Tax administration (TA)
New Regulations of Refunding (Offset) of a Tax Overpayment (a Difference) were approved.
As of 13 February 2013, a new wording of the Regulations of Refunding (Offset) of a Tax Overpayment (a Difference) was approved by Order No. VA-11 of the State Tax Inspectorate under the Ministry of Finance, dated 6 February 2013. The Order also approved a new wording of Form FR0781 of the Application to Refund (Set off) a tax overpayment (a difference). The application was set in a new form.
The Application may also be filed via the authorised electronic service system - Mano VMI - of the electronic website of the tax authorities (VMI).
In the new wording of the Regulations, the list of cases, when a tax overpayment (a difference) may be also set off against the tax obligations of another tax payer was supplemented.
When an individual pays a tax obligation by his own funds on behalf of another individual, however, in a tax payment document he does not indicate and/or indicates wrongly the identification data of the individual on behalf of which the tax obligation has been paid, based on the inaccurately and/or wrongly indicated data, the tax administrator sets off the paid amount in the name of the payer.
In such a case the tax payer, who has wrongly paid the amount, shall file an application with the respective local state tax inspectorate on the wrongly paid amount to be set off against a tax obligation of another individual.
The Regulations for Performing of a Tax Audit and an Operative Tax Investigation were amended.
On 4 February 2013, by Order No. VA-10 of the Head of the State Tax Inspectorate of the Republic of Lithuania the Regulations for Performing of Operative Tax Investigations, Documentation and Approval of Their Results were amended.
The regulations were supplemented with a new provision regarding notification of a tax payer on an operative tax investigation to be performed as well as exceptions provided when a tax payer shall not be notified. Furthermore, the cases, when the appendix of an operative tax investigation assignment shall be filled out (e.g. when there is a necessity to change/supplement the officials to be involved in the operative investigation) were set forth.
On 25 January 2013, by Order No. VA-7 of the Head of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania the Regulations of Performing of a Tax Audit were amended.
The Regulations were supplemented with a new provision regarding notification of a tax payer in advance on the planned tax audit and the exceptions, when the tax payer should not be notified. The Order approved a new wording of the Notification on the Tax Audit Performed (Form FR0687) where space is left to indicate a number of days when the misstatements and/or contradictions should be eliminated.
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Personal income tax (PIT)
The state tax inspectorate explained whether an individual shall be entitled to a personal income tax relief when the fee for studies is covered by a scholarship for studies.
The state tax inspectorate received an enquiry to explain whether an individual shall be entitled to a tax relief specified in Subpar. 3, Par. 1, Art. 21 of the Law on Personal Income Tax which allows a deduction of the expenses incurred for studies from the income when the scholarship is used to cover the fee for studies.
The state tax inspectorate explained that a student is free to dispose the amount assigned to him (a scholarship) also in the cases when he uses this amount to pay for the studies. In the light of the Law on Personal Income Tax, the scholarship amount is deemed to be an amount paid for studies, i.e. the expenses which may be subject to a tax relief specified in Subpar. 3, Par. 1, Art. 21 of the Law on Personal Income Tax. Such expenses may be deducted from the income. This evaluation is applicable irrespective whether the student himself transfers the scholarship to the education institution or it is transferred by the State Fund of Studies at a request of the student.
A list of codes of income types in Form FR0471 for declaration of B class income was supplemented.
By Order No. VA-13 of the Head of the State Tax Inspectorate under the Ministry of Finance of 14 February 2013, the Regulations of Form FR0471 of a Certificate for Declaration of B Class Income Paid to Individuals, were amended. According to the order, a list of codes of income types was supplement with a new code 88 to be used for indicating the income received by an individual under a service receipt.
This amendment relates to the Law on Provisions of Agricultural and Forestry Services under a Service Receipt which sets forth the provision of agricultural and forestry services for consideration, which are of temporary or one-off nature and the provision of which does not require special skills, qualifications, permits, certificates, trainings or courses. It is established that an individual will be remunerated for such services according to a receipt of agricultural and forestry services. The Law comes into force as of 1 April 2013.
The state tax inspectorate explained how the general communication rules should be evaluated in relation to occurrence of benefit in kind.
According to provisions of Art. 9 of the Law on Personal Income Tax, a benefit of an individual received for personal purposes using fixed assets belonging to another person, having received a credit or an interest free loan or paying lower interest etc. may be recognised as benefit in kind.
Based on the evaluation of enquiries of tax payers by the state tax inspectorate, a practice has been formed that in certain cases a benefit received may not be evaluated as subject to income tax as it was received on the basis of general communication which was not aimed at receiving or giving a benefit based on economic rules. For example, such communication rules imply when an employer presents flowers, souvenirs with the logo of the institution to employees on the occasion of a jubilee, leaving for another job and similar cases.
A commentary of Art. 9 of the Law on PIT sets forth that the use of an asset owned by another person for personal needs, especially, when such use of assets is grounded exclusively by personal relationship (friendship, neighbourhood, blood relationship etc.) is not deemed to be benefit in kind. However, the state tax inspectorate notes that in practice there are cases when transactions between the persons related by blood relationship or friendship may be concluded to get a tax benefit, may be fictitious, as an intermediate link in the tax evasion chain or a way of legalisation of illegally received income etc.
Consequently, blood relationship, neighbourhood and friendship may never be the only criteria based on which it could be stated implicitly that general relationship exist between the parties and the situation is evaluated not like subject to income tax or conversely. The state tax inspectorate emphasises that each specific situation should be evaluated individually, taking into account the actual circumstances, the essence of the relationship between the parties, the content of their agreement etc.
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Value added tax (VAT)
A summarized explanation ( a commentary) of Art. 631 of the Law on Value Added Tax regarding goods and/or services acquired by a VAT payer that is not registered for VAT purposes was issueed.
A commentary of Art. 631 regarding goods and/or services acquired and/or imported by a VAT payer that is not registered for VAT purposes was prepared. The commentary specifies when and what kind of VAT may be deducted in a VAT statement by taxable persons that are not registered for VAT purposes.
Par. 3 of Art. 631 sets forth that the provisions of this article shall not apply to the goods and (or) services (part thereof) if these goods and services have not been used yet in the activities of the taxable person. Furthermore, these provisions shall not apply in the cases when the input (import) VAT (part thereof) of the mentioned goods and services (or part thereof) is deducted in the manner prescribed by Art. 63 of the Law on VAT, i.e. if a taxable person registers later for VAT purposes, the input VAT may be deducted according to the provisions of Art. 63 regarding the goods and (or) services acquired and (or) imported before the registration for VAT purposes.
The state tax inspectorate has issued explanations regarding the application of the Law on VAT in certain cases.
Taking into account the need and enquiries of legal entities and individuals, the state tax inspectorate has prepared the following explanations:
• Regarding VAT application on heating energy
• Regarding the taking over of import VAT payment (offset) by the state tax authorities as of 1 March 2013
• Regarding taxation of technical aid devices for the disabled
The explanations are provided in the Lithuanian language.
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Corporate income tax (CIT)
Par. 1 and 2 of the commentary of Par. 2, Art. 24 of the Law on CIT regarding deduction of input and import VAT from income were amended.
The amendments of the commentary are related to the new wording of Par. 2, Art. 24 of the Law on CIT according to which input and import VAT which is non-deductible according to the Law on VAT may be treated as partly allowable deductions irrespective of the payment fact and under certain conditions.
A commentary of Par. 2, Art. 57 of the Law on CIT regarding requirements for accounting was amended.
The commentary specifies in detail what legal acts should be followed by an entity when performing accounting and preparing sets of financial statements depending on the form and activities of the legal entity.
The commentary sets forth that in the accounting periods starting on or after 1 January 2013 management companies, acting in accordance with the Law on Collective Investment Undertakings of the Republic of Lithuania, and management companies, acting in accordance with the Law on Supplementary Voluntary Accumulation of Pension, shall perform accounting and prepare sets of financial statements according to international accounting standards.
Small partnerships and unlimited civil liability legal entities (except for general partnerships and limited partnerships, the general partners of which are public or private limited liability companies,) shall be entitled to choose whether accounting should be performed and financial statements should be prepared based only on Business Accounting Standard 38 Record keeping and financial reporting of unlimited civil liability legal entities and small partnerships or based on all other business accounting standards.
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Real Estate Tax (RET)
A commentary of the Law on Real Estate Tax regarding obligations of real estate tax under financial lease agreements was updated.
In the commentary of Par. 2, Art. 3 of the Law on Real Estate Tax, the cases were updated regarding the situations, when tax on the real estate, acquired under a financial lease agreement, where transfer of the ownership right is set forth, a hire purchase sale agreement or a leasing agreement, shall be paid not by the actual owner but by the acquiring person. The situations regarding registration/non-registration of an agreement on the transaction are discussed in the updated commentary.
The state tax inspectorate announced the real estate tax rates for 2013.
In accordance with Par. 2, Art. 6 of the Law on Real Estate Tax, a specific tax rate which will be in force in the territory of a respective municipality as of the beginning of the following taxable period, shall be set forth by the council of the municipality before 1 June of the current taxable year.
All decisions of municipalities regarding the real estate tax rates for 2013 are available on the website of the state tax inspectorate.
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As of 1 March, the Law on Bankruptcy of Natural Persons came into effect.
This law regulates the process of bankruptcy of natural persons which could be initiated only by an individual. A natural person may initiate a bankruptcy procedure when he cannot settle his debt liabilities, the maturity of which has already expired and the amount of which exceeds 25 minimal monthly salaries. A repeated bankruptcy of a natural person may be initiated not earlier than after 10 years.
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The newsletter has been prepared in accordance with legislation effective as at 7 March 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.