Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 7/10/2012

July, 2012 

Tax and Legal Newsletter

Tax administration

The administration burden has been reduced.

On 30 June 2012, Par. 20, Art. 33 of the Law on Tax Administration (LTA), which sets forth that the tax administrator has the right to exempt a tax payer from fulfillment of the requirements prescribed by legislation which is within the competence of the tax administrator, came into force. The tax administrator may use this right if the tax obligations prescribed by the legislation are ensured by equivalent alternative measures.

This provision is aimed at reducing the taxpayers’ administrative burden when the tax administrator may examine, without anything required to be done by the taxpayer, whether respective obligations of the taxpayer have been fulfilled (e.g. not requiring to provide a receipt on the fee payment etc.).

The procedure of implementation of these provisions of the LTA shall be established by the central tax administrator.

Residents should have to notify on the transactions exceeding 50 thousand Litas.

The Law on Tax Administration was supplemented with Art. 421 which will come into force 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:

    • a resident receives funds (including borrowed funds) from individuals and foreign legal persons (hereinafter – the Person) according to the transactions concluded,
    • the amount paid by a person to a resident 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 form,
    • the resident does not receive any income from the transactions which have been declared with the tax administrator in the manner prescribed by other tax laws.

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.

A taxpayer could be released also from interest on a tax loan.

Art. 88 of the Law on Tax Administration was supplemented with Par. 6 which sets forth that in accordance with the procedure of and on the grounds for release from default interest a taxpayer may be released from the calculated but still outstanding (not recovered) interest, increased interest, default interest or its part.

The tax administrator will be able to calculate tax according to the latest tax return.

As of 1 January 2013, Art. 1041 of the Law on Tax Administration (hereinafter referred to as the LTA) will come into force. The provisions of this article set forth that the tax administrator, aiming to fulfill a non-declared tax obligation, will be entitled to establish a tax obligation for a taxpayer by its decision according to the latest tax return of the preceding tax period in which the tax payer has declared the payable amount if the taxpayer has not filed a respective tax return in due time prescribed by tax legislation.

Such decision of the taxpayer does not repeal the obligation of the taxpayer according to the provisions of respective tax legislation to calculate tax and file a tax return. If the tax return is filed after the deadline for the filing, the tax obligation established by the tax administrator shall be adjusted according to the data of the filed tax return.

By such provisions the legislator seeks to ensure prevention of tax non-declaration, fulfillment of an obligation of non-declared taxes, decrease of the costs related to identification and recovery of such obligations.

The tax administrator will be entitled to forbid settlements in cash.

As of 2013, the tax administrator will be entitled to give instructions to a taxpayer (legal entity and an individual engaged in business activities) for a limited period to settle accounts with legal persons and individuals engaged in business activities only in non-cash.

The instruction to settle accounts in non-cash may be given if the taxpayer or the head or an autorised person of a legal person acting to the benefit of or for the interests of the legal person was recognised to be guilty or an administrative penalty has been imposed on him with regards to the following:

    • fraudulent or negligent accounting,
    • legalization of cash and property acquired by a criminal way and (or) its sale,
    • illegal work,
    • violation of the remuneration payment procedure,
    • violation of the regulations of accounting of cash and material valuables,
    • filing of false data on income, profits or property, an

conviction has not expired and has not been abolished or more than one year has not passed since the expiry of an administrative penalty.

An instruction to settle accounts in non-cash may also be given if, when investigating whether tax was correctly calculated and paid, as well as during an assignment with regards to issuance of an opinion of a specialist, violations of tax legislation are identified and there is grounded risk that the taxpayer may conceal income or otherwise avoid tax payment by making settlements in cash.

The right to enforced recovery of a tax underpayment will be granted sooner.

As of 2013, new wording of the provisions of Par. 2, Art. 105 of the Law on Tax Administration comes into force. The amendments set forth that the right for enforced recovery of a tax underpayment will be granted for the tax administrator the next day of the deadline for the payment of the declared tax and the next day of the deadline for the payment of the additionally calculated tax and related amounts. Currently, the right for enforced recovery of tax underpayment occurs for the tax administrator after 20 days of the deadline of the payment of the tax.

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Corporate income tax (CIT)

A commentary of the Law on Corporate Income Tax regarding entertainment costs was supplemented.

The state tax authorities have supplemented the commentary of Par. 2, Art. 22 of the Law on Corporate Income Tax regarding entertainment costs. The commentary specifies the purpose of the entertainment costs (to introduce the entity, the services provided, the goods sold) and the criteria of the events organised by an entity which comply with the concept of entertainment.

The commentary sets forth that the entertainment costs may also include the costs for small business gifts (e.g. pens, flowers). High value gifts are not included in the concept of entertainment costs and should be treated as gifts.

The commentary has also been supplemented with examples of practical situations.

The commentary of the Law on Corporate Income Tax (Law on CIT) regarding an investment project was supplemented.

The state tax authorities supplemented the commentary of Par. 5, Art. 461  of the Law on CIT taking into account the amended provisions of Par. 5, Art. 461  of the Law on CIT (with regards to transfer of fixed assets, which are being used for an investment project, before the expiry of a three years period). The new provisions shall apply for calculation of corporate income tax for 2011 and subsequent tax periods.

The commentary explains the mentioned provisions in more detail and provides practical examples.

The compliance of works with scientific research and experimental development will be evaluated by experts.

Art. 171 of the Law on Corporate Income Tax sets forth that the costs of work of scientific research and experimental development may be deducted by an entity for CIT purposes for 3 times during the taxable period when incurred. On 14 June 2012, Resolution No. 650 of the Government of 6 June 2012 came into force. It sets forth that both a tax payer and the tax administrator may apply to the Agency of Science, Innovation and Technologies if there are uncertainties with regards to the treatment of respective activities as scientific research and experimental development.

The resolution also specifies a recommendation schedule of the classification of scientific research and experimental development stages from the acquisition of knowledge to creation of a product. These guidelines are provided, based on which and taking into account the fact that the duration and number of these stages depend on a specific product the compliance of scientific research and development works with the mentioned Schedule may be verified.

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Value added tax (VAT)

Lower VAT rates shall apply to certain goods and services.

As of 1 January 2013, the following reduced VAT rates are established:

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.

Import VAT may be deducted irrespective of the fact of its payment.

The European Court of Justice has adopted a judgment in case C-414/10 Veleclair SA versus Ministre du Budget, des Comptes publics et de la Reforme de l‘Etat where it explained that Art. 172(b) of Sixth Directive 77/388/EEC shall be interpreted as not allowing a Member State to make the right to deduct value added tax on importation conditional upon the actual prior payment of that tax by the taxable person where that taxable person is also the holder of the right to deduction.

This decision means that a taxable person who has imported goods to Lithuania for his economic activities (set forth in Par. 1, Art. 58 of the Law on VAT) has the right to deduct import VAT calculated in the manner prescribed, irrespective whether this amount has already been paid to the customs account.

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Contributions of compulsory health insurance (CHI)

As of 1 August 2012, CHI contributions will increase.

Taking into account the fact, that as of 1 August 2012 the minimum monthly salary will be increased, the payable compulsory health insurance contributions will change accordingly.

Persons engaged in individual activities under a business certificate and taking compulsory health insurance independently shall pay fixed monthly CHI contributions of 9 percent of the minimum monthly salary. Therefore, as of 1 August 2012, the monthly CHI contributions to these persons shall be 77 Litas instead of 72 Litas. Accordingly, payable compulsory health insurance contributions of farmers and other persons involved in agriculture will also change.

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Labour law

Minimum monthly salary will increase.

On 20 June 2012, Resolution No. 718 of the Government On Increase of Minimum Monthly Salary came into force. It specifies that as of 1 August 2012 the minimum monthly salary shall increase to 850 Litas and the minimum hourly rate to 5.15 Litas.

The administrative burden of the employer in the field of safety and health has been reduced.

As of 1 July 2012, the amendment to Subpar. 2, Par. 2, Art. 264 of the Labour Code, according to which the employer is not required to maintain a passport of safety and health status and keep it, comes into force.

New wording of Par. 2, Art. 274 of the Labour Code also comes into force as of 1 July 2012. It sets forth that the requirement to include the general obligations regarding ensuring of safety and health of employees in the labour regulations is eliminated.

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Miscellaneous

The Law on Bankruptcy of Natural Persons was adopted.

On 10 May 2012, the Seimas adopted the Law on Bankruptcy of Natural Persons. The provisions of the Law come into force and shall be applied as of 1 March 2013.

This law regulates the bankruptcy procedure of natural persons which could be initiated by the natural person itself. A natural person can initiate a bankruptcy procedure when he is not able to fulfill his debt liabilities which are outstanding and the amount of which exceeds 25 minimum monthly salaries. A repeated bankruptcy of a natural person may be initiated not earlier than after 10 years.

     

    The newsletter has been prepared in accordance with legislation effective as at
    30 June 2012 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.

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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