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Tax and Legal Newsletter, February 2013


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TAX NEWS

REGARDING THE COMMENTARY OF ARTICLE 63 (1) OF THE LAW ON VALUE ADDED TAX

On 11 February 2013, State Tax Inspectorate under the Ministry of Finance (hereinafter – STI under MF) prepared a Commentary of Article 63 (1) of the Law on Value Added Tax (hereinafter – VAT), that is effective as of 1 January 2013. Article 63 (1) regulates the cases when a person who is not registered as a VAT payer may deduct the input VAT, as the goods/services purchased are used in the activities, in respect of which the input/import VAT paid may be deducted (i.e. activities regulated in Article 58 of the Law on VAT).

In accordance with the Commentary, it is considered that a person who is not registered as a VAT payer uses purchased goods/services in the activities provided in Article 58 of the Law on VAT, if the goods/services are used:

• for the supply of goods/services in the territory of the country, on which VAT was calculated;
• for the supply of goods/services that were taxed with a VAT rate of 0%;
• for the transactions of the supply of goods/services provided in Article 58 Paragraph 1 Subparagraph 2 of the Law on VAT, the place of supply of which is a foreign country and the input VAT of which may be deductible.

The Commentary explains that there may be other transactions of the activities listed in Article 58 of the Law on VAT, that can be concluded by a person who is not registered as a VAT payer, when VAT paid for the purchased goods/services shall be deductible.

The Commentary also explains that, contrary to a person who is registered as a VAT payer and having a rigth to deduct the input VAT as soon as the goods/services are purchased, a person who is not registered as a VAT payer may deduct the input VAT only when the goods/services are used in respect of the aforementioned transactions.

More information is available here.

REGARDING THE AMENDMENT OF THE COMMENTARY OF ARTICLE 3 OF THE LAW ON REAL ESTATE TAX

On 21 February 2013, STI under MF amended the Commentary of Article 3 of the Law on Real Estate Tax (hereinafter – RET). The amendment was made in order to align the Commentary with the provisions of the Law on RET that were amended at the end of 2011.

The amendment of the Commentary provides that as of 1 January 2012, a person (natural or legal) acquiring real estate has to calculate RET starting from the following month after a month during which the person actually began managing such real estate acquired. Until 31 December 2011, RET had to be calculated starting from the month during which a person began managing real estate.

More information is available here.

OTHER NEWS

REGARDING THE TAKEOVER OF THE PAYMENT (OFFSET) OF THE IMPORT VAT BY STI UNDER MF

On 12 February 2013, STI under MF reminded in written that as of 1 March 2013, Lithuanian VAT payers would have to pay (offset) the import VAT for the goods imported to Lithuania to the account of STI under MF and not to the account of the Customs, as was the case before. STI under MF also explained in which cases and for which persons the new procedures of the payment (offsetting) of the import VAT will be applied; indicated the legislation on which the new regulation is based and discussed other important questions related to the takeover of the payment (offset) of the import VAT.

According to the new procedures, the import VAT will be credited to STI under MF when the following VAT payers registered in Lithuania import the goods to Lithuania:

• persons conducting VAT taxable activity;
• persons who do not perform VAT taxable activity but are registered as VAT payers due to purchasing goods/services from other countries (e.g. budgetary institutions);
• persons conducting mixed economic activity (e.g. banks);
• persons conducting economic as well as non-economic activities (e.g. public institutions, associations).

Meanwhile, the new procedures of payment (offset) of the import VAT to the STI under MF will not be applicable to the persons who are not registered as VAT payers – they will still pay the import VAT to the Customs’ account in accordance with the procedures applicable prior to 28 February 2013.

STI under MF will receive the payment (offset) of the import VAT which was calculated:

• when the goods were released to free circulation, if the goods were declared to the Customs by submitting the Customs’ return (general administrative document or document of automatic data processing by technical means);
• after the goods were released to free circulation while adjusting the data of the Customs’ return, according to which VAT was offset.

However, import VAT shall not be offset to the account of STI under MF and shall be offset to the Customs’ account if:

• the obligation to pay VAT arises in other cases provided by the Law on VAT, except the release of goods to free circulation (e.g. when the Customs calculate VAT payable for the undeclared goods in cases of the violation of transit procedures etc.);
• when the Customs’ agent or another person intermediating on behalf of an importer who is a Lithuanian VAT payer, will represent the person indirectly (and vice versa, when the Customs’ agent represents the importer who is a VAT payer directly), VAT payable will be paid (offset) to STI under MF.

According to the new procedures, VAT payers who import goods to Lithuania shall not be required to leave a collateral or provide a guarantee, ensuring the payment of the import VAT to the Customs.

More information is available here.

REGARDING THE CHARGEABILITY OF HEATING ENERGY WITH VAT

Following the inquiries received from individuals and legal persons regarding the application of reduced VAT rate of 9% to the heating energy supplied to residential premises, and regarding the criteria, based on which it is possible to determine that the heating energy has been supplied to residential premises, on 8 February 2013 STI under MF prepared the comments on the most relevant questions.

STI under MF explained that a heating energy supplier should decide on the methods of obtaining the information confirming that the premises are of residential nature, as well as on heating sufficiency. The main sources of information proving that the premises are of residential nature might be the following:

• the agreement of the supply of heating energy, signed between heating energy suppliers and individuals, regarding the supply of heating energy, as well as the extract from the Register of Real Estate or the declaration of the place of residence, provided by the individual;
• heating supply agreement signed by the heating suppliers with and a construction company with respect to the supply of heating energy to (i) a building that is being under construction (is constructed) and is intended to be sold (rented), which includes the premises of various nature, or to (ii) a building which is not yet considered exploitable, but the flats are already purchased by individuals. In this case, the construction company shall provide the information on the residential premises in the building, which will be sold as flats (or are sold already, although the agreement regarding the supply of heating energy has not been concluded);
• heating supply agreement concluded with respect to the supply of heating energy to the premises owned by legal entities, including temporary uninhabited residential premises. In this case, the legal persons shall provide the information on the residential premises in the buildings, which they own. An extract from the Register of Real Estate or the declaration of the place of residence can be used as a confirming document.

STI under MF also indicated that if individuals or legal persons start using the residential premises for other purposes (e.g. as a hotel or an office) and do not inform the heating energy supplier hereof, VAT rate may be adjusted by applying a standard VAT rate. VAT rate may be adjusted for current and five preceding calendar years.

VAT rate may be adjusted in the case of an opposite situation, i.e. when individuals and (or) legal entities are late to provide proof that the heating is supplied specifically to residential premises. In the latter case, a reduced VAT rate could be applied for the correct period.

More information is available here.

REGARDING THE INCOME IN KIND

On 14 February 2013, STI under MF prepared an explanation on the application of Article 9 of the Law on Personal Income Tax (hereinafter – PIT), regulating the taxation of income in kind. In the mentioned explanation, STI under MF commented the criteria, based on which the inter-human relations provided in the Commentary of Article 9 of the Law on PIT may be separated from the economic intention to receive or give benefit.

STI under MF provided that in certain cases the received benefit cannot be deemed as subject to PIT as it may be received on the basis of inter-human relations. According to the existing practice, the examples of inter-human relations include cases when an employer presents flowers or souvenirs with the company’s logo etc. to his/her employees on their anniversaries, changing a job or in similar situations (these gestures are treated as an expression of honouring, gratitude and attention to an individual, and not as an economic benefit or as a compensation for work). An interest-free loan given by parents to their children shall also not be treated as income in kind, as in this case there is no basis to presume that by this transaction the provision of benefit to the children was sought.

In order to separate the cases which arise from inter-human relations, the cognition, neighborhood or friendship should not be the only criteria, based on which inter-human relations between the individuals could be unconditionally claimed. In such situations, the criteria of fairness and prudence as well as other circumstances should be taken into account.

More information is available here.

REGARDING THE AMENDMENT OF THE RULES OF THE PERFORMANCE OF TAX INVESTIGATION

By the Order No. VA-47 of the Head of STI under MF, dated 25 January 2013, the Rules of the Performance of Tax Investigation (hereinafter – the Rules) were amended.

The Order supplemented the Rules with a new provision regarding the notification of a tax payer with respect to the forthcoming tax investigation. The tax payer shall be informed on the forthcoming tax investigation by receiving a free-format document no later than five calendar days before the tax investigation.

In some cases, the tax payer shall not be informed on the forthcoming tax investigation. The cases are the following:

• tax investigation is performed with respect to the recovery of tax overpayment (difference);
• the analysis of a tax payer’s activity is performed (except the cases when the tax payer is required to provide additional information, data/documents etc.).

By the aforementioned Order, the new edition of the Form FR0687 of Notice on the Performed Tax Investigation was approved, whereas the Form FR0688 (Assignment to Perform a Tax Investigation) was supplemented with an appendix FR0688P. The amendments of the Rules related to filling in the forms FR0688 and FR0688P will become effective as of 1 May 2013.

More information is available here.

REGARDING THE AMENDMENT OF THE RULES OF PERFORMING OPERATIVE TAX AUDITS, THE DOCUMENTATION OF THEIR RESULTS AND AFFIRMATION

By the Order No. VA-10 of the Head of STI under MF, dated 4 February 2013, the Rules of Performing Operative Tax Audits, the Documentation of their Results and Affirmation (hereinafter – the Rules) were amended.

The Rules were supplemented with the provisions defining the procedures of informing a tax payer on the forthcoming operative tax audit; e.g. according to the amendments, the tax payer shall be informed at least five calendar days before the operative tax audit by a free-format document or by electronic means.

The amendments also establish the exceptions, when tax payers must not be informed on the forthcoming operative tax audit. These are the cases when:

• the control purchase of goods/services is intended to be performed;
• there is a risk that the tax payer will hide or destroy the documents required for the operative tax audit, or other conditions shall arise, due to which the audit will become impossible;
• the information on the violation of legal acts is held by the Tax Authorities;
• an order to perform a tax audit is issued for a certain territory and the specific tax payer to be audited is not known;
• the operative tax audit is related to the recovery of tax overpayment (difference).

The amendments of the Rules also specify the cases when the appendix of the order of operative tax audit shall be completed (e.g. when the officers performing the operative tax audit are being replaced or new officers join in, as well as when the decision is made to extend the operative audit). The provisions related to the completion of the appendix of the order of operative tax audit will become effective as of 1 May 2013.

More information is available here.

REGARDING THE AMENDMENT OF THE RULES ON FILLING IN AND SUBMITTING THE FORM FR0471 WITH RESPECT TO PAYMENTS MADE TO INDIVIDUALS, ATTRIBUTABLE TO CLASS B INCOME

By the Order No. VA-13 of the Head of STI under MF, dated 22 February 2013, the Rules on Filling in and Submitting the Form FR0471 with Respect to Payments Made to Individuals, Attributable to Class B Income (hereinafter – the Rules) were amended.

The Order supplemented the appendix of the Rules, “Codes of Income Types” – the list of codes of income types was supplemented with the code 88 for the income received under the service voucher.

Other amendments are related to the Law on Provision of Agricultural and Forestry Services under the Service Voucher, that will become effective as of 1 April 2013.

More information is available here.

REGARDING THE INTEREST RATE OF THE TAX LOANS FOR THE SECOND QUARTER OF 2013

By the Order No. 1K-084 of the Minister of Finance, dated 22 February 2013, a daily interest rate of 0.01%, applied to the tax loans effective in the second quarter of 2013 (as of 1 April), was set. Such interest rate for the tax loans is applied since the third quarter of 2010.

More information is available here.

REGARDING THE SIZE OF THE LATE PAYMENT INTEREST FOR THE SECOND QUARTER OF 2013

By the Order No. 1K-085 of the Minister of Finance, dated 22 February 2013, the size of the daily late payment interest applicable for the second quarter of 2013 (as of 1 April) and equal to 0.03% was confirmed (such late payment interest is applied since the fourth quarter of 2010).

More information is available here.

LEGAL NEWS

LITHUANIA IS PREPARING FOR EURO ADOPTION

On 27 February 2013, the Lithuanian Government formed the Commission on the Coordination of euro Adoption in the Republic of Lithuania, which is aimed at ensuring smooth preparation for the introduction of euro in Lithuania (hereinafter – the Commission).

During the preparation for the changeover, a number of different working groups of the Commission shall, according to the respective fields of competence, examine possible ways of helping business to prepare for euro adoption, protecting consumers against potential abuses, ensuring that the public is properly informed and covering other related issues.

The Commission and coordinating working group shall quarterly be informed on Lithuania’s progress in fulfilling the Maastricht convergence criteria: inflation; government budget deficit; government debt; long-term interest rates and exchange rate stability of national currency. The Government seeks euro adoption in Lithuania in 2015.

More information is available here.

PRICING RATES METHODOLOGY FOR ELECTRICITY, PRODUCED FROM RENEWABLE RESOURCES, WAS AMENDED

Considering the amendments to the Law on Energetics of Renewable Resources, valid from 1 February 2013, the National Control Commission for Prices and Energy (hereinafter – the Commission) amended the Pricing Rates Methodology for Electricity, Produced from Renewable Resources, under the Resolution No. O3 - 41 as of 22 February 2013 (hereinafter – the Methodology).

Substantial amendments to the Methodology:

• pricing rates shall be recalculated four times a year (previously, the pricing rates for electricity, produced from renewable resources, used to be established for the entire year);
• the definition of a small power plant is amended: the capacity of small power plant is reduced to 10 kW (previously – 30 kW).

The pricing rates for energy, produced from renewable resources, for II quarter of 2013 were approved by the Commission Resolution No. O3-58 on 28 February 2013.

More information is available here.

Contacts

Name:
Tatjana Vaiciuliene
Company:
Deloitte
Job Title:
Head of Tax & Legal department
Phone:
+370 5 255 3000
Email
tvaiciuliene@deloittece.com
Name:
Tomas Davidonis
Company:
Deloitte
Job Title:
Attorney-at-Law
Phone:
+370 5 255 3000
Email
tdavidonis@deloittece.com
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