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Tax and Legal Newsletter, November 2012


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TAX NEWS


REGARDING THE SUPPLEMENT OF THE COMMENTARY OF ARTICLE 12 SUB-PARAGRAPH 8 OF THE LAW ON CORPORATE INCOME TAX

State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (hereinafter – STI under MF) in accordance with the amendments of the Law on Corporate Income Tax (hereinafter – CIT) has prepared the supplement of the Commentary of Article 12 Subparagraph 8 of the Law on CIT, which defines the forfeit.
Commentary of Article 12 Subparagraph 8 of the Law on CIT provides that amount of money that is paid by a debtor to a creditor for the correct advanced fulfillment of the obligation cannot be considered as a forfeit.
Therefore, amounts of money that are paid by a debtor as a compensation to a creditor for the advanced fulfillment of the obligation according to the conditions laid out in the agreement shall not be regarded as non-taxable income for CIT calculation purposes.

More information is available here.


REGARDING THE SUPPLEMENT OF THE COMMENTARIES OF ARTICLES 7 AND 28 OF THE LAW ON VALUE ADDED TAX

STI under MF has supplemented the Commentaries of Articles 7 and 28 of the Law on Value Added Tax (hereinafter – VAT).

Paragraph 1 Subparagraph 1.2. of the Commentary of Article 7 of the Law on VAT was supplemented with an explanation, that when a loan granted to a client by a bank is paid back before the term of a loan and a client has to pay a certain payment established in the agreement, this amount is regarded as a remuneration for the termination of the agreement and not as a forfeit.

Amendment of the Commentary of Article 28 Paragraph 1 of the Law on VAT provides that the payment for an advanced return of a loan for VAT purposes is regarded as a remuneration for the service related to a loan that is treated as a financial service not taxable with VAT according to Article 28 of the Law on VAT.

More information is available here.


REGARDING THE AMENDMENTS AND SUPPLEMENTS OF THE COMMENTARY OF ARTICLE 80 OF THE LAW ON VAT

STI under MF has prepared amendments and supplements of the Commentary of Article 80 of the Law on VAT.
Subparagraph 1 of the Commentary of Article 80 Paragraph 1 was supplemented with an explanation that the quantity of goods (services) has to be provided in the VAT invoice as of 1 January 2013. If the quantity of services cannot be specified, the provision of quantity is not mandatory.

Commentary of Article 80 Paragraph 1 was also amended by updating the formulations of the details to be specified when special VAT schemes are applied. The Commentary also provides what references shall be made when an obligation to calculate VAT arises after receiving the remuneration or when a VAT invoice is issued by a purchaser of goods (services).

Commentary of Article 80 Paragraph 7 explains that in cases when according to Article 79 Paragraph 14 of the Law on VAT the receipt of less than LTL 500 (with VAT) is issued when providing goods or services in the retail of fuel and it has all the details to be specified on a cashier receipt, as well as details according to which the purchaser of goods (services) can be identified, such receipt is not regarded as a simplified invoice.

The Commentary of Article 80 of the Law on VAT was supplemented with Paragraph 8, which provides that when the purchaser has to calculate and pay VAT for the provision of goods or services according to the provisions of Article 95 of the Law on VAT or corresponding provisions of other countries’ legislation (except the cases, when a purchaser formalizes the provision of goods or supply of  services), the taxable amount of provided goods or supplied services can be specified instead of price of goods (services), taxable amount of goods (services), taxed with a same VAT rate, VAT rate and the amounts of VAT in a national currency.

Paragraph 9 of the Commentary of Article 80 of the Law on VAT provides the required details to be specified in a simplified VAT invoice.

The amendments and supplements of the Commentary will become effective on 1 January 2013, when the amendments of Article 80 of the Law on VAT will come into effect.

More information is available here.


REGARDING THE AMENDMENT OF ARTICLES 17 AND 22 OF THE LAW ON PERSONAL INCOME TAX

Law amending Articles 17 and 22 of the Law on Personal Income Tax (hereinafter – PIT) was adopted on 13 November 2012.

Paragraph 1 of Article 17 of the Law on VAT was supplemented with Subparagraph 55, which provides that income not exceeding LTL 6 000 received as a remuneration for services provided under service voucher, when such services are regulated by the Law on Provision of Agricultural and Forestry Services under Service Voucher, is not taxed with PIT.

Article 22 of the Law on PIT provides that income received as a remuneration for services provided under service voucher and exceeding LTL 6 000 is classified as B Class income, PIT on which is calculated, declared and paid by a resident himself.

Aforementioned provisions are applicable for income calculated and declared for the year 2013 and further tax periods.

More information is available here.


REGARDING THE AMENDMENT OF THE COMMENTARY OF ARTICLE 2 PARAGRAPH 14 SUBPARAGRAPH 5 OF THE LAW ON PIT

STI under MF has prepared the amendment of the Commentary of Article 2 Paragraph 14 Subparagraph 5 of the Law on PIT that is in line with the Law amending Article 2 of the Law on PIT dated 22 June 2011 (No. XI-1501).

The Commentary provides that the amounts received as compensations of expenses incurred for accommodation, food, registration to the event or travelling are not regarded as income for PIT calculation purposes, if they are related with the voluntary activity of a resident organized in accordance with the particular legislation.

More information is available here.


OTHER NEWS


REGARDING DOUBLE TAXATION AGREEMENT WITH MEXICO

Double taxation agreement signed by the Governments of Lithuania and Mexico and dated 23 February 2012 was ratified by the Lithuanian Parliament on 3 October 2012.

The agreement has been prepared in accordance with the OECD’s Model Tax Convention on Income and on Capital.

More information is available here.

 

REGARDING AMENDMENTS OF THE METHODOLOGY OF IMPOSITION OF FINES AND CALCULATION OF LATE PAYMENT INTEREST

By the Order No. VA-100 of the Head of STI under MF dated 8 November 2012 the Methodology of Imposition of Fines and Calculation of Late Payment Interest (hereinafter – Methodology) was amended.

The Order corrected the invalid provision, stated in the previous Methodology, that in case of the tax inspection it is found that the social insurance contributions have been illegally reduced, the tax administrator charges a missing amount of social insurance contributions as well as a penalty equal to 200 % of the missing amount. Subparagraph 13 of the new edition of Methodology was amended by setting a penalty equal to 50 % of the missing amount.
In accordance with Subparagraph 18.1.3. of the Methodology, the tax administrator may increase the penalty imposed on the taxpayer with respect to underpayment of CIT and / or PIT, when the correction of  prices of the controlled transactions is performed because the prices were not consistent with the arm’s length principle, except the cases when the taxpayer provides the transfer pricing documentation of the controlled transactions during the tax inspection, which is in line with the Lithuanian transfer pricing legislation. Prior to the amendment of the Methodology, the penalty could be increased if the taxpayer was seeking tax benefits.

Amendment of Subparagraph 28 of the Methodology provides that the right of enforced recovery of tax payable arises on the next day after the term of payment of the corresponding tax.

More information is available here.


REGARDING THE AMENDMENT OF THE LIMITS FOR SUBMITTING OF INTRASTATE REPORTS

By the Order No. DĮ-194 of the General Director of the Statistics Department of Lithuania dated 30 October 2012, the new limits for submitting of Intrastate reports have been established.

By the mentioned Order the limit of the import Intrastate report was increased to LTL 700,000, while the limit of export Intrastate report was increased to LTL 750,000.  Submitting of the reports is not mandatory for VAT payers not exceeding these amounts in 2013.

Order also established a new limit for submitting of import statistical value, which starting from the year 2013 will be equal to LTL 11,000,000. New established limit for submittings of export statistical value will be equal to LTL 39,000,000. VAT payers who do not exceed these amounts are exempt from completing field No. 13 of Intrastate report (‘Statistical value’, Lt).

More information is available here.


REGARDING THE AMENDMENT OF THE LAW ON INDIVIDUALS‘ PROPERTY DECLARATION

Law amending Article 10 of the Law on Individuals’ Property Declaration (No. XI-2325) was adopted on 6 November 2012. Law establishes that as of 2014 the data of certain returns will be announced annually until 1st of October in the website of Tax Authorities. Prior to the amendment this data was announced in the special annex of “Valstybės žinios“.

More information is available here.


REGARDING THE UPDATE OF PUBLICATIONS

STI under MF has announced that it has updated the publications “VAT taxation of the land and other real estate” and “Income in kind”.

More information is available here and here.


LEGAL NEWS


LABOUR CODE HAS BEEN AMENDED

6 November 2012 the Parliament adopted the Law on Amendments to the Labour Code No. XI-2358 (hereinafter – the Law), establishing additional guarantees for the employees in cases of business transfer, amending the rules of compensation payment for unused annual leave and the terms for the announcement of working time schedules.
In addition to other amendments and supplements, it was established that the compensation for unused annual leave shall be paid upon the termination of the employment contract, but not more than for a period of three years, provided that the employee was able to use the annual leave and it is not established otherwise by the collective agreement. Employees that have unused annual leave for more than three years until 1 December 2012, can use it until 1 November 2015. If the employment contract is terminated until this date, compensation shall be paid for the whole period of unused annual leave.

Article 138 of the Labour Code was also supplemented with a provision stating that in cases of business transfer, employment relationship shall continue under the same conditions in the company of the transferee regardless of the grounds of the business transfer. It is forbidden to amend the employment conditions or terminate the employment contract on the basis of the business transfer. Furthermore, the amendments establish employers‘ obligation to inform employees: it is stipulated that employees have to be notified about the forthcoming business transfer not later than ten business days in advance and informed about the date of the business transfer, legal ground, economical and social consequences for the employee.

Article 147 was also amended establishing that in cases stipulated by the work regulations, working time schedules can be announced not later than one week in advance (previously, the general term of two weeks was applied).
The Law came into force on 1 December 2012.

More information is available here.

 

A NEW LAW ON REDUCTION OF ADMINISTRATIVE BURDEN HAS BEEN ADOPTED

8 November 2012 the Parliament adopted a new Law on Reduction of Administrative Burden No. XI-2386 (hereinafter – the Law), which is aimed at reducing the administrative burden imposed by public institutions on individuals and business operators.  

The Law stipulates the principles, measures and procedure of their application in order to reduce the administrative burden. It is established that public institutions should not require individuals and business operators to fill in the reports, application forms and other documents of similar or the same content for several times. It is also stipulated that the frequency of the required documents‘ submission shall be reduced to the minimum extent, necessary to achieve the goals of the legal acts. According to the provisions of the Law, the submission of documents via e-mail or Internet should be preferred to the submission of printouts.

It is established that the Government shall approve and submit to the Parliament the action plan and terms of the measures for reduction of administrative burden for the particular year.

The Law shall come into force on 1 March 2013.

More information is available here.

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