Indirect tax snapshot
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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 annual registration 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 is above the limit of €14,000 per calendar year.
Lithuanian legislation does not provide for a possibility that two or more corporate bodies be registered together as a VAT group.
However, a tax administrator might see several legally independent persons as one for VAT purposes under the following conditions:
If a legal entity is controlled by a person that controls several legal entities and whose total amount of income from the supply of goods / services in Lithuania per year (during the last 12 months) exceeds 45,000 euros or purchases goods in Lithuania from other European Union (EU) member states for an amount of more than 14,000 euros per calendar year, all those legal persons must register for VAT.
NOTE: the EC found that this legal norm is not line with EU LAW, therefore, Lithuanian government agreed to change it in the near future
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) has to register as a VAT payer in Lithuania:
- when beginning to supply goods or services and the place of such a supply is Lithuania (with some exceptions) if it acquires 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 if Lithuania was chosen as the place for distance selling.
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 One-Stop-Shop (OSS 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.
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. There are certain exceptions, when taxable persons from outside the area of EU do not have to register via fiscal agent.
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.
Tax periods are the following: calendar month/calendar quarter/calendar half year.
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 calendar quarter) 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 0.03% for each day of delay. A fine may also be imposed that is from 10% to 50% of the outstanding tax amount.
Failure to present tax returns is subject to administrative liability attracting a warning or administrative fine from.
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 European Union has to submit a refund application electronically via the portal of the State Tax Inspectorate „Mano VMI“, directly to the Vilnius County State Tax Inspectorate or by post. Currently only taxable persons established in in certain countries have a right to ask for a refund of VAT.
However, those restrictions are not applied if the foreign taxable person established outside the European Union is using e-commerce scheme in so far as the VAT to be refunded was paid on goods or services used for activities under e-commerce scheme.
From the 1st of January 2018 taxable persons established in the countries which are members of OECD (Organization for Economic Co-operation and Development), in which there is no VAT (or a tax identical to it) are entitled to apply for VAT paid in Lithuania refund. However, this provision applies for VAT paid on purchases from 1 January 2018.
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.
For further information on indirect tax in Lithuania please contact: