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Lithuania: accounting requirements


Accounting requirements. A commentary of the Corporate Tax Act 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.

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,) are 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.

The Commentary has been supplemented with a provision which states that not only companies whose securities are traded in regulated market should keep records and prepare financial statements according to the International Accounting Standards but also financial brokerage companies, an operator of the regulated market, the Central Securities Depository of Lithuania and credit institutions except for credit unions.

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Lithuania: Valued Added Tax

Alessandro PasutLithuania
Valued Added Tax: A commentary to the VAT tax act regarding goods and/or services acquired and/or imported by a VAT payer that is not registered for VAT purposes specifies when and what kind of VAT may be deducted in a VAT statement by taxable persons that are not registered for VAT purposes.
However, the provisions of this article will not apply to the goods and/or services (or part thereof) if these goods and services have not yet been used in the activities of the taxable person. Furthermore, these provisions will not apply in the cases when the input (import) VAT of the mentioned goods and services 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.

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Lithuania: Value Added Tax (VAT)

Alessandro PasutWhen the rental services of real estate (or a vehicle) and other services related with the exploitation of that asset constitutes a single economic supply, such services are treated as one transaction for VAT purposes. If the real estate lease agreement contains a clause that the agreement will be terminated if the lessee does not pay for at least one service which is related to the exploitation of the real estate, i.e. insurance, utilities and other services, such a clause can be the determining condition for treating such services (rental and insurance, utilities) as a single supply. If a vehicle insurance constitutes separate and independent purpose for a lessee and (or) there is a possibility for the lessee to choose whether to conclude an insurance agreement independently, such criterion can be decisive to treat vehicle rental services and vehicle insurance services as separate services.

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Lithuania: the VAT law

Alessandro PasutThe VAT Law was supplemented with new explanations and practical examples regarding the sale or other transfer of immovable property. The sale of an old building together with the land is considered as a supply of building land, which is a VAT taxable transaction, if the seller has demolished the building or is committed to demolish it. The demolition of the building has to be started before the conclusion of the transaction. The above described transaction or sale of an old building, which is being reconstructed into a new building, together with the land is considered as a supply of an old building which is being sold together with the land – this transaction is exempt from VAT -, if only partial demolition of the building is done and the building is still being used as a building. The main criteria for the determination of the land as being building land are: a detailed plan must be approved; a decision to change the purpose of the land is issued; a territorial planning document similar to the detailed plan, where the conditions for construction are determined, is approved; records of data on the purpose of the land exist at the Register of Immovable Property.

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Lithuania: Corporate income tax

Alessandro PasutCompanies may reduce their taxable profits up to 50% by the amount of expenses incurred for investment in certain fixed assets such as machinery and equipment, computer hardware and software, communication equipment, acquired rights. The investment assets must be new and produced not more than 2 year ago. Part of the acquisition costs of fixed assets, which has not been utilised during the taxable year, may be carried forward, but not more than 4 years. The tax authorities should be notified that the company is performing an investment project. The income of foreign entities received from a Lithuanian entity is considered to include not only annual payments (bonuses) for activities of members of the supervisory board but also any benefits from Lithuanian entities for the activities of the previously mentioned members.

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Lithuania: Vat purposes

Alessandro PasutObligation for travel agents to register for VAT purposes. The travel agents, who supply tourism services for end consumers, which are considered to be supplied in the territory of Lithuania and for which margin scheme is applied, are obliged to register for VAT purposes when the amount of consideration paid by end consumers exceeds the threshold of LTL 155,000. In cases, when a travel agent exceeds the threshold, but does not register for VAT purposes, the VAT amount payable is calculated on the margin of services supplied for which the threshold of obligatory registration was exceeded.

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Lithuania: income threshold

Alessandro PasutThe commentary of the Corporate income tax law regarding the application of a 5% was supplemented. The amended commentary sets forth that, when determining 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 has to 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 have to 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 has to be calculated.

The commentary also explains that income from agricultural activities has also to be calculated by considering income earned through a permanent establishment abroad and income of a foreign entity from agricultural activities earned though a permanent establishment in Lithuania.

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Lithuania: Corporate Income Tax

Alessandro PasutCorporate Income Tax. As of 2014 entities may carry forward losses only up to 70% of the taxable profit of a taxable period. These provisions also apply to the losses of financial institutions incurred due to disposal of securities and/or derivatives.

These limitations accordingly will also apply to carry-forward of losses in case of reorganisation, merger and acquisition, and restructuring of entities in accordance with Art. 43 of the Corporate Income Tax Law.

The procedure regarding the carry forward of losses of non-financial institutions due to the disposal of securities and derivatives will remain unchanged, i.e. the 5 year tax loss carry forward rule still applies.

A main change of the Corporate Income Tax rules in 2014 is the earlier deadline for the tax payment. From 2014 the deadline is the same as the submission date of the annual corporate income tax return. If the taxable year of an entity corresponds to the calendar year, both the deadline for submission of the tax return and payment of corporate income tax for 2013 is 1 June 2014. In other cases the return must be submitted and tax must be paid by the first day of the sixth month of the following taxable period.

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Lithuania: corporate income tax

The rules for determining a tax period of taxable entities considering the peculiarities of their activities were reworded. Pursuant to these changes, a request to determine a different taxable period may be filed electronically via the authorised electronic services system Mano VMI or delivered directly or sent by mail to a respective tax authorities’ office.
The beginning of the taxable period will start from the 1st day of a calendar month. A request will not be considered if the tax period has already been changed during the last 5 years, unless the period has been changed not to the calendar year and it is requested again to determine the tax period that matches with the calendar year.

Value added tax (VAT).
The order regarding the requests of foreign taxable entities to refund VAT paid in the Republic of Lithuania was amended. The request of a taxable person established outside the territory of the EU to refund VAT may be filed electronically via Mano VMI along with other requested documents (VAT invoices etc.).

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Lithuania: company law

Amendments to the Law on Companies will come into force on 1 January 2014. The following changes have been established:
Private limited liability companies held by a single shareholder are not required to form and submit the list of shareholders to the Commercial Register. Information on shareholders has to be provided to the Commercial Register by electronic means. Data should be provided within 5 days from the receipt of documents, based on which entries in personal securities accounts or shareholders register are made. In case of the incorporation of a new company, the list of shareholders should be submitted within 5 days from the registration of the company with the Commercial Register.

All private limited liability companies incorporated until 1 January 2014 having more than one shareholder should provide the list of shareholders under the new procedure until 10 July 2014 unless any changes in shareholding occur during the period from January to July of 2014.

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