Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 1/8/2012

January, 2012 

Tax and Legal Newsletter


COMPANY LAW

Restricted rules to payment of annual bonuses to members of the board and the supervisory council

On 6 January 2012, amendments to the Law on Companies which set forth limitations to payment of annual bonuses (tantiemes) to members of the board and the supervisory council came into force. It was established that the amount of the net profit of the accounting financial year allocated for such annual bonuses may not exceed 1/3 of the profit share to be paid as dividends.

A possibility to pay interim dividends

As of 1 March 2012, amendments to the Company Law specifying that dividends may be paid for a period shorter than a financial year came into force. The right to initiate distribution of interim dividends shall be vested in shareholders that hold shares granting more than 1/3 of all votes (unless the by-laws of the company require other qualified majority of votes).

When distributing interim dividends all the below listed requirements shall be fulfilled:

    • The company shall be profitable during the period for which interim dividends are distributed;
    • The company shall have no liabilities overdue before the adoption of the decision and, having paid the dividends, shall be capable to fulfil its liabilities for the current financial year;
    • The interim dividends may not exceed the aggregate amount of profit of the current period and the non-distributed profit (loss) of previous financial year as at the end of the financial year after deduction of the profit amount to be allocated for mandatory reserves;
    • A set of interim financial statements of the company shall be prepared and audited, if the audit is mandatory.

The decision to distribute interim dividends shall be adopted not later than 3 months after the end of the period, for which the interim dividends are to be paid, but not prior to the approval of the set of financial statements and distribution of profit (loss) for the previous financial year, however, not later than by the end of the respective financial year.

A three-month interval between each distribution of interim dividends shall be observed.

The rule regarding the distribution of interim dividends shall not apply to banks, other credit and financial institutions, the operator of the regulated market, the Central Securities Depository of Lithuania.

 

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TAX ADMINISTRATION

As of 1 January 2012, the rules regarding binding rulings of the tax administrator on application of taxation legislation provisions to future transactions and advance pricing agreements came into force

According to the rules established, tax payers may apply to the tax administrator with a request to get an approval of the proposed application of provisions of legal acts (except for the tax amount) for a future transaction or advance pricing. Having decided to approve the position of the tax payer under the factual circumstances related to the transaction, the tax administrator shall be obliged to follow the principles of the application of legal acts set forth in the ruling within a period specified in the ruling but not longer that the current and 5 calendar years following the date of the approval of the ruling.

 

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CORPORATE INCOME TAX (CIT)

A corporate income tax (CIT) rate of 5 percent shall apply to small size enterprises with the income of the taxable period not exceeding Litas 1 million

As of 2012, a CIT rate of 5 percent shall apply to the entities the average listed number of employees of which does not exceed 10 persons and the income of the taxable period does not exceed Litas 1 million (previously, Litas 500 thousand) (limitations shall apply).

Corporate income tax shall not be recalculated in a case of reorganisation or transfer when the non-current assets, in relation to which the investment project was performed, has been used in the activities of the entity for less than 3 years

When the non-current assets, in relation to which the investment project was performed, have been used in the activities of the entity for less than 3 years, due to the fact that in cases of reorganisation or transfer such assets are being transferred to the acquiring entity, then CIT shall not be recalculated. However, the acquiring entity shall use the non-current assets, that have been taken over, until a 3 year period since the first use of the acquired asset in the transferring entity laps. The acquiring entity, which has taken over the non-current assets during the reorganisation or transfer of business (certain limitations appy), or due to the requirements of other legal acts, may continue to reduce the taxable income the same way it would have been reduced by the entity which transferred the assets and lost an opportunity of the taxable income reduction. These provisions shall apply when calculating CIT for 2011 and subsequent tax periods.

A possibility to establish data storing and processing centres and aircraft technical maintenance centres in a free economic zone has been provided

The entities which carry out their activities in a free economic zone (FEZ) and the capital investments of which reached at least EUR 1 million are entitled to a CIT relief:

    • A 0 percent CIT rate shall apply for 6 tax periods;
    • A CIT rate reduced by 50 percent shall apply to other 10 taxable periods,

in case where not less than 75% of the income earned in the taxable period is income from certain activities performed in the FEZ.

As of 2012, the list of activities was supplemented with the following:

    • manufacturing of aircraft, spacecraft and related production, maintenance and repair of aircraft and spacecraft, activities related to the maintenance and repair of the aircraft and spacecraft (electronic and optical equipment repair, technical testing and analysis),
    • computer programming activities, computer consulting activities, computer hardware management, other information technology and computer services activities, data processing, web servers (hosting) and related activities of call centre operations.

Furthermore, as of the beginning of 2012, free economic zones will start operating in Šiauliai, Marijampolė and Akmenė.

 

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VALUE ADDED TAX (VAT)

The VAT taxpayer registration threshold was increased to Litas 155 thousand and the adjustments specifying the income included under this threshold were adopted

As of 1 January 2012, the VAT taxpayer registration threshold was increased to Litas 155 thousand (previously, Litas 100 thousand). Only goods supplied and services provided in the territory of Lithuania shall be taken into account for the calculation of the threshold (previously, supplies of goods and provision of services outside the territory of Lithuania had also been taken into account). The VAT payable to the state budget should be calculated not on the income exceeding the threshold but on the total income of the transaction, the value of which exceeded the threshold.

As of 2012, a possibility to adjust output VAT due to bad debts occurs

A VAT payer may treat the remuneration receivable for goods supplied and (or) services provided as a bad debt (including output VAT) if it was not received from the purchaser of goods (services) for a period longer than 12 recent calendar months after the moment of taxation of the supply of goods (provision of services) and if the output VAT related to the bad debt was calculated and reported in the VAT returns. This provision applies to output VAT calculated and declared as of 1 January 2012.

The bad debt should be evidenced in the manner provided by legal acts. A VAT payer should issue a free form document for the purpose of recognising the debt as a bad debt and assigning of the output VAT amount to the bad debt. The entities that failed to pay for the goods or services (including VAT) shall adjust the output VAT deduction related to the bad debt, i.e. to increase the payable VAT by a respective amount.

Until 31 December 2012, an application of a reduced VAT rate of 9 percent and 5 percent was extended, a tax relief for hotel accommodation was repealed

The following was extended until 31 December 2012:

    • A reduced VAT rate of 9 percent shall apply to thermal energy supplied to heat residential premises (including the thermal energy supplied through the hot water supply system), hot water supplied to residential premises or cold water used for preparation of hot water and thermal energy consumed for heating this water.
    • A reduced VAT rate of 5 percent shall apply to medicine and medical aid equipment when the acquisition expenses of the goods are fully or partially reimbursed in the manner prescribed by the Law on Health Insurance.

As of 1 January 2012, the standard VAT rate of 21 percent shall apply to hotel an special accommodation services.

The Law was supplemented with a provision that VAT deduction is not adjusted when appropriate documentation is provided specifying that the asset was destroyed or lost

VAT deduction may be not adjusted (and in the cases specified in Part 8, Art. 53 of the Law on VAT the output VAT may be not be calculated) not only due to the goods lost, when the loss does not exceed the rates of a natural loss set forth by legislation, goods lost due to force majeure or criminal activities of third persons, but also in relation to the goods lost due to other reasons not depending upon the taxpayer (destruction of expired goods etc.) when the taxpayer can provide supporting documentation.

As of 2012, a taxable person has the right to calculate VAT for transactions related to real estate when such transactions are concluded with diplomatic representative offices, consular offices etc.

As of 1 January 2012, a taxable person has the optional right to calculate VAT not only in the cases when the asset immovable according to its nature is leased, sold or otherwise transferred to taxable persons, VAT payers, but also in the cases when the purchasers of these services or goods are the entities specified in Art. 47 of the Law on VAT (diplomatic representative offices, consular institutions etc. except for individuals) which are entitled to refunding of purchase (import) VAT.

The requirement to fill in subledgers for registration of output VAT on goods and services acquired was repealed

As of 1 January 2012, the obligation to fill in subledgers for registration of VAT on the goods and services acquired, when the goods are acquired from another member state or when in accordance with provisions of the Law on VAT an obligation to calculate output VAT for the goods and services acquired falls to the purchaser, was repealed.

The right to VAT deduction is also granted to taxable persons not registered as VAT payers

As of 1 January 2013, provisions of Art. 57 and 631 of the Law on VAT, which set forth that taxable persons not registered as VAT payers shall be entitled to VAT deduction if they used the acquired (imported) goods and services for supply of VAT taxable goods or provision of VAT taxable services, will come into force.

EU directive 2010/45/ES on simplification of VAT invoicing will be effective as of 2013

As of 2013, VAT invoices for supplies of goods to another EU member state or provisions of services, where an obligation of VAT calculation and payment falls on their purchaser, shall be issued not later than the 15th day of the month following the month when the services were provided or the goods supplied.

A possibility to issue electronic VAT invoices as well as adjust mandatory details of VAT invoices was introduced.

As of March 2013, import VAT shall be only declared

As of 1 March 2012, the control over the payment of import VAT on the goods imported by Lithuanian VAT payers will be passed over to the State Tax Inspectorate in accordance with the procedure established by the State Tax Inspectorate and the Customs Department under the Ministry of Finance. Furthermore, when the import VAT for the above mentioned goods is offset, the VAT payer will no longer be required to place a deposit or a guarantee ensuring the import VAT payment to the Customs.

 

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PERSONAL INCOME TAX, SOCIAL INSURANCE CONTRIBUTIONS, GUARANTEE FUND

A rate of contributions to the guarantee fund was increased

As of 1 January 2012, a rate of contributions to the Guarantee Fund was increased from 0.1 percent to 0.2 percent.

Higher amount of insured income was approved for 2012

The insured income of the current year amounting to Litas 1,488 (previously, 1,170) was approved for 2012. Many social insurance benefits depend on this amount including state social insurance pensions for old-age and for incapacity for work, maximum and minimum limit of maternity, paternity, maternity (paternity), sickness benefits, the top limit of unemployment benefit etc.

As of 2012, higher „ceiling“ on mandatory social insurance for persons engaged in individual activities shall apply

In 2012, for persons engaged in individual activities under a certificate „the ceiling“ on mandatory social insurance and mandatory health insurance will amount to Litas 71,424 (in 2011, Litas 56,160).

As of 2012, a joint account for social insurance contributions is established

As of 2012, the procedure of payment of social insurance contributions changed. Currently, the social insurance contributions shall be paid to the collecting accounts of the Board of the State Social Insurance Fund (SODRA) instead of the accounts of territorial divisions.

 

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REAL ESTATE TAX (RET)

As of 2012, real estate owned by individuals with the value exceeding Litas 1 million shall be subject to real estate tax

Pursuant to the amendments to the Law on Real Estate Tax, which become effective in 2012, the aggregate value of structures intended for dwelling, gardens, garages, homesteads, greenhouses, farms, subsidiary farms, structures for the purposes of science, religion, recreation, fish farming structures as well as engineering structures shall be subject to real estate tax at a rate of 1 percent to be paid by the individuals who own or acquire them under the ownership right and the data of which are entered into the public register.

It should be noted that the tax exempt value of Litas 1 million shall apply to the total real estate owned or acquired under the ownership right by the members of a family. Members of a family shall include spouses, single parents and their biological children (adopted children) under 18 who live with them. In this case the taxable value of the real estate consists of the aggregate value of the property owned by all members of the family. The real estate tax of 1 percent shall be calculated and paid on the part of the value exceeding Litas 1 million.

Real estate tax shall be declared and paid until 15 December of the current taxable period. If the ownership to real estate has not covered the whole taxable period, the tax shall be calculated proportionally to portion of the accounting period (in months).

 

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LAND TAX

As of 1 January 2013, the re-worded Law on Land Tax will come into effect

The main amendments to the Law on Land Tax are as follows:

    • The tax base is deemed to be the average market value determined according to the mass appraisal or individual assessment for 5 years. The taxable value of land of agricultural purpose, except for neglected agricultural land, shall be calculated by multiplying the average market value or the individually assessed land value by a coefficient of 0.35.
    • For calculation of the taxable value of land a transitional period of 5 years was established.
    • The tax rate ranging from 0.01 percent to 4 percent of the taxable value shall be established by each municipal council.
    • The land tax return shall be submitted until 1 November of the current tax period and the tax shall be paid until 15 November of the current taxable period.

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TAX ON THE STATE NATURAL RESOURCES

As of 2012, new tax rates for minerals, water and constructional soil were established and the procedure for declaration and payment was changed

The tax period for the Tax on State Natural Resources (except for tax on resources of animals for hunting) shall be a quarter of a calendar year (previously, a calendar year). Tax rates shall be indexed according to the consumer prices index announced by the Statistics Department on a quarterly basis.

The tax due shall be paid during a month after the end of the tax period (i.e. until 30 April, 31 July, 30 October, 30 January).

 

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The newsletter has been prepared in accordance with legislation effective as at 7 January 2012 which is subject to change retroactively or prospectively and any such change might affect the content of the newsletter. We accept no obligation to update should law or understanding change the content of the newsletter in the future.

The information contained herein is of a general
nature only 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.

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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