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Tax and Legal Newsletter, March 2013


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TAX NEWS

REGARDING THE AMENDMENT OF THE COMMENTARY OF ARTICLE 24 PARAGRAPH 2 AND ARTICLE 57 PARAGRAPH 2 OF THE LAW ON CORPORATE INCOME TAX

State Tax Inspectorate under the Ministry of Finance (hereinafter – STI under MF) prepared the amendments to Article 24 Paragraph 2 and Article 57 Paragraph 2 of the Law on Corporate Income Tax (hereinafter – CIT).

The Commentary of Article 24 Paragraph 2 of the Law on CIT regulating the amounts of value added tax (hereinafter – VAT) deductible from the revenue was amended in order to harmonize its provisions with the respective amendments of Article 24 Paragraph 2 of the Law on CIT effective as of 29 December 2012. It should be mentioned that the latter amendment established a possibility to deduct the import VAT amounts from the income, if these amounts are not deductible according to the provisions of the Law on VAT and are calculated on the allowable deductions established by the Law on CIT, irrespective of whether these import VAT amounts were paid to the budget or not.

The Commentary of Article 57 Paragraph 2 of the Law on CIT was supplemented with the provisions stating that the requirements for the content and preparation of the financial statements of small partnerships are established by the Business Accounting Standards, whereas the small partnerships may select whether in their accounting treatment and financial reporting they shall follow:

• business accounting standard No. 38 “Accounting and financial reporting of the unlimited liability legal entities and small partnerships”, solely, or
• all other business accounting standards.

Furthermore, the Commentary of Article 57 Paragraph 2 of the Law on CIT was supplemented with a provision explaining that management companies operating under the Law on Collective Investment Undertakings and management companies operating under the Law on Supplementary Voluntary Pension Accumulation, shall treat their accounting and prepare the financial statements in line with the international standards. This provision is applicable for the tax periods beginning as of 1 January 2013 and later.

More information is available here.

REGARDING THE AMENDMENT AND SUPPLEMENT TO THE COMMENTARY OF ARTICLE 101 PARAGRAPH 1 OF THE LAW ON VAT

STI under MF prepared the amendment and supplement to Article 101 Paragraph 1 of the Law on VAT, establishing the cases when a set of services provided by a VAT payer (travel agent), who purchases the services from the third parties and sells them to the final customer, shall be treated as a sole service which is subject to a special VAT taxation scheme.

Paragraph 5 of the Commentary was supplemented with a provision, according to which in cases when the travel agent sells (resells) to the final customer a sole service or several certain services, which by nature are not necessarily related to travelling, such services should not be treated as tourism services and may not be covered with the margin scheme. For example, in cases when the catering service is provided only and it is not clear that this service is provided as a part of a tour package, such service may not be regarded as a tourism service with respect to which a margin scheme might be applied.

Paragraph 9 of the Commentary was also supplemented with a provision, explaining that if the transaction on services provision constitutes of several elements, it should be evaluated, whether from VAT perspective such transaction should be treated as a sole transaction or as several separate transactions. In determining whether the services should be attributed to the taxable amount of the main transaction, each such transaction should be assessed on a case-by-case basis, considering the objectives of a customer and other circumstances.

Commentary of Article 101 Paragraph 1 of the Law on VAT was also supplemented with a new Subparagraph 10. Considering the ECJ practice (e.g. cases C-349/96 and C-41/04), it provides that if one or several elements constitute the main service, whereas additional services do not have individual objectives and are provided with an aim of making the main service more attractive to the customers, it is considered that a provision of a sole service was performed. However, if an additional service has a separate aim and a customer may choose whether to receive only the main service or the main and additional services for an additional fee, such services should be treated as individual services and may not be included into the taxable amount of the main transaction.

In case the services provided by travel agents to the final customers consist of several elements, the following criteria shall be applied in order to determine whether such services are to be regarded as tourism services:

• services provided are typical of trips (main services typical of trips: passenger transportation, accommodation, catering, tours etc.);
• a trip is organized for cognitive, professional, ethnical, cultural, recreational, health, wellness, religious or special purposes in home or foreign countries with staying for at least one night but travelling no more than a year off the place of residence of the traveller;
• a set of services is provided for a period of one trip and includes at least one service listed in paragraph 1 mentioned above.

Commentary also provides two examples illustrating the conditions that shall be met in order to apply the margin scheme.

More information is available here.

OTHER NEWS

REGARDING THE REPEAL OF THE CERTIFICATE FORM ON TAKEOVER OF CONTROL OF IMPORT VAT PAYMENT AND THE RULES ON ISSUANCE THEREOF

In accordance with the Order No. VA-12 of the Head of STI under MF, dated 11 February 2013, an Order No. 202 of the Head of STI under MF „Regarding the Certificate Form on Takeover of Control of Import VAT Payment and the Rules on Issuance thereof“, dated 2 July 2002, was repealed from 1 March 2013.

The latter repeal was made in relation to the amendment effective as of 1 March 2013, according to which Lithuanian VAT payers shall have to pay the import VAT for the goods imported to Lithuania to the account of STI under MF and not to the Customs’ account, as it was required previously.

More information is available here.

REGARDING THE AMENDMENT OF THE RULES ON THE REGISTER OF VAT INVOICES

By the Order No. VA-16 of the Head of STI under MF, dated 26 February 2013, the Rules on Management of the Register of VAT Invoices, form FR0671 of the data of the register of received VAT invoices and form FR0672 of the data of the register of issued VAT invoices were amended.

The aforementioned amendments are made considering the Order No. 1K-424 of the Minister of Finance of the Republic of Lithuania, dated 12 December 2012, based on which the Rules on Formalizing the Supply of Goods or Services by One VAT Invoice were adopted. Concept “joint VAT invoice” was amended into “one VAT invoice”, as well as other editorial and technical changes were made.

More information is available here.

REGARDING THE AMENDMENT TO THE RULES ON THE REGISTRATION OF GOODS TRANSPORTED TO ANOTHER MEMBER STATE OF THE EU FOR THE PURPOSES ESTABLISHED IN SUBPARAGRAPHS 5-7 OF ARTICLE 51 PARAGRAPH 2 OF THE LAW ON VAT

Paragraph 3.1 of the Rules on the Registration of Goods Transported to Another Member State of the EU for the Purposes Established in Subparagraphs 5-7 of Article 51 Paragraph 2 of the Law on VAT (hereinafter – the Rules) was amended by the Order No. VA-21 of the Head of STI under MF, dated 21 March 2013. The latter paragraph was supplemented in order to harmonize its provisions with Subparagraph 5 of Article 51 Paragraph 2 of the Law on VAT that came into force on 1 January 2013.

The amendment established that the Rules inter alia shall be applied in cases when a taxable person transports goods from the Republic of Lithuania to another EU state, where the assessment of goods is performed, on condition that upon the assessment the goods shall be returned to Lithuania to the same taxable person. Prior to the amendment, assessment procedures were not included into the scope of the Rules.

REGARDING THE RULES ON ISSUANCE AND ACCEPTANCE OF THE ACCOUNTING DOCUMENTS USED FOR THE CALCULATION OF TAXES

Resolution No. 163 of the Government of the Republic of Lithuania, dated 20 February 2013, amending Resolution No. 780 of the Government of the Republic of Lithuania, “Regarding the Rules on Issuance and Acceptance of the Accounting Documents used for the Calculation of Taxes” (hereinafter – the Rules) came into effect on 1 March 2013. The amendments were made in order to harmonize the provisions of Resolution No. 780 with the provisions of Article 80 (4) of the Law on VAT effective as of 1 January 2013. It should be noted that Article 80 Paragraph 4 of the Law on VAT establishes the requirements for the VAT invoices, when the joint supply of goods/services by more than one supplier/to more than one customer is formalized by one VAT invoice.

Subparagraph 2.7 of Resolution No. 780 was supplemented with a third paragraph, which provides that when the joint supply of goods/services by several VAT payers or supply of goods/services to several persons is formalized by one VAT invoice, the incurred costs that are based on these VAT invoices may be regarded as expenses if the VAT invoices include all the required details established in the legislation.

Furthermore, newly established Subparagraph 13 of the Rules describes the required details specified in cases when  goods/services are jointly supplied to attorneys of a law firm, notaries of a notary office, as well as in other cases established by the order of the Minister of Finance No. 207, dated 2 June 2004. According to the new regulation, the details of purchaser, as established by the Minister of Finance, shall be provided in the VAT invoice instead of the name (first name and last name in case it is a natural person) and VAT payer’s code. Prior to the amendment, the mentioned details, as established by the Minister of Finance, had to be indicated instead of the payer’s code (personal ID code).

More information is available here.

LEGAL NEWS

REGARDING THE LAW ON BANKRUPTCY OF NATURAL PERSONS

On 1 March 2013, the Law on Bankruptcy of Natural Persons No. XI-2000 (hereinafter – the Law) came into force. The Law is aimed at establishing the conditions for restoring the solvency of a natural person, a farmer or a person carrying out individual activities.

It is stipulated that in order to initiate the bankruptcy proceedings, an insolvent natural person may apply to the district court. A natural person is deemed to be insolvent when his/her debt obligations exceed 25 minimal monthly wages (i.e. LTL 25,000) and are overdue. The Law applies regardless of the time when the debts have been incurred.

The Law also establishes that a natural person under bankruptcy proceedings must prepare a plan on the fulfillment of creditors’ claims and the restoration of the persons’ solvency. Once the creditors’ approval has been received, the plan should be approved by the court. The plan must be implemented within the maximum term of 5 years. After the termination of this term, the remaining debts shall be written off.

More information is available here.

REGARDING THE AMENDMENTS TO THE LAW ON ENTERPRISE BANKRUPTCY

On 28 March 2013, amendments to the Law on Enterprise Bankruptcy No. XII-208 (hereinafter – the Law) were adopted. The Law amends the procedure for bankruptcy administrators’ selection and appointment.

The Law establishes that the bankruptcy administrator shall be selected using a special software selection program. This program shall ensure the random selection of the bankruptcy administrator, having regard to the criteria characterizing the corresponding enterprise, i.e. size, type of activities, the specifics of the bankruptcy proceedings etc. The software program will not be applied in the cases of non-judicial bankruptcy proceedings.

The Law stipulates that the candidacy of randomly selected bankruptcy administrator shall be approved by the court. The court’s decision of approval is not subject to appeal.

In addition to other amendments, the Law also concerns the issues on convocation of the first creditors’ meeting, contesting the creditors’ claims and other matters.

The Law shall come into force on 1 January 2015.

More information is available here.

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Tatjana Vaiciuliene
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Deloitte
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Head of Tax & Legal department
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Attorney-at-Law
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Phone:
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Email
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