Personal income tax (PIT)
A new version of the commentary of the Law on Personal income tax (PIT) was adopted.
The commentary of the Law on PIT was reworded and came into effect as of 25 February. The wording changed the version of the commentary which was effective as of 2 July 2012.
The commentary of Art. 17 of the Law on PIT regarding non-taxable income was updated.
On 25 February 2014, a new summarized commentary of Subpar. 9, 91, 14, 141, 16, 161 of Par. 1 and Par. 2, 3 and 4 of Art. 17 was adopted. This commentary provides explanations related to life insurance payments, pension payments from pension funds and the application of tax reliefs when an individual receives income from tax havens. Full text of the commentary is available here.
Form GPM308 of the annual personal income tax return was reworded and the rules for its completion were amended.
Form GPM308 of the annual personal income tax return was reworded and will be effective for declaration of income of 2014 and subsequent years. The major amendments include:
- The form was supplemented with Annex GPM308F to be used for declaration of income received from sale of financial and derivative financial instruments;
- Annexes GPM308P and GPM308N of form GPM308 were supplemented with codes to specify interest of various types;
- Annex GPM308V was supplemented with two fields:
- V18 field to be used for state social insurance and additional mandatory health insurance on income from individual activities;
- V17 field to be used for an option of an individual to deduct 30 percent of his income from the total income instead of actually allowable deductions;
- The list of codes of foreign states was supplemented.
Major amendments of the rules:
- The rules were supplemented with section XVII which specifies the procedure of declaration of the income from sale and disposal of financial instruments and derivatives;
- Income from sale of non-noble metal waste shall be declared in Annex GPM308P. Such income shall be subject to a 5 percent rate without deduction of the acquisition costs and without applying of the relief of Litas 8,000 set forth for the income from sale of other assets;
- While declaring income from distributed profit (dividends) for 2014 and subsequent periods, a tax rate of 15 percent shall be indicated;
- The amendments explain how interest on deposits and non-equity securities, which is subject to the relief specified in Subpar. 20, Par. 1, Art. 17 of the Law on PIT, shall be declared and how the withholding tax paid in a foreign state shall be calculated;
- The list of non-declarable and non-taxable income was amended – interest of various types treated as non-taxable income may be not declared if its amount during the tax period of 2014 has not exceeded Litas 2000.
Filing of the data on B class payments to bailiffs.
The State Tax Inspectorate under the Ministry of Finance (hereinafter referred to as the STI under MF or the STI) explained the procedure of declaration of administration costs of recovery law cases and other costs of bailiffs paid or recovered from a debtor. There were misunderstandings to whose benefit these amounts shall be attributed - to the bailiff or the recoverer. The amounts paid to individuals treated as B class income from the amounts transferred to deposit accounts of bailiffs shall not be declared in form FR0471. The total income received shall be declared by bailiffs in the annual income declaration.
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State social insurance (SSI)
The amount of insured income of 2014 is Litas 1488.
In accordance with Par. 1, Art. 16 of the Law on State Social Insurance Pensions of the Republic of Lithuania, the amount of insured income for 2014 is Litas 1488.
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Corporate income tax (CIT)
The commentary of the Law on CIT regarding excess/shortage of goods identified during stock counting was supplemented.
The amended and supplemented commentary of Par. 1, Art. 17 of the Law on CIT provides relevant cases and practical examples of the treatment of excess/shortage of goods identified during stock counting as taxable income/allowable deductions.
The supplemented commentary is available here.
The commentary of the Law on CIT regarding application of a 5 percent rate was supplemented.
The amended commentary of the Law on CIT sets forth that, while identifying if the income of a taxable period of an entity does not exceed Litas 1 million, the total income of the entity sourced in Lithuania and outside Lithuania shall be calculated:
- when an entity performs activities through a permanent establishment in another foreign state – the total income of the Lithuanian entity and income earned abroad through a permanent establishment (including the permanent establishment the income of which is not included in the tax base in accordance with Par. 1, Art. 4 of the Law on CIT) shall be calculated, except for dividends received.
- when this relief is applied to a permanent establishment of a foreign entity in Lithuania – the total income of the foreign entity including income of the permanent establishment earned in Lithuania shall be calculated.
The commentary also explains that, in accordance with Par. 6, Art. 5 of the Law on CIT, income from agricultural activities shall also be calculated in an analogues way, i.e. income earned through a permanent establishment abroad and income of a foreign entity from agricultural activities earned though a permanent establishment in Lithuania shall be evaluated.
The commentary of the Law on CIT regarding the application of the cash accounting principle and maximum depreciation or amortisation rates was supplemented.
The commentary of Par. 2, Art. 9 and Par. 3, Art. 18 of the Law on CIT was supplemented with a provision that while identifying if the income of a taxable period of an entity does not exceed Litas 100 thousand and Litas 500 thousand accordingly, the total income of the entity sourced in Lithuania and outside Lithuania shall be calculated:
- income which in accordance with Art. 12 of the Law on CIT shall not be treated as non-taxable income;
- when an entity performs activities through a permanent establishment in another foreign state – the total income of the Lithuanian entity and income earned abroad through a permanent establishment (including the permanent establishment the income of which is not included in the tax base in accordance with Par. 1, Art. 4 of the Law on CIT) shall be calculated, except for dividends received;
- when a foreign entity is engaged in activities in Lithuania through a permanent establishment – the total income of the foreign entity including income of the permanent establishment earned in Lithuania shall be calculated.
It should be noted that dividends received from Lithuanian and foreign entities shall not be included in the calculation of the income threshold.
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Value added tax (VAT)
The commentary of Art. 60 of the Law on VAT regarding proportionate distribution of input and import VAT was supplemented.
The commentary of Par. 1, Art. 60 of the Law on VAT regarding proportionate distribution of input and import VAT was supplemented with several new paragraphs.
Par. 2.1. explains when and how the value of goods and services used for private needs of a VAT payer engaged in mixed activities should be taken into consideration when calculating the percentage of the VAT deduction.
New paragraphs 2.2., 2.4. and 6.1.6. explain when and what income of financial transactions (when the transactions are not random) shall be included by banks engaged in mixed activities and other taxable persons, when calculating the percentage of VAT deduction. Such income include:
- Loan interest;
- Interest on debt securities;
- Foreign currency exchange gain;
- Income from derivatives.
The supplemented commentary also provides new practical cases related to derivatives.
A comparative commentary of this article in the Lithuanian language is available here.
A preliminary ruling adopted by the ECJ in the case regarding actual provision of services and deduction of input VAT on services.
A preliminary ruling was adopted by the ECJ in the case (C-18/13) between Maks Pen EOOD and Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika“ Sofia. (C-18/13).
In the judgment of the case the ECJ indicated that a taxable person is not allowed to deduct VAT specified in the invoices of the supplier of the services, when, despite the fact that the service was performed, it turned out that it has not actually been performed by the supplier or his subcontractor as, inter alia, they had no necessary personnel, equipment and asset, provision of their services were not supported by the accounting etc. Furthermore, there was an additional condition that in order to treat such deduction as non-allowable, the behaviour should be treated as dishonest and, taking into account the objective evidences provided by tax institutions, it was confirmed that the taxable person was aware or had to be aware that the transaction, based on which the right to the deduction is grounded, is related to fraud.
A proposal of the European Commission regarding a standard VAT return has been supported in the European Parliament.
On 26 February, Algirdas Šemeta, Commissioner for Taxation of the European Commission, appreciated the initiative of the European Parliament which has shown a support to the proposed standard VAT return in Member States of the European Union.
The implementation of a VAT return is one of major proposals of the European Commission aiming at simplification of a tax administration burden both to businesses and Member States.
More detailed information regarding the proposal of the European Commission of 23 October 2013 on the standard VAT return is available here.
The commentaries of Art. 71 and Art. 92 of the Law on VAT were supplemented with additional paragraphs regarding an obligation of travel operators to calculate and/or pay VAT and register for VAT purposes.
A commentary of Par. 2, Art. 71 of the Law on Value Added Tax regarding an obligation to calculate and/or pay VAT and mandatory registration for VAT purposes was amended. It was supplemented with Par. 5 specifying that, when establishing an obligation of registration for VAT purposes to travel operators that provide to final customers tourism services which are deemed to be provided in the territory of the country and which are subject to the margin scheme, a consideration received (receivable) for these services is deemed to be the total amount paid (to have been paid) by clients (final consumers) to the operator.
Furthermore, the commentary sets forth that if the travel operator providing the mentioned services, which has not registered for VAT purposes, exceeds the threshold of the consideration received (receivable), the payable VAT amount for these services shall be calculated on the margin in accordance with the procedure specified in Art. 92. Accordingly, the commentary of Par. 1 of the mentioned article related to the obligation of VAT payment by non-registered VAT payers was supplemented with Par. 7 where a practical case regarding VAT calculation according to the margin scheme is provided.
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As of 1 March 2014, the increased rates of excise duties on tobacco products came into effect.
Please note that, as of 1 March 2014, the increased the rates of excise duties on cigarettes, cigars and cigarillos came into effect. Accordingly, the STI has amended and supplemented Art. 30 and 31 which set forth a summarized explanation of excise duty rates on manufactured tobacco products.
The commentary of the Law on Excise Duties regarding ethyl alcohol and alcoholic beverages was amended and supplemented.
The commentary of Art. 23, 24, 25 and 26 of the Law on Excise Duties regarding establishment of the rates of excise duties on ethyl alcohol and alcoholic beverages was amended and supplemented. Please note that the increased excise duties on beer, wine and other fermented beverages, intermediary products and ethyl alcohol will come into effect as of 1 April 2014.
Data of the rates of excise duties on alcohol, tobacco products, energy resources and electricity in the EU countries were updated.
The European Union updated the information regarding the rates of excise duties on alcohol, tobacco products, energy resources and electricity applicable as of January 2014.
The updated information is available in the website of the European Commission - here.
Regarding amendment of the rules for registration of warehouses of excise goods.
The rules of registration of users of the excise duties information system (hereinafter referred to as the EDIS) were reworded. The major amendment is that a person seeking to use the EDIS of the STI shall register its employee (-s) as a user of the EDIS. This may be done via Mano VMI and having chosen the electronic service of the EDIS users management.
Furthermore, it should be noted that forms FR1058 (a request to register/deregister as a user of the EDIS), FR1058 (a permission to be connected to the EDIS) and FR0392 (a prohibition to be connected to the EDIS) have been recognised as null and void.
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Land tax (LT)
A commentary of the Law on Land Tax was reworded.
On 5 March 2014, the STI under the MF prepared a reworded commentary of the Law on Land Tax which specifies to what entities, when and what amount of land tax shall be applicable. The commentary also sets forth the procedure of filing of complaints and requests for the identification of the taxable value of land, provides practical cases.
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A proposal has been provided by the European Commission for the Directive regarding financial transaction tax.
On 14 February, the European Commission provided a proposal of the Directive of financial transaction tax (FTT) under enhanced cooperation. This Directive would allow 11 Member States to proceed the introduction of FTT, adopt the directive legitimising the tax and harmonising it with the national law. This way was chosen after the Member States have not agreed on the adoption of FTT on the European Union scale. There are no essential differences between this proposal and the primary FTT project.
Communiqué of G20 finance ministers after the meeting in Australia.
After the meeting in Australia finance ministers of the G20 have announced a communiqué consisting of 11 points. The 9th point of the communiqué is related to goals of the Base Erosion and Profit Shifting (BEPS) plan and exchange of tax information between jurisdictions. Ministers expressed comprehensive approval of the BEPS plan and specified their aim – to implement automatic exchange of tax information between G20 states until the end of 2015.
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Regarding updated recommendations for checking of the reliability of perspective business partners.
On 25 February 2014, the STI presented updated Recommendations for Checking of the Reliability of Perspective Business Partners which have been supplemented with advice how entities engaged in economic activities should get assured about the reliability of perspective business partners in order to avoid negative consequences related to improper fulfilment of tax obligations. Following the mentioned recommendations, the consequences of the illegal activities of dishonest business partners seeking VAT deductions and/or recognition of costs could be avoided.
The publication Recommendations for Checking of the Reliability of Perspective Business Partners is available here.
Mandatory deductions of 5 percent from income generated from raw timber sold and standing forest shall apply also to private forest operators.
In accordance with Par. 2, Art. 7 of the Law on Forestry, as of 1 January 2014, all operators of forests shall be subject to the deductions of the mandatory 5 percent from income generated from raw timber sold and standing forest to be paid to the state budget. Before the amendment, this obligation was established only to operators of state forests.
The rules of completion of form FR0567 of the annual return on oil and gas resources were supplemented.
By order VA-10 of the Head of the STI under the FM of 21 February 2014, the rules of completion of form FR0567 of the annual return on oil and gas resources were supplemented. The supplements of the law set forth that in 2013 and subsequent years the tax base shall be established in the same way as in the 3rd and 4th quarters of 2012.
The list of territories, where the EU VAT and excise duty Directives shall not apply, was supplemented.
The lists of the territories which are not deemed to be third territories and the territories of General Customs Duties where Principal VAT Directive 2006/112 EC and Directive 2008/118/EC concerning the General Arrangements for Excise Duties and Repealing Directive 92/12/EEC were amended. According to the amendments other territories of France, specified in the Treaty on the Functioning of the European Union, were included, thus supplementing the lists where until now only French overseas departments and some other territories of EU member states were indicated.
Please note that while supplying goods or providing services in these territories VAT taxation and declaration may differ from the one which would be applicable from the EU customs duties perspective. Furthermore, part of these territories are included in the list of tax haven territories, therefore, attention should be paid to additional documentation for corporate income tax purposes.
The list of codes of taxes, fees and other contributions to the budget of the Republic of Lithuania, the budgets of municipalities and state monetary funds was supplemented.
Under a decision of the Head of the STI and the Director of the Customs Department, the list of codes of taxes, fees and other contributions to the budget of the Republic of Lithuania, the budgets of municipalities and state monetary funds was supplemented. The list was supplemented with lines 6426, 6427, 6428, 5794 and section 5470. The decision is available here.
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The newsletter has been prepared in accordance with legislation effective as at 10 March 2014 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.