- Service: Tax
- Type: KPMG information, Publication series
- Date: 1/7/2013
Please enjoy the January edition of the Tax, Legal and Accounting Newsletter.
KPMG in Lithuania
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Individuals shall notify on the transactions exceeding 50 thousand Litas.
The Law on Tax Administration was supplemented with Art. 42 (1) which comes into effect as of 1 January 2013. According to these provisions, residents of Lithuania will have to provide information to the tax administrator, following the procedure and the terms established by the tax administrator on the transactions which meet the following conditions:
▪ An individual receives funds (including borrowed funds) from individuals and foreign legal entities (hereinafter – the Person) according to the transactions concluded;
▪ The amount paid by a person to an individual in cash during one calendar year according to a transaction or several transactions concluded with the same person exceeds 50 thousand Litas;
▪ The transactions are not of the notary forms;
▪ An individual does not receive any income from the transactions which have been declared with the tax administrator in the manner prescribed by other tax laws.
Information shall be provided to the tax administrator by completing and filing a Notification of a Resident of Lithuania on the Transactions Concluded Form PRC907. Such form shall not be filed if the individual has provided information on the non-taxable non-declared income in the Annual Income Tax Return. The accounting period is deemed to be a calendar year. Information shall be provided on the transactions concluded in 2012 and subsequent years.
If such information regarding the mentioned transactions is not provided according to the prescribed rules and terms, the sources for acquisition of assets or income received cannot be justified by these transactions.
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Corporate Income Tax (CIT)
Sponsorship used not for its purposes.
As of 1 January 2013, provisions of Par. 2, Art. 8 of the Law on Charity and Sponsorship which specify that, if the amount of expenses incurred by the donee of the sponsorship when disseminating information on the donor exceeds 10 percent of the value of the sponsorship provided by this donor, the amount exceeding the limit established shall be treated as the sponsorship used not for its purpose as set forth in the Law on Charity and Sponsorship and shall be included in the corporate income tax base in accordance of the provisions of Par. 6, Art. 4 of the Law on Corporate Income Tax.
Until 31 December 2012, in accordance with the Procedure of Permitted Liabilities of the Donee of the Sponsorship Towards the Donor of the Sponsorship, approved by Order No. 350 of 29 December 2000 (Official gazette Valstybės Žinios, 2001, No. 3-53), if the amount of expenses incurred, when disseminating information on the donor of the sponsorship, exceeded 10 percent of the value of the sponsorship provided by this donor, the total amount of the sponsorship received by the donee of the sponsorship was treated as income received for advertising services and the amount transferred by the donor of the sponsorship as the costs incurred by the donor of the sponsorship for advertising (allowable deductions).
Non-deducted import VAT – allowable deductions.
On 29 December 2012, the amendment of Par. 2, Art. 24 of the Law on CIT came into force. Import VAT may be treated as allowable deductions if the amount is indicated in the import customs declaration of the established form or some other documents used as instead of such declaration. Before the amendment only the import VAT amounts, which have been not only declared but also paid, could have been deducted.
The commentary of the Law on Corporate Income Tax regarding carrying forward tax losses was supplemented.
The commentary of Par. 1, 2 and 4, Art. 30 of the Law on Corporate Income Tax was amended and supplemented.
The commentary specifies the cases when tax losses may be carried forward for indefinite period though the entity does not continue its activities, i.e. the reasons, that are deemed to be not depending on the entity, are specified. The commentary also provides practical examples.
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Value Added Tax (VAT)
Lower VAT rates for some goods and services.
As of 1 January 2013, reduced VAT rates shall apply:
▪ 9 percent – for newspapers, magazines and other periodicals, except for editions of erotic and (or) violence nature or editions where professional ethics is not followed, recognised as such by the institution authorised by legal acts and where the paid advertising amounts to 4/5 of the total area of the edition;
▪ 9 percent – for the services of passenger carriage by regular routes established by the Ministry of Communication or its authorised institution or municipalities as well as for the services of baggage carriage of passengers specified in this point;
▪ 5 percent – for technical aid means of disabled persons and repairs of these means.
The following was extended until 31 December 2013:
▪ 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.
According to EU directive 2010/45/ES, the provisions related to VAT invoicing which become effective as of 1 January 2013 (amendment to Articles 5-1, 14, 64, 78, 79, 80, 83 of the Law on VAT) were adjusted.
▪ VAT invoices may be both on paper and in electronic form and the authenticity, integrity and legibility of VAT invoices may be insured by any business means (ensuring authenticity and integrity of electronic VAT invoices by application of electronic data exchange and advanced signature technologies is only one of possible ways);
▪ In certain cases a simplified VAT invoices with less mandatory details required may be issued;
▪ A later VAT invoice issuance term related to supply of certain goods and provision of services between EU member states, which will be the same in all EU member states, was established, i.e. not later than the 15th day of the month following the month when the services were provided or the goods supplied.
The right to VAT deduction (amendment of Par. 3, Art. 92, Art. 87, supplement to Art. 63-1 of the Law on VAT).
Taxable persons not registered as VAT payers shall also 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. This right has been established based on the practice of the Justice Court of the European Union. The amendment of the Law comes into effect as of 1 January 2013.
The rule of establishment of the place where services of long-term lease of a vehicle are provided to non-taxable persons (Par. 13, Art. 13 of the Law on VAT) was amended.
Until this amendment, long term lease of a vehicle to a non-taxable person was subject to VAT in the country where the provider of the VAT services was established. As of 1 January 2013, the services of long-term lease of a vehicle (except for an entertainment ship) shall be subject to taxation in the territory of the country if the purchaser is established in Lithuania. In case of purchase of the services related to long-term lease of an entertainment ship, the services are deemed to be provided in Lithuania if the entertainment ship has been physically transferred to the recipient of the services in Lithuania.
The Law on VAT and its commentary with regards to the moment of VAT application on long term services were supplemented.
Par. 6, Art. 14 of the Law on VAT with regards to the moment of VAT application on long-term services were amended and supplemented. The commentary explains that in the cases, when the supplier of long-term services or electricity, gas, heat and other types of energy is a foreign taxable person and an obligation to calculate and pay VAT for the services and goods falls on the purchaser of the services and goods in accordance with Par. 2, Art. 95 of the Law on VAT, the moment of application of VAT, when the long-term services are provided not shorter than 12 months, is deemed to be the moment:
▪ When a VAT invoice is issued (not later than the 10th day of the month);
▪ If an invoice is not issued - when the fee has been paid;
▪ If a VAT invoice is not issued and the fee has not been paid - when the provision of services is finally completed.
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Personal income tax (PIT)
The Law on PIT was supplemented with the provisions related to rendering of agricultural and forestry services under a service receipt.
This amendment is related to the provision of agricultural and forestry services under a service receipt which will come into effect as of 1 April 2013.
Art. 17 of the Law on PIT was supplemented with Par. 55 which sets forth that income received as remuneration for the services rendered under a service receipt when the income amount does not exceed 6000 Litas during the taxable period, shall be treated as non-taxable income.
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Mandatory Health Insurance (MHI)
Having increased the minimal monthly salary, the payable MHI contributions change.
As of 1 January 2013, the minimal monthly salary is increased from 850 Litas to 1000 Litas. Taking this into consideration, as of 1 January 2013, the payable MHI contributions will change accordingly:
▪ For self-insured persons and the persons engaged in individual activities under a business certificate, the monthly contribution is 90 Litas;
▪ For persons engaged in agricultural activities and having agricultural holdings (farms) not exceeding 2 economic size units, the monthly contribution is 30 Litas.
▪ For persons engaged in agricultural activities and having agricultural holdings (farms) exceeding 2 economic size units, the monthly contribution is 90 Litas.
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Contributions to the Guarantee Fund (GF contributions)
The Law on the Guarantee Fund was amended.
As of 1 January 2013, a new wording of the Law on the Guarantee Fund came into effect. It sets forth that the contributions to the GF shall be paid also by individuals (previously, only legal entities) engaged in individual activities and acting as employers. The individuals shall pay the contributions as of 1 March 2013. Such amendments are related to the Law on Bankruptcy of Individuals which will come into effect as of 1 March 2013.
The amendment to the Law on GF has specified the provisions regarding contributions to the GF paid by the entities established in the Republic of Lithuania by legal persons and other organisation established in EU member states and EEA member states when their entities establish in the Republic of Lithuania perform activities in Lithuania.
As of 1 January 2013, if an employer (both a legal entity and an individual) is engaged in activities not only in Lithuania but also in the territory of an EU member state or an EEA member state, the GF contributions shall be paid for the employees employed in the Republic of Lithuania on a permanent basis. It is deemed that employees are employed on a permanent basis in the Republic of Lithuania if they actually perform the main responsibilities to the employer. In the cases, when it is impossible to identify whether an employee works on a permanent basis in the Republic of Lithuania, it shall be considered that the employee works in the member state where his main working place is located.
The accounting period shall be the calendar year (not the taxable period chosen by the Company).
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Real Estate Tax (RET)
The interval of the RET rate was increased.
As of 1 January 2013, a new wording of the Law on Real Estate Tax (hereinafter referred to as the Law on RET), which established a new interval of the RET rate: from 0.3 percent to 3 percent (instead of previously effective interval from 0.3 to 1 percent) came into effect.
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As of 1 January 2013, a new edition of the Law on Land Tax came into effect.
From the effective date of the new edition, the land tax shall be calculated from the average land market value which may be estimated according to the land value maps prepared by mass valuation or according to individual valuation. The value of agricultural land, including the land of collective amateur gardens but excluding abandoned land plots, shall be calculated by multiplying the estimated average market price by the coefficient of 0.35.
A transitional period of 5 years was established for calculation of the taxable value of land, i.e. if an increase of the land value is established in the taxable period of 2013 as compared to the taxable value in 2012, the increase in value of 80 percent shall be deducted from the taxable value in 2013, 60 percent - in 2014, 40 percent - in 2015, 20 percent - in 2016 and only in the fifth year the land tax shall be calculated from the total estimated land value.
The council of each municipality shall individually establish the rates ranging from 0.01 to 4 percent of the land taxable value. The municipalities may also establish several differentiated tax rates taking into account certain criteria in accordance with Par. 3, Art. 6 of the Law on Land Tax.
The tax shall be declared until 1 November of the current taxable period and paid until 15 November of the same current taxable period.
Tax reliefs effective until 31 December 2012 have been moved to the new edition of the law. Additionally, it was established that bankrupt companies and the Bank of Lithuania as well as land of general use in the territory of collective amateur gardens shall be exempt from the land tax. Provisions regarding taxation of land of archaeological, historical and art monuments as well as their territories were adjusted.
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New excise duties to smoking tobacco and gas oils.
As of 1 January 2013, a new excise duty for smoking tobacco – 163 Litas per kilo (previously, 139 Litas) became effective. Furthermore, a new excise duty was established for gas oils – 1140 Litas for 1000 litre of the product (previously, 1043 Litas).
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Business Accounting Standards (BAS) of the Republic of Lithuania
Approved BAS 6 Explanatory notes where all requirements for disclosure of information were transferred.
The Authority of Audit and Accounting approved BAS 6 Explanatory notes. The revision covered all requirements for disclosure of information in the explanatory notes to financial statements of a company, which previously were set forth in separate business accounting standards, except for requirements of special activities specified in the general provisions of the Standard. In accordance with orders of the Director of the Authority of Audit and Accounting of 21 December 2012, the previous BAS 6 and sections of all other Business Accounting Standards regarding disclosure of information in explanatory notes to financial statements become void as of 1 January 2013 as the relevant provisions have been transferred to the new BAS 6.
As specified in the general provisions of the new BAS 6, the provisions of the following standards regarding disclosures in explanatory notes remain in force:
▪ BAS 16 Consolidated financial statements and investments in subsidiaries;
▪ BAS 28 Liquidation of entities;
▪ BAS 29 Interim financial statements;
▪ BAS 33 Financial statements of financial brokerage firms and management companies;
▪ BAS 34 Segment reporting;
▪ BAS 38 Record keeping and financial reporting of unlimited civil liability legal entities and small partnerships;
▪ BAS 39 Accounting, financial statements of collective investment undertakings and pension funds;
▪ BAS 43 Accounting and financial statements of credit unions.
The new BAS 6 shall apply when preparing financial statements for accounting periods starting on and after 1 January 2013. The Standard may also apply for preparation of financial statements for previous accounting periods.
Order No. VAS-24 of the Director of the Authority of Audit and Accounting of 21 December 2012.
Amended Section XV Disclosing information in explanatory notes to consolidated financial statements of BAS 16 Consolidated financial statements and investments in subsidiaries.
Taking into account the approved new BAS 6 Explanatory notes, Section XV Disclosing information in explanatory notes to consolidated financial statements of BAS 16 Consolidated financial statements and investments in subsidiaries was amended.
The Standard shall apply when preparing financial statements for accounting periods starting on and after 1 January 2013. The Standard may also apply for preparation of financial statements for previous accounting periods.
Order No. VAS-34 of the Director of the Authority of Audit and Accounting of 21 December 2012.
Amended BAS 2, BAS 3, BAS 4, BAS 8 and BAS 35.
The new BAS 38 Record keeping and financial reporting of unlimited civil liability legal entities and small partnerships, which came into effect as of 1 January 2013, sets forth that small partnerships and unlimited civil liability legal entities, except for general partnerships and limited partnerships where all general members are joint stock or closed joint stock companies, have the right to choose or follow either provisions of BAS 38 or all other Business Accounting Standards, when keeping records and for financial reporting purposes. The Authority of Audit and Accounting made relevant amendments of the provisions regarding small partnerships and unlimited civil liability legal entities in BAS 2 Balance sheet, BAS 3 Income statement, BAS 4 Statement of changes in equity, BAS 8 Equity and BAS 35 Transformation of entities for those who have chosen to apply all Business Accounting Standards.
Furthermore, BAS 3 sets forth that the agricultural companies which have chosen the cost method, as specified in BAS 17 Biological assets, for estimation of agricultural produce at the moment of its receiving and biological assets, when preparing financial statements may choose the form of income statement specified in Annex 1 of BAS 3 or the condensed form of income statement specified in Annex 2.
The amendments came into force as of 1 January 2013 and shall apply for preparation of financial statements for accounting periods starting on and after 1 January 2013. A more detailed commentary regarding these amendments is provided on the website of the Authority of Audit and Accounting.
Orders No. VAS-19, VAS-20, VAS-21, VAS-22 and VAS-23 of the Director of the Authority of Audit and Accounting of 14 December 2012.
Approved methodological recommendations of BAS 9 Inventories.
In the approved updated methodological recommendations of BAS 9 Inventories, the amendments of this Standard approved by Order No. VAS-8 of the Director of the Authority of Audit and Accounting of 4 June 2012, which come into force as of 1 January 2013, were taken into consideration. The new paragraphs 71, 81, 82, 83, 191 of the Standard incorporated in the methodological recommendations were explained by additional examples.
Approved methodological recommendations of BAS 43 Accounting and financial statements of credit unions.
The approved methodological recommendations of BAS 43 include explanations and examples of how business operations and business events related to activities of credit unions shall be registered.
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International Financial Reporting Standards
Regulations of the European Commission regarding amendments to International Financial Reporting Standards (IFRS).
Commission Regulation No. 1254/2012 of 11 December 2012 approved the following:
▪ IFRS 10 Consolidated Financial Statements;
▪ IFRS 11 Joint Arrangements;
▪ IFRS 12 Disclosure of Interests in Other Entities;
▪ IAS 27 Separate Financial Statements;
▪ IAS 28 Investments in Associates and Joint Ventures.
The objective of IFRS 10 is to provide a single consolidation model that identifies control as the basis for consolidation for all types of entities. IFRS 10 replaces IAS 27 Consolidated and Separate Financial Statements and Interpretation 12 of the Standing Interpretations Committee (SIC) Consolidation – Special Purpose Entities. IFRS 11 establishes principles for the financial reporting by parties to a joint arrangement, and replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Ventures. IFRS 12 combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structural entities. As a consequence of these new IFRSs, the International Accounting Standards Board also issued the amended IAS 27 and IAS 28.
Each company shall apply IFRS 10, IFRS 11, IFRS 12, the amended IAS 27, the amended IAS 28 and related amendments to other standards specified in the Regulation, at the latest, as from the commencement date of its first financial year starting on or after 1 January 2014.
Commission Regulation No. 1255/2012 of 11 December 2012 approved the following:
▪ Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards;
▪ Amendments to IAS 12 Income Taxes;
▪ IFRS 13 Fair Value Measurement;
▪ IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine.
The objective of the amendments to IFRS 1 is to introduce a new exemption in the scope of IFRS 1 – namely, entities that have been subject to severe hyperinflation are allowed to use fair value as the deemed cost of their assets and liabilities in their opening IFRS statement of financial position. In addition, those amendments also replace the references to fixed dates in IFRS 1 with references to the date of transition. As to IAS 12, it prescribes the accounting treatment for income taxes. The objective of the amendments to IAS 12 is to introduce an exception to the measurement principle in IAS 12 in the form of rebuttable presumption that assumes that the carrying amount of an investment property measured at fair value would be recovered through sale and an entity would be required to use the tax rate applicable to the sale of underlying asset. IFRS 13 sets out a single IFRS framework for measuring fair value and provides comprehensive guidance on how to measure the fair value of both financial and non-financial assets and liabilities. IFRS 13 applies when another IFRS requires or permits fair value measurement or disclosures about fair value measurements. The objective of IFRIC 20 is to provide guidance on recognition of production stripping costs as an asset and on the initial and subsequent measurement of the stripping activity asset in order to reduce the diversity in practice as to how entities account for stripping costs incurred in the production phase of a surface mine.
Each company shall apply the amendments to IFRS 1 and IAS 12, at the latest, as from the commencement date of its first financial year starting on or after the date of entry into force of this Regulation. Each company shall apply IFRS 13, IFRIC 20 and the consequential amendments, at the latest, as from the commencement date of its first financial year starting on or after 1 January 2013.
Commission Regulation No. 1256/2012 of 13 December 2012 approved the following:
▪ Amendments to IFRS 7 Financial Instruments: Disclosures;
▪ Amendments to IAS 32 Financial Instruments: Presentation.
The amendment to IFRS 7 aims to require the provision of additional quantitative information in order to allow the users to better compare and reconcile the disclosures under IFRS and the Generally Accepted Accounting Principles (GAAP) of the United States. In addition, the IASB amended IAS 32 to provide additional guidance to reduce inconsistent application of the standard in practice.
Each entity shall apply the amendments to IFRS 7 and related amendments to IAS 32 as from the commencement date of its first financial year starting on or after 1 January 2013. Each company shall apply the remaining amendments to IAS 32, at the latest, as from the commencement date of its first financial year starting on or after 1 January 2014.
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Public Sector Accounting and Financial Reporting Standards (PSAFRS)
PSAFRS 27 Concessions and Government-Private Sector Partnership Agreements.
This Standard sets forth the requirements for the public sector entity (the institution granting a concession or participating in the public and private sector partnership agreement as the authority entity) regarding accounting of business operations and business events arising from the concession and the government-private sector partnership agreements and their presentation in financial statements. PSAFRS 27 shall apply to accounting of business operations and business events related to the agreements based on which investments are made in the assets, which after the expiry of the agreement will remain under the ownership of the public sector entity when this entity establishes the type, the recipient and the fee of the public services provided by a private entity, and presentation in financial statements, except for business operations and business events set forth in the general provisions of the Standard.
PSAFRS 27 shall apply to partnership agreements which at the effective date of the Standard, i.e. 23 December 2012, have not expired, applying the method of retrospective change in the accounting policy in accordance with the provisions of PSAFRS 7 Change in Accounting Policy, Accounting Estimates and Correction of Errors.
Order No. 1K-435 of the Minister of Finance of the Republic of Lithuania of 20 December 2012.
Amended provisions of other Public Sector Accounting and Financial Reporting Standards.
Orders of the Minister of Finance of the Republic of Lithuania amended the provisions of the following standards:
▪ PSAFRS 2 Statement of Financial Position
▪ PSAFRS 3 Statement of Performance Results
▪ PSAFRS 7 Change in Accounting Policy, Accounting Estimates and Correction of Errors
▪ PSAFRS 9 Income from Taxes and Social Contributions
▪ PSAFRS 10 Other Income
▪ PSAFRS 14 Mergers and Investments in Associates
▪ PSAFRS 17 Financial Assets and Financial Liabilities
▪ PSAFRS 20 Financing Amounts
▪ PSAFRS 26 Accounting of Resource Fund and Set of Financial Statements
Amendments to the provisions of the above mentioned standards became effective as of 30 December 2012 (PSAFRS 14 as of 1 January 2013) and shall apply to preparation of sets of financial statements for the year 2012 and subsequent accounting periods.
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Amended Resolutions of the Board of the Bank of Lithuania On the Approval of the Main Principles of the Policy of Financial Accounting and Preparation of Financial Statements of Credit Institutions.
Resolution No. 03-270 of the Board Bank of Lithuania of 31 December 2012 amends and recasts the previous resolution On the Approval if the Main Principles of the Policy of Financial Accounting and Preparation of Financial Statements of Credit Institutions.
The amendments are aimed to harmonize the supervision requirments limiting the risk for all partiicipants of the financial markets and increase the efficiency of such supervision.
The resolution comes into effect as of 1 April 2013.
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The newsletter has been prepared in accordance with legislation effective as at 7 January 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.