• Service: Tax
  • Type: KPMG information, Publication series
  • Date: 6/3/2012

June, 2012 

Tax and Legal Newsletter

Tax administration

The provisions regarding the issue of accounting documents used for tax calculation were amended.

As of 27 May 2012, Resolution No. 548 of the Government of the Republic of Lithuania of 23 May 2012 On Amendment of Resolution No. 780 of 29 May 2002 On the Approval of the Regulations for Issue of the Accounting Documents Used for Tax Calculation and their Recognition came into force. According to the supplements and amendments, at an option of the individual, who is not a VAT payer, either personal identification code of the person engaged in individual activities, or the number of the certificate of individual activities may be specified on the invoices. These provisions shall apply to both the seller and the buyer of goods or services. Prior to the amendments, only the personal identification code of the individual could have been used.


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Corporate income tax (CIT)

A commentary to the Law on Corporate Income Tax with regards to an investment project was supplemented.

The State Tax Inspectorate has supplemented part 1 of the Commentary to Par. 121, Art. 2 of the Law on Corporate Income Tax with regards to an investment project. The commentary sets forth that, while leasing an acquired fixed asset, it is deemed that such activities of an entity do not conform with the concept of an investment project. Such position is grounded by the fact that the leased assets are not used by the entity to develop innovations, do not reduce the resources used, do not increase productivity or efficiency, the services provided by the entity are not diversified to new (additional) services, while the assets held for investment purposes are directly used by the lessee. The tax authorities take the same stand when leasing is the entity‘s main activity.

A commentary to the Law on Corporate Income Tax regarding capital gain in case of transfer of shares.

By Letter (No. 18.10-31-1)-R-4687) of 29 May 2012, the State Tax Inspectorate informed that a commentary to Par. 15, Art. 12 of the Law on Corporate Income Tax was prepared and a commentary to Subpar. 4, Par. 10., Art. 42 was amended and supplemented.

The commentary set forth under what conditions the capital gains from the transfer of shares is not subject to corporate income tax. The commentary also includes practical examples.

A commentary to the Law on Corporate Income Tax with regards to allowable deductions was supplemented.

By Letter (18.10-31-1)-R-3795 of the State Tax Inspectorate of 26 April 2012, the commentary to Subpar. 6.30.1, Par. 1, Art. 17 of the Law on Corporate Income Tax was supplemented.

The Commentary states that, when the court awards an employee his average salary and severance payment for the period of the involuntary idle time from his former employer due to illegal dismissal from work, these expenses incurred by the employer are regarded as allowable deductions, since this benefit of the employee is subject to personal income tax.


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Value added tax (VAT)

New Rules for the Issue and Cancellation of the Licenses to Establish a VAT Warehouse were approved.

The new rules have simplified the procedure of filing the documents for establishment of a VAT warehouse.

Furthermore, an application and its appendixes may be submitted not only directly to an employee of the local tax authorities or by mail, but also electronic means.

The regulations repeated the following requirements:

    • To reregister the license every 5 years,
    • In order to supplement the license, the original license shall be submitted (a copy of the license shall be kept with the local tax authorities).

The ommentary to Par. 5, Art. 15 of the Law on VAT with regards to calculation of the taxable value was supplemented.

According to Par. 5, Art. 15 of the Law on VAT, in all cases the taxable value includes all taxes and fees except for VAT. The commentary specifies that local fees for public waste collection and management shall be included into the taxable value of lease services, i.e. the amounts payable by a lessee to the owner of the real estate in order to compensate the expenses incurred by the owner due to local fee payment shall not be deemed to be a compensation for the expenses incurred in relation to payments to third parties.


The commentary to the Law on VAT was supplemented by a provision specifying what is deemed to be supply of services and VAT application on termination of an agreement for consideration.

The State Tax Inspectorate has supplemented the commentary to Art. 7 of the Law on VAT providing more examples what is deemed to be supply of services. Furthermore, the commentary to Par. 4, Art. 31 of the Law on VAT with regards to the VAT application on termination for consideration of an agreement for lease of immovable property was amended.


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More requirements to accountants will be introduced as of 2013 and 2016.

On 24 April 2012, amendments to the Law on Accounting which set forth that as of 2013 and 2016 the requirements for the entities performing accounting become more stringent, were adopted.

The major amendments which will come into force as of 1 January 2013 are as follows:

    • Accounting may be outsourced not only from an accounting company which provides accounting services but also from an individual who provides such services independently having registered individual activity under a certificate;
    • The head of an entity may no longer perform accounting of the entity. Such restriction has not been established in the law previously. The owner of an individual company may continue to perform accounting of his company;
    • Entities and individuals providing accounting services shall take a civil liability insurance with the annual amount not less than 10 thousand Litas
    • It is clearly defined that the head of the entity will be responsible for submission of impartial, precise, comprehensive and timely information on business events and business operations to the chief accountant (accountant) or the company providing accounting services or the individual providing services independently.

As of 1 January 2016, the other provisions of the Law on Accounting will come into force. These provisions specify that the chief accountant and/or an accountant of an entity, an individual independently providing accounting services and employees of a company providing accounting services shall comply with the following requirements:

    • To follow the principles of professional ethics prescribed by the Code of Professional Ethics of Accountants;
    • To have passed a professional examination of accounting and financial reporting as well as tax examination recognised in accordance with the procedure prescribed by the Government or its authorised institution. The procedure has not yet been approved;

In addition to the mentioned amendments, other technical and wording amendments have been adopted.


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Legal practice

Liquidation of a company is not the basis for termination of labour relations.

The ruling of the Lithuanian Supreme Court (the LSC) of 16 May 2012 specifies that in the cases when the employer is liquidated, but actually its business (or part of the business) is taken over by another entity, then the latter shall also take over all liabilities to the employees, i.e. guarantees to employees shall always apply when the company taken over retains its identity and pursues performing its functions.

Such a position of the LSC is based on Art. 138 of the Labour Code and Council Directive 2001/23/EC On the Approximation of the Laws of the Member States Relating to the Safeguarding of Employees' Rights in the Event of Transfers of Undertakings, Businesses or Parts of Undertakings or Businesses. According to these provisions the change of the owner of an undertaking, its subordination, the incorporator or the name, its merger, division, parceling out or merger to another legal entity may not be legal grounds for termination of labour relations.

The ruling of the LSC also sets forth that the uninterrupted employment record of an employee to be used for estimation of a severance payment, includes the time from the dismissal day to the date of the court ruling coming into force.

The salary for annual vacation may be paid later than three days prior to the commencement of the vacation.

The ruling of the Lithuanian Supreme Court (the LSC) of 24 May 2012 prescribed that parties of an employment agreement may agree on the term for filing of an application for vacation and also the payment for vacation procedure. Such position of the LSC is grounded by the fact that the Labour Code does not prohibit:

    • for parties of labour relations to agree on granting of the annual vacation when less than three days are left to the commencement of the vacation (the Labour Code does not provide for a specific term how many days before the commencement of the annual vacation an employee must express his will on the vacation (by filing an application with the employer), and
    • for parties of labour relations to agree on another procedure of payment of the annual vacation than indicated in Par. 2, Art. 176 of the Labour Code (not later than 3 days before the commencement of the vacation).

Taking the above into consideration the employer and the employee may agree that an application for vacation may be filed even one day before the commencement of the vacation. However, in this case the employee understands that the employer will not be able to fulfill the obligation regarding payment for the annual vacation within the terms specified in Par. 2, Art. 176 of the Labour Code (not later than 3 calendar days prior to the commencement of the vacation), and agrees on such payment procedure. The LSC sets forth that in such a case the employee expresses his will to waive the right to require that on this basis the annual vacation is prolonged and the prolonged time is paid as annual vacation.


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The newsletter has been prepared in accordance with legislation effective as at 1 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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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


+370 46 480 012