virtual currency.

The STI has issued a letter explaining how, in accordance with the Law on PIT, income from transactions of virtual currency (bitcoins) shall be taxed. Two cases are specified:

    • when individuals buy-sell the above mentioned currency seeking economic benefit: in accordance with Par. 14, Art. 2 of the Law on PIT, such income is subject to taxation in the same manner as income from individual activities applying a 5 percent income tax rate;
    • when, in accordance with Par. 28, Art. 2 of the Law on PIT, virtual currency is deemed to be assets and occasional income from the sale of currency is received, such income is deemed to be income from sale or other transfer of assets to ownership and profit from such transactions shall be subject to a 15 percent income tax rate. In such cases, when declaring income of respective tax year in accordance with Subpar. 20, Par. 1, Art. 17 of the Law on PIT, the income amount may be reduced by Litas 8,000.

 

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Corporate income tax

The rules for return (form PLN203) of sponsorship exceeding Litas 50,000 were amended.

By Letter No. (VA-95) of the STI under FM of 31 December 2013, the regulations of completion of form PLN203 The monthly report on sponsorship and (or) charity provided by one person and sponsorship received from one person which exceed Litas 50,000 were amended and supplemented.

Major amendments:

    • Form PLN203 submitted by a small partnership may be signed by a member of the small partnership performing bookkeeping;
    • Par. 14 of the rules was supplemented with additional examples, explaining in more detail when form PLN203 shall be submitted;
    • an obligation to adjust the submitted form PLN203 in the tax period, when mistakes occurred, was introduced.

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Value added tax (VAT)

The ECJ preliminary ruling in the case regarding the determination of the taxable value when engaged in intermediary activities.

The European Court of Justice (ECJ) adopted a preliminary ruling in Case Finanzamt Dusseldorf-Mitte v Ibero Tours GmbH (C-300/12) lodged by the German court Bundesfinanzhof.

The court sought an answer whether the principles of the judgment of the ECJ in Case C-317/94 Elida Gibbs, related to determination of the taxable value for VAT purposes shall also be applied if the travel agency Ibero Tours GmbH, acting as an intermediary on the travel agency’s own initiative and at its own expense, grants to the final customer a reduction of the price of the principle services provided by tour organiser Finanzamt Dusseldorf-Mitte.

In the mentioned Case Elida Gibbs, where the ruling was adopted in 1996, the ECJ decided that, if in accordance with the agreement a producer that is not related to the final customer, however, is the first in the distribution chain where the final customer is at the end of the chain, grants a price reduction to the latter by issuing a discount coupon which is accepted by retailers and the amount of which, equal to the value, is refunded by the producer, the taxable value for VAT purposes shall be reduced by the amount of the price reduction.

In the latter mentioned case, the tour organiser provides services to a final customer and the travel agency acts only as an intermediary, i.e. provides mediation services, which are quite different from the services provided by the tour organiser. Furthermore, the tour organiser does not grant any price reductions as the travel agency has to pay the price agreed irrespective of the possible discount which is granted by the travel agency itself to the final customer. Due to the financing of part of the travel price, expressed by a price reduction to the final customer, neither the taxable value of the principle transaction nor of the services provided by a travel agency is reduced.

Based on the circumstances disclosed above, the ECJ decided that the principles of determination of the taxable value in the Case Elida Gibbs may not be applicable if the travel agency acting as an intermediary, on its own initiative and at its own expense reduces to the final customer the price of the principal service provided by the tour organiser.

Certain VAT provisions related to provision of telecommunication, broadcasting and electronic services will change.

The European Commission has prepared and announced in its internet website new VAT rules to be applied for the provision of telecommunication, broadcasting and electronic services as of 1 January 2015.

The major amendment is that as of 1 January 2015 the place of taxation of the services in all cases shall be established according to the place, where the consumer of the services belongs, both in B2N and B2C cases.

Detailed comparative information is available here.

Seeking for more effective fight against tax fraud and evasion, closer cooperation with non-EU states is proposed.

The European Commission has initiated the process regarding negotiation between Russia and Norway with regards to agreements on administrative cooperation in the field of VAT. These agreements should be aimed at the establishment of the exchange system which would assist in combating the international VAT fraud and evasion and recovery of its VAT part. Currently, the European Commission is looking forward for an authorisation of member states to initiate official negotiations with these two countries and at the same time pursues preparatory negotiations with other international partners.

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Excise duties

Excise duty return forms and the rules for their completion were reworded.

Please be informed that the rules for the completion and submission of excise duty return forms FR0630 and FR0630A and their annexes were amended, and forms FR0630 and FR0630A and their annexes were reworded (version 08).

Taking into account the amendments of excise duties for beer as of 1 April 2014, the excise duty rate in respective fields of excise duty returns and their annexes shall be accurate to one ten thousandth of Litas.

These updated returns with annexes may be filed as of 1 February 2014 for the tax periods starting as of 1 January 2009.

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Land tax

Land tax rate for Šilalė district in 2014 is 0.01%.

As on 27 June 2013 the Council of the Šilalė district municipality approved the land tax rate to be applied in its territory in 2014, i.e. too late (the deadline was 1 June 2013), therefore, in accordance with the provisions of Par. 4, Art. 6 of the Law on Land Tax the land in the territory of Šilalė shall be subject to a land tax rate of 0.01% in 2014.

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State fees

The state fees for the issuance or replacement of residence permits to aliens in Lithuania were changed.

The amendments to Resolution No. 1458 of the Government of the Republic of Lithuania regarding specific fees and the approval of the rules for the payment and refunding of such fees, when aliens apply for issue or replacement of residence permits for temporary residence in the Republic of Lithuania or permanent residence in the European Union came into effect as of 1 February 2014. The rates can be found here.

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Tax administration

Transfer of a tax overpayment (a difference) to a bailiff– a tax dispute.

In its ruling of 16 January 2014 (administrative case No. A442-58/2014) the Supreme Administrative Court of the Republic of Lithuania (hereinafter referred to as the Court) declared that the decision of the tax administrator, according to which an overpayment (a difference) of a taxpayer is not refunded to him but transferred to a deposit account of a bailiff when executing the bailiff‘s order in the case, is deemed to be treated as the object of a tax dispute.

As to the Court, although the tax administrator was acting in accordance with the provisions of the Civil Code when transferring a tax overpayment to a bailiff, however, the investigation of the taxpayer‘s claim regarding the repeal of the tax administrator‘s decision in a respective institution engaged in the tax dispute investigation was recognised to be a tax dispute due to the following reasons:

    • the tax administrator decided to transfer the tax amount refundable to the taxpayer to a deposit account of a bailiff under the procedure of tax refunding (set off), therefore this actions was recognised as part of a tax refunding procedure;
    • the refundable tax amount transferred to a deposit account of a bailiff has not been actually refunded.
      Consequently, in such a case, a tax payer has the right to use a possibility of lodging a complaint against the tax administrator‘s actions and initiate a tax dispute procedure.

Regarding amendment to the rules for the issuance of certificates on the settlement with the state and/or municipality budgets, monetary funds.

Please be informed that under the order of the Head of the STI under FM of 22 January 2014 the following was amended and reworded:

    • The rules for the issuance of certificates on the settlement with the state and/or municipality budgets, monetary funds;
    • Standard application form FR0319;
    • Form FR0320 of a certificate on settlements with the state and/or municipal budgets, monetary funds;
    • Form FR0321 of a certificate on insufficient settlement with the state and/or municipal budgets, monetary funds and its annexes.

Major amendments are related to the terms of preparation of the certificates and a possibility to file and collect these certificates electronically via Mano VMI.

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International treaties

Agreement of the Government of the Republic of Lithuania and the Government of the States of Guernsey for the exchange of information relating to tax matters.

Under the terms of the Entrustment from the United Kingdom of Great Britain and Northern Ireland, the Government of the Republic of Lithuania and the Government of the States of Guernsey have concluded the Agreement for the exchange of information relating to tax matters. This information is relevant to the determination, assessment and collection of taxes, the recovery and enforcement of tax claims, the investigation of tax matters or the prosecution of criminal tax matters in relation to such persons.

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International taxation

The OECD has presented a common template for transfer pricing documentation which also includes a requirement to provide additional tax data of the group.

On 30 January 2014, the OECD presented a common template for transfer pricing documentation. The interested parties have a possibility to provide comments regarding the format of the documentation template, the requirements for the data to be provided and other aspects.

The transfer pricing documentation template distinguishes a two-tier structure consisting of a master file, containing information relevant to a group and a local file referring to local country affiliates. The master file shall contain information on the group structure, its activity model and other information relevant to the group. The local file shall contain information on the activity of local country affiliates, their transactions with associated parties as well as functional and economic analysis of the transactions.

Another important part of the documentation template is the presentation of tax and other financial data of group companies in accordance with Art. 13 of the BEPS Action Plan. According to the proposed template of the documentation, the master file should contain the following information on a country-to-country basis where at least one of the group companies operates:

    • earnings
    • taxes paid (in the country, where the entity operates, and other countries)
    • number of employees
    • salaries and other staff costs
    • non-current assets
    • intercompany payments and/or received amounts including royalties, interest and service fees.

It should be noted that the current version is not final. The OECD will have consultations with interested parties regarding the development of the draft transfer pricing documentation. The final result should be announced in May 2014.

The draft template of the transfer pricing documentation is available here.

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Accounting news

Amendments to BAS 12 Non-current Tangible Assets.

Tangible assets that are received under the right of trust but are not used by state and municipality enterprises to earn income and that, in accordance with laws, shall only be state-owned (Chapter III, paragraph 9) can now be recognised as non-current assets. Accounting procedure for such non-current assets is also set forth in Chapter X of the Standard.

The Standard shall apply when preparing financial statements for reporting periods starting on or after 1 January 2013.

Amendments to BAS 23 Impairment of Assets.

Following the aforementioned amendments of BAS 12, the impairment of tangible assets that are received under the right of trust but are not used by state and municipality enterprises to earn income shall be determined only when such assets are damaged due to natural disasters or other factors (Chapter III, paragraph 11).

For the purpose of accounting, the impairment is recorded by reducing the value of and the capital equivalent to such assets (Chapter VII, paragraph 35).

The Standard shall apply when preparing financial statements for reporting periods starting on or after 1 January 2013.

Amendments to BAS 13 Intangible Assets.

The Standard defines mineral resources and specifies the accounting of expenses incurred in relation to prospecting and valuation of such resources (Chapter IX).

According to the Standard, if expenses related to prospecting and valuation of mineral resources fall within the definition and recognition features of intangible assets, such expenses shall be recognised as intangible assets, registered in accounting at acquisition cost and stated in financial statements at cost. The Standard shall apply when preparing financial statements for reporting periods starting on or after 1 January 2013.

Amendments to BAS 17 Biological Assets.

Agricultural entities often enter into contracts to sell biological assets or agricultural produce in future. In practice, companies would sometimes use selling prices under such contracts to establish the fair value of biological assets. According to the revised interpretation of the Standard, such contract prices may not necessarily be relevant in determining the fair values of these assets or produce, since after some time such contract prices may not reflect the actual prices in the active market based on which potential buyers and sellers would enter into a contract. Thus, the fair value of biological assets or agricultural produce shall not be adjusted due to the existing contract.

Since aforementioned contracts can sometimes be loss-making, BAS 19 Provisions, Contingent Liabilities and Contingent Assets, and Events After the Balance Sheet Date shall be followed for the purpose of forming provisions for valid contracts (Chapter V, paragraph 14).

The Standard shall apply when preparing financial statements for reporting period starting on or after 1 January 2014.

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The newsletter has been prepared in accordance with legislation effective as at 10 February 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.


 

 

Contact us:

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

Tax card 2014

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