Details

  • Service: Tax
  • Type: KPMG information, Publication series
  • Date: 10/25/2012

October, 2012 

Tax and Legal Newsletter
 

Corporate income tax (CIT)

The commentary of the provisions of the Law on CIT specifying the treatment of the costs incurred to the benefit of employees and their family members as partly allowable deductions was supplemented.

The commentary of Par. 1 and 2 Art. 26 of the Law on CIT was supplemented.

According to provisions of Par. 1, Art. 26 of the Law on CIT, the amounts paid directly by an entity to education institutions of the European Economic Area member states and the states, which have double taxation avoidance treaties with Lithuania, for higher education or acquisition of certain qualification, where such education and/or qualification is necessary for the entity to earn income, shall be treated as partly allowable deductions.

The commentary of Par. 1 of the mentioned article sets forth that if an employee has not started his job for which certain education (qualification) is needed or the studies have been terminated and the education has not been acquired, then the amounts paid for the education may not be treated as partly allowable deductions.

According to provisions of Par. 2, Art. 26 of the Law on CIT, the costs incurred to the benefit of employees and/or their family members shall be treated as partly allowable deductions when it is impossible to identify the individual benefit received and the provision of such benefit is specified in a collective agreement.

It is emphasized in the commentary of Par. 2 of the mentioned article that such benefit shall be treated as partly allowable deductions if it is established in the collective agreement. If it is not established or no collective agreement is available at all, the costs incurred shall be treated as non-allowable deductions.

The commentary sets forth that a free form statement shall be drawn up to support the costs of the benefit specified in a collective agreement and it shall be approved by the head of the entity or his authorised person and the chief financier or his authorized person.

The commentary was also supplemented with practical examples.

The commentary of the Law on CIT regarding Recognition of Bad Debts as Partly Allowable Deductions was updated.

The tax authorities have updated the commentary of Art. 25 of the Law on CIT. The commentary was issued based on the provisions of the Rules on the procedure for providing proof of bad debts and of efforts made to recover them as well as the procedure for calculation of the amounts of such debts approved by the Minister of Finance of the Republic of Lithuania.

The procedure of the recognition of bad debts as partly allowable deductions was explained in detail, providing practical examples.

The commentary of Art. 32, Par. 1 of the Law on CIT regarding taxation of dividends received by investment funds was amended and supplemented.

According to the commentary, the pension funds or investment funds established or otherwise organised in a member state of the EU or the European Economic Area shall not be treated as taxable entities. Consequently, if a Lithuanian entity pays dividends (or other distributable profit) to the mentioned funds, no withholding tax shall be withheld and paid to the state budget on such dividends. Dividends paid to the funds established in other foreign countries shall be subject to taxation in accordance with the provisions of the Law on CIT.

The Commentary of the Law on CIT regarding treatment of taxes as allowable deductions was supplemented.

Taking into account the enquiries to the state tax authorities, the commentary of Art. 24 of the Law on CIT was supplemented with practical examples.


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Personal income tax (PIT)

The commentary of the Law on PIT was supplemented with examples specifying what amounts are not considered to be income.

Subpar. 1, Par. 14, Art. 2 of the Law on PIT sets forth that the shares issued to shareholders free of charge, in proportion to the number of their shares, or the sum whereby the par value of the shares issued earlier has been increased as a result of the increase of the authorised capital, as well as the amount by which the value of member shares or interests has been increased as a result of the increase of the authorised capital for holders of member shares or interests in proportion to the value of their member shares or interests as well as the funds (or their part) and (or) assets (or their part) received due to reduction of the authorised capital related to the reduction amount of the authorised capital, which consists of the contributions of the participants of the entity, shall not be deemed to be income.

The commentary of this provision was updated providing new practical examples when the amounts shall not be treated as income.

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Social security

The information on social insurance is available by the short telephone number 1883.

On 2 October, an information centre was opened by the Social Insurance Authorities in Radviliskis aimed at effective provision of the information on social insurance to the insured persons and the insurers by telephone. Prior to the establishment of such centre, information on social insurance was provided by the specialists of the Social Insurance Fund Board and territorial divisions.

Meanwhile, the information centre provides information on general questions. However, a possibility to provide individual information by telephone to the insured persons and the insurers is considered.

The opening hours of the information centre are from 8 a.m. until 5 p.m. during workdays (until 3.45 p.m. on Fridays). The short number is 1883, the number +370 5 250 0883 should be dialed when calling from abroad.

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Value added tax (VAT)

The commentary of Art. 69 of the Law on VAT regarding adjustment of VAT deduction when a person engaged in agricultural production is deregistered as a VAT payer was supplemented.

The commentary has been supplemented with a provision which states that when an entity engaged in agricultural activities deregisters as a VAT payer, VAT deduction of the biological assets (crop and animals), which are not specified in Annex 1 of the Law on Corporate Income Tax and for which depreciation has not been calculated, has been used for the VAT taxable activities prior to the deregistration, shall not be adjusted.

When such biological assets purchased or manufactured (e.g. animals raised) by the entity have not been used for the VAT taxable activities prior to the deregistration as a VAT payer, adjustments to input VAT amounts of the purchased (manufactured) biological assets and related costs shall be made.

 

The commentary of Art. 20 of the Law on VAT was supplemented with an example regarding denture correction services.

Par. 1, Art. 20 of the Law on VAT sets forth that personal and public health services provided by the persons licensed to provide such services shall not be subject to taxation.

It is indicated in the example that the purpose of the services provided is therapeutic, aimed at restoring fully or partially the mastication function of the patient. Consequently, for VAT purpose these services shall be treated as health care services.


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Land tax

The deadline for payment of land tax is 2 November.

The state tax authorities inform that land tax shall be paid by the owners by 2 November of this year. Information on the payable land tax is available for individuals and companies in the Electronic Declaration System (the EDS) of the state tax authorities. The land owners who are not EDS users will receive hard copies of the declarations by ordinary mail.


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Petroleum and gas resources tax

Quarterly tax return form FR0566 and annual tax return form FR0567 as well as the regulations of completion of these forms were amended and reworded.

Under Order No. VA-86 of the Head of the Ministry of Finance of the Republic of Lithuania dated 21 September 2012, quarterly tax return form FR0566 and annual tax return form FR0567 as well as the regulations of completion of these forms were amended and reworded.

The order was issued taking into account the amendments to the provisions of the Law on Petroleum and Gas Resources of 21 December 2011 which set forth that the tax rates for all petroleum deposits are established taking into account the location of the deposit and the annual extraction volumes, repealing their differentiation according to the time when the extraction has been started. The amended tax rates were also taken into consideration.

The provisions of the Law shall apply for calculation and declaration of tax for the 3rd quarter of 2012 and the year 2012.


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Legal news

A virtual address was established.

On 3 October, the Government approved the proposal to have a virtual address. The virtual address is an official electronic address to be specified by a legal entity in the Register of Legal Entities at its own choice along with the physical address of the company. This virtual address may be used for sending all electronic form documents. Such a way of sending of documents will ensure that the fact of sending and receiving of correspondence will be recorded and legal entities will be able to save time and money. The virtual address will be granted to the entity by the Centre of Registers or other suppliers of electronic delivery services.

Up to now, legal entities had to indicate physical address of the company seat in order to receive correspondence and the documents were only deemed officially delivered when received at this address.


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Accounting news

The forms of financial statements prepared according to Business Accounting Standards (BAS) of the Republic of Lithuania were supplemented with a requisite for the second signature.

The forms of the balance sheet, profit and loss account, cash flow statement, consolidated accounts, financial accounts of financial stock broker and holding companies, collective investment undertakings and pension funds, credit institutions prepared as of 1 January 2013 were supplemented with a requisite for the second signature – title, name, surname and signature of the chief accountant (accountant) or another person who is able to manage financial accounting. Annexes of BAS 2, 3, 5, 16, 33, 39 and 43 were updated as well.


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The newsletter has been prepared in accordance with legislation effective as at
8 October 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.

 

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