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Tax and Legal Newsletter, June 2013


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TAX NEWS

NEW INCENTIVE ON THE CORPORATE INCOME TAX

The Law amending and supplementing the Article 2, amending the title of Chapter IX(1) and adding Articles 17(2) and 46(2) to the Law on Corporate Income Tax (hereinafter – CIT) was adopted on 13 June 2013. Based on the amendments of the Law on CIT, a Lithuanian entity or a foreign entity operating through a permanent establishment in Lithuania may be entitled for a double CIT incentive in case it provides the funds to the Lithuanian film producer for the production of the film or its part free of charge.

The new edition of the Law on CIT provides the definitions of a Lithuanian film producer and the production of a part of a film, as well as establishes that certain amount (no more than 75 percent) of funds provided to the Lithuanian film producer free of charge during the period between 1 January 2014 and 31 December 2018 could be deducted from taxable income if:

1) the film corresponds to the criteria of cultural content and production established by the Government of the Republic of Lithuania or the authorized institution and
2) at least 80 percent of the costs of the production of a film or its part are incurred in the Republic of Lithuania and these costs are not below LTL 150,000, and
3) total amount of funds invested by the Lithuanian entities and the permanent establishments in the Republic of Lithuania does not exceed 20 percent of the total costs of production of the film or its part.

New edition also provides the restrictions to the incentive, i.e. the amount of taxable income cannot be reduced by the amount of funds, provided the funds were used for:

1) consultations regarding preparation of application;
2) preparation of application;
3) fines, late-interest payments, litigation;
4) acquisition, construction or reconstruction of fixed asset, if it is not related to the production of the film;
5) travelling costs, in case the Republic of Lithuania is not the country of arrival or departure;
6) preparatory works of the film;
7) advertising of the film;
8) distribution of the film;
9) compensation of the actors’ salaries exceeding 4 percent of the costs of the production of the film or its part.

It should be noted that according to the aforementioned amendments of the Law on CIT, the funds provided for the production of a film or its part are deducted from the taxable income in a tax period, during which a certificate of the compliance of the usage of funds provided to the film producer following the provisions of the Law on CIT (hereinafter – investment certificate) is granted in accordance with the procedures established by the Government authorized institution.

Moreover, besides the possibility to reduce the amount of taxable income, according to Article 46(2) of the Law on CIT a Lithuanian entity or a foreign entity operating through a permanent establishment in Lithuania, investing the funds to the production of a film or its part in the Republic of Lithuania, may deduct this amount from the CIT (not exceeding 75 percent of the CIT), calculated for the tax period, during which the investment certificate was granted or, in case the investment certificate is granted before the term of submission of the CIT return, the CIT payable for the previous tax period may be reduced. If the amount of funds exceeds 75 percent of the CIT payable for the tax period, the CIT payable for the following two tax periods may be reduced by such exceeding amount (not exceeding 75 percent of the CIT each year).

The mentioned Law amending and supplementing the Law on CIT comes into effect as of 1 January 2014.

More information is available here.

ADJUSTEMNT OF VAT DEDUCTION IN CASE OF THE CONSTRUCTION OF SOLAR POWER STATIONS

By the Note No. (18.2-31-2)-RM-3579 dated 5 June 2013 State Tax Inspectorate under the Ministry of Finance (hereinafter - STI under MF) has explained that the changes of legal framework and the economic environment related to the terms of construction of solar power stations and to the reduction of the purchasing price of the electricity produced therein shall be treated as circumstances which are objective and not dependable on the taxable persons (constructors of solar power stations). Therefore, according to the opinion of STI under MF, in case the construction of solar power station was terminated, the input VAT deduction of goods and services acquired for the design and construction of solar power station should not be adjusted.  

More information is available here.

REGARDING THE REMOVAL FROM THE LIST OF REGISTERED CONSIGNORS OF EXCISE GOODS

Note No. KD-8071 issued by the STI under MF on 3 June 2013 provides the finite list of cases in which the tax administrator has a right to remove the registered consignors of excise goods from the list of registered consignors. The cases are as follows:

1) the registered consignor did not transport the imported excise goods which were under the regime of the temporary suspension of excise duty within 6 months starting from the date of registration;
2) the registered consignor did not submit the document confirming the fulfillment of consignor’s obligations within the specified period, when such document must have been submitted according to the legislation;
3) the licenses to the registered consignor, which grant the right to engage in activities related to the excise goods, are terminated;
4) under the written request of the registered consignor.

The consignor has to be informed on the decision to remove him from the list of registered consignors no later than the next working day after such decision. The consignor has to return the certificate and its appendix to STI under MF immediately upon the notification.

More information is available here.

OTHER NEWS

SIMPLIFICATION OF THE RULES REGARDING THE ISSUE OF CERTIFICATES OF THE INDIVIDUAL ACTIVITIES

Based on the Order No. VA-37 of the Head of STI under MF dated 25 June 2013, the Rules regulating the procedures of issue of the certificates for the Lithuanian residents’ individual activities performance and for the Lithuanian non-residents’ registration of the permanent base (hereinafter – the Rules) were amended.

The amended Rules provide that the data of issued certificate, along with other data of a person provided in the registration register, is published in the authorized electronic services section Mano VMI of the e. STI’s website. In addition, the new edition of the Rules provides that the certificate may be printed using Mano VMI, i. e. the person is no longer required to come to the local STI and take the issued certificate.

More information is available here.

AMENDMENT OF THE RULES REGARDING THE PROCEDURES OF CONSULTATIONS AT STI UNDER MF

Based on the Order No. VA-34 of the Head of STI under MF dated 11 June 2013, the Rules on the procedures of providing the consultations and answers to the queries at STI under MF (hereinafter – the Rules) were amended. The new edition of the Rules provides the definition of the term “general information and/ or consultation“ stating that it is “the information and/ or consultation which is not related to the information (data) of the inquirer which the STI under MF is obliged to keep in secret“.

More information is available here.

APPROVAL OF THE RULES CONCERNING THE REGISTRATION/ REMOVAL FROM THE TAXPAYERS’ REGISTER

Based on the Order No. VA-36 of the Head of STI under MF dated 25 June 2013, the Rules on the registration/ removal of the natural persons to/ from the Taxpayers Register (hereinafter – the Rules) were approved. The new edition of the Rules replaces and summarizes the previous rules which were separately regulating the procedures of registration/ removal to/ from the Taxpayers‘ Register of the residents of Lithuania, non-Lithuanian residents as well as citizens of the foreign countries and consolidates the provisions applicable to the natural persons engaged in individual or other activities.

Moreover, the new edition of the Rules also provides that the taxpayers for whom the provisions of the Rules are applicable, have to complete the application form REG812 for the registration to the Taxpayers‘ Register (which replaces the formerly valid forms FR0792 and REG807) and submit it to the STI.

More information is available here.

REGARDING THE PLACE OF SERVICE IN CASE OF COMPLEX STORAGE SERVICE SUPPLY

European Court of Justice (hereinafter – ECJ) in a case C-155/12, investigated the situation regarding the determination of the place of supply in case when complex storage service is provided to the foreign taxable persons, and it includes the admission of goods to a warehouse, placing them on the appropriate storage shelves, storage, packaging, issuing, unloading and loading of goods and concluded that supply of such service shall be treated as service related with the immovable property (as it is laid down in the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax) only provided that:

• storaging is the main service of a complex storage service and
• the recipients of such service are given the right to use all or part of the defined immovable property (warehouse).

In case these conditions are fulfilled, the complex storage service is considered as service connected with immovable property and the place of supply of this service is the country where the immovable property (warehouse) is located.

More information is available here.

REGARDING THE STATUS OF TAXABLE PERSON IN CASE OF PERFORMING OTHER ECONOMIC ACTIVITIES OCCASIONALL

ECJ in a case C-62/12 has concluded that a natural person who is already a taxable person for value added tax purposes in respect of his/ her independent court bailiff activities shall be treated as a ‘taxable person’ in respect of any other economic activity carried out occasionally, provided that this activity constitutes an activity within the meaning of economic activity defined in  Article 9 Paragraph 1 Subparagraph 2 of Directive 2006/112/EC of 28 November 2006 on the common system  of value added tax.

More information is available here.

LEGAL NEWS

LAW ON TERRITORIAL PLANNING HAS BEEN RESTATED IN A NEW WORDING    

On 27 June 2013 the Parliament of Lithuania adopted a new wording of Law on Territorial Planning (hereinafter – the Law), whereby the regulation of territorial planning is substantially amended and the new system of territorial planning is introduced.

In addition to other changes, the following amendments should be taken into account:

1) a clear distinction between territorial planning and formation of land plots is established – municipalities shall have no right to require for preparation of the detailed plans. The preparation of the detailed plans shall be the obligation of municipalities, meanwhile, the owners and users of land plots shall be able to carry out the construction in accordance with the general plan;
2) instead of the recently established two types of territorial planning levels (i.e. territorial planning levels according to institution approving the territorial planning document and territorial planning levels according to the size of the planned territory and the level of specification of the solutions), the state, municipal and local planning territorial levels are determined under the Law;
3) the following two types of territorial planning documents are established: complex territorial planning documents (general and detailed plans) and special territorial planning documents;
4) the Law establishes that natural and legal persons have the right of initiative and in accordance with the terms and conditions set by the Government, are entitled to provide suggestions to municipality or other organisers of special territorial planning regarding the preparation, amendment, correction and(or) financing of local level territorial planning documents.

The Law comes into effect on 1 January 2014.

More information is available here.

AMENDMENTS TO THE LAW ON PHARMACY ARE ADOPTED

On 18 June 2013 the Law on amendment of Law on Pharmacy No. XII-388 (hereinafter – the Law) was adopted, whereby provisions of Directive 2011/62/EU of 8 June 2011, aimed at preventing falsified medicinal products from entering into the legal supply chain, were transposed into national legislation.

In addition to other amendments, the following amendments were established under the Law:

1) the concept of wholesale distribution of medicinal products was adjusted, by establishing that it is an activity involving the purchase, storage, supply and export of medicinal products, except where the mentioned actions are conducted with the aim of selling or dispensing them to residents or patients;
2) the term of brokering of medicinal products was determined, which describes the activities in relation to the sale or purchase of medicinal products (except for wholesale distribution), that do not include physical handling and that consist of negotiating independently and on behalf of another person;
3) the term of parallel distribution was determined, which describes a wholesale distribution of medicinal products registered with the Community Code of Medicinal Products, when it is imported into the Republic of Lithuania outside the distribution network of marketing authorisation holder of respective medicinal product;
4) it is provided that the packages of medicinal products subject to prescription and medicinal products not subject to prescription (except for products enlisted in respective list of medicinal products of the European Commission) must be equipped with safety features enabling to verify the authenticity of medicinal product, to identity individual packages and determine whether there was a breach of the outer packaging (these provisions are subject to transitional period);
5) Article 19 (1) of the Law on Pharmacy was amended whereby the distribution of active substances is exempted from the licencing requirement;  
6) the list of responsibilities of wholesale distribution licence holder was supplemented (for e.g. a holder of wholesale distribution licence must have a quality system complying with good distribution practice; to inform the State Medicines Control Agency (hereinafter – SMCA) and respective marketing authorisation holder having suspected or found that received or proposed medicinal products are falsified; to register incoming and dispatch operations purchased by using broking services; in case of intention to carry out parallel distribution, to provide the European Medicines Agency with respective information and pay the fees for examination of documents; on the intention to carry our parallel distribution, to inform the marketing authorization holder and SMCA 15 days before the first anticipated delivery and to report to trade-mark holder or his successor on repackaging of the medicinal product), etc.

The Law comes into effect on 1 July 2013.

More information is available here.

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Head of Tax & Legal department
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