Indirect tax - Lithuania

Value Added Tax (VAT) is the main type of indirect taxation in the Lithuania and in other European Union (EU) countries.

It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply ie the sale.

A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.

The supply of goods and/or services is subject to Lithuanian VAT providing the following conditions are satisfied:

• the supply of goods and/or services is effected for consideration,
• the supply of goods and/or services, according to the provisions of the Republic of Lithuania VAT law, is considered to be effected within the territory of Lithuania,
• the goods and/or services are supplied by a taxable person for economic activities.

There are four rates of VAT that are applied to goods and services in the Lithuania: the standard rate (21%), the reduced rates (9% and 5%), and the zero rate. In addition, some goods and services are exempted from VAT.

Businesses that make exempt supplies are unable to claim all of the input VAT that they incur, so the VAT paid to suppliers will be a ‘real’ cost.

Most goods imported into Lithuania from outside the EU are subject to VAT. If the established conditions are met, import VAT is not required to be paid to customs by the importer at the time of importation. Where the importation is for VAT chargeable activities and the importer is registered for VAT purposes, import VAT is declared as deductible in a VAT return and due to the import, a payable amount shall not occur.

It is also important to note the interaction between VAT and customs duty. Customs duty is levied across the EU at the place where goods are imported into the community. It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within it. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer. It therefore represents a bottom-line cost to the importing business if it cannot be passed on in higher prices.

It is therefore very important to ensure that the correct rate of duty is applied. VAT is charged on the value of the importation, including any customs duty.

Yes, €45000; a ‘domestic person’ who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business must register for VAT if the value of its taxable supplies in Lithuania exceeds the limit, or is expected to exceed the limit in the near future. A business can register on a voluntary basis even if the registration limit has not been exceeded.

For these purposes, a ‘domestic person’ includes any legal entity and natural person performing economic activity. Therefore, once a person is registered for VAT, all of his business activities will be covered by the registration – even if the nature of some of those activities is very different.

Even if the above threshold has not been reached, a person has to register as a VAT payer in Lithuania if they acquire goods in Lithuania from another EU member state (except the new vehicles or the goods which are subject to excise duties) and the value of such goods was above the limit of €14,000 last calendar year or it is foreseen that the value of such goods will be above the limit of €14,000 this calendar year.

Lithuanian legislation does not provide for a possibility that two or more corporate bodies be registered together as a VAT group.

A penalty may be imposed by the tax authority if a business fails to register at the correct time.

No, the limit is not applied. The VAT registration limit does not apply to businesses who are not established in Lithuania, but for the purposes of the tax are making taxable supplies there. Those businesses will need to register as a VAT payer in Lithuania when they begin to supply goods or services and the place of such a supply is Lithuania (with some exceptions), irrespective of the level of turnover.

Foreign person (legal or natural) have to register as a VAT payer in Lithuania:

• when supplying goods and/or services subject to VAT in Lithuania (including when the goods are supplied from Lithuania or transferred from Lithuania to another Member State of the EU for business purposes), except for certain cases provided for in Republic of Lithuania Law on Value Added Tax (hereinafter referred to as “Law on VAT”),
• when purchasing goods in Lithuania (excluding new vehicles and excise goods) from VAT payers or persons liable for VAT in another Member State of the EU, the value of which (excluding VAT paid or payable in the Member State of the EU from which the goods were imported) exceeded EUR 14,000 in the previous calendar year, or is expected to exceed EUR 14,000 in the current calendar year. However, if  foreign taxable persons carry out economic activities for which they are entitled to recover (deduct) the input VAT paid in Lithuania on the goods and/or services purchased, then such foreign taxable persons are not subject to the threshold of EUR 14,000 for the purpose of registering as a VAT payer,
• when foreign taxable persons carry out intra-EU distance sales of goods and/or services of telecommunications, radio, television broadcasting and services supplied by electronic means with the total value thereof exceeding EUR 10,000 in the preceding or current calendar year, unless the foreign taxable person is a registered member of the OSS system, and the VAT liability on those goods and/or services is settled through the OSS system. In case of distance supply of new vehicles, there is no obligation to register for VAT purposes in Lithuania, while in case of distance supply of excise goods, the obligation to register for VAT purposes in Lithuania arises from the first euro.

Suppliers can choose to make the Lithuania the place where the goods are supplied by registering for VAT voluntarily before the threshold is reached.

The Mini One-Stop-Shop (MOSS Scheme) allows you to supply the following services within the EU without the need to register in each EU country you supply to:

• telecommunication services,
• television and radio broadcasting services,
• electronically supplied services,
• distance selling of goods to non-taxable person.

Persons from territories outside the area of EU are registered through their branch in Lithuania, and where they do not have a branch – through the fiscal agent appointed to act in Lithuania (with certain exceptions).

The requirement to appoint a fiscal agent to act in Lithuania is not applicable to persons from EU member states. Such persons may be registered for VAT purposes directly.

A VAT return for a tax period must be submitted no later than 25 days after the end of a tax period.

There is a difference between the tax periods applied to natural persons who are VAT payers and legal persons who are VAT payers: a tax period for a legal person is a calendar month and a tax period for a natural person is a calendar half-year (in certain cases, at the request of a VAT payer, a tax period other than a calendar month or a calendar half-year may be established).

In certain cases there may be a requirement to file annual VAT return. This return is normally used for the correction of pro-rata. It must be submitted and the VAT due must be paid no later than 1 October of the following year.

VAT calculated in a tax period return (calendar month, calendar half-year or other tax period) as well as in an annual return must be paid to the budget no later than 25 days after the end of a tax period.

Late payment of VAT is subject to default interests of 0.027% (the percentage determined every three months) for each day of delay. A fine may also be imposed that is from 20% to 100% of the outstanding tax amount.

Failure to present tax returns is subject to administrative liability attracting a warning or administrative fine.

Businesses that are registered for VAT in Lithuania and make supplies of goods or services to VAT payers of other EU country are required to file the statements of inter-community supply of goods/services. The reporting period of the statement is a calendar month. Completed statements of inter-community supply of goods/services have to be submitted not later than within 25 days after the end of the reporting period.

In addition, if the value of the intra-EU trade in goods dispatched or arriving from other EU is above an annual threshold, a supplementary declaration (referred to as an Intrastat declaration) has to be submitted for either or both. These declarations have to be submitted on a monthly basis.

Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules.

Fines and default interest can be applied for errors and omissions made on tax returns, or where the tax is paid late. Administrative fines can also be applied where the business has failed to maintain adequate records, provide information (including additional declarations), or makes repeated mistakes.

Criminal proceedings may be brought in the case of more serious matters.

Yes, it may be possible to reclaim the VAT incurred in certain circumstances.

Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere. The foreign taxable person, established in another EU member state, has to submit an electronic refund application via the system provided to him by the EU member state of establishment. The foreign taxable person established outside the EU has to submit a paper refund application directly to the ‘State Tax Inspectorate’ of Lithuania. It is worth noting that VAT is refunded to those taxable persons of foreign states that refund VAT to Lithuanian VAT payers. This restriction shall not apply to non-EU electronic service providers that are registered for VAT purposes in other EU member states.

A foreign taxable entity shall have the right to submit an application to be refunded VAT paid in Lithuania only in the case where during that period in which the VAT paid is requested to be refunded it satisfies the following criteria:

• had no divisions/subdivisions in the Republic of Lithuania,
• had not performed any activity which is subject to VAT in Lithuania, except the cases when it supplied only such services and goods the VAT on which must be calculated and paid by the purchaser.

VAT may be refunded to the foreign entity if the goods and services acquired are designated for economic activity of that foreign entity, which is granting right to deduct VAT in the country of its establishment. VAT paid by the foreign taxable entity in respect of the goods and/or services, the input and/ or import VAT whereof shall, under the provisions of the law, in no case be deductible by VAT payers, shall not be refundable to foreign taxable entities. VAT is also not refundable if supply of goods and services were not subject to VAT.

According to the Lithuanian VAT legislation, the minimum refundable amount is

• €400 if the request is presented for the term less than calendar year but not less than three calendar months of that calendar year,
• €50 if the request is presented for the entire calendar year or part of the term remaining until the end of the calendar year which is less than three calendar months.

A foreign taxable entity may present application to refund VAT for the period, which is not longer than calendar year and not less than three calendar months of that calendar year; or less than three calendar months provided these months are the last months of the calendar year.

The taxable person, established in another EU member state, must submit the application to refund VAT no later than 30 September of the following year for the preceding calendar year. The taxable person, established outside the EU, must submit the application to refund VAT no later than 30 June of the following year for the preceding calendar year.

The decision to refund VAT (or refuse to refund) may take the tax authorities up to 4 months, if additional information is not requested.

Mandatory details of VAT invoice:

• the date of issue,
• a sequential number, based on one or more series which uniquely identifies the invoice,
• the supplier’s VAT identification number,
• the customer’s VAT identification number,
• the full name and address of the supplier,
• the full name and address of the customer,
• the nature of the goods supplied or the nature of the services rendered and the quantity of the goods supplied and extent of the services rendered
• the date on which the supply of goods or services was made (if it differs from date of the invoice),
• the unit price exclusive of VAT and any discounts or rebates if they are not included in the taxable amount,
• the taxable amount per rate or exemption,
• the VAT rate applied,
• the VAT amount in Eur.

In case of an exemption and when 0% rate applicable, reference to the applicable provision of this directive, or to the corresponding national provision, or any other reference indicating that the supply of goods or services is exempt or 0% rate applicable for certain sales other details are required, like: ‘Reverse charge’, ‘Margin scheme’, VAT code of fiscal agent, etc.

Following the established requirements, VAT invoices can be issued, received and stored in an electronic format. Invoices in a paper format must be stored in Lithuania.

Invoices must be kept for ten years.

Lithuania has launched its delayed Standard Audit File for Tax (SAF-T).

SAF-T file must be prepared by the entities whose net sales revenue exceeded EUR 300 thousand in the previous financial year.