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Tax and Legal Newsletter, August 2012


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TAX NEWS


REGARDING THE SUPPLEMENT OF THE COMMENTARY OF ARTICLE 18 PARAGRAPH 2 OF THE LAW ON CORPORATE INCOME TAX


State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania (hereinafter – STI under MF) has amended a Commentary of Article 18 Paragraph 2 of the Law on Corporate Income Tax (hereinafter – CIT), which is related to the application of CIT tax relief for investment projects in accordance with Article 46(1) of the Law on CIT.

Amendments provide that the fixed assets, which have been purchased during the tax period of the year 2009 or later and have been registered in the appropriate register of the property, from the CIT perspective shall be attributed to the certain group of fixed assets and depreciated accordingly depending only on the purpose of the use of such property.

In an example, provided in the Commentary, an entity has purchased a tug boat, which main function is to help mooring and de-mooring other coming and leaving ships. An entity uses a tug boat as a machine. Thus, despite the fact, that it is registered as a ship in a Register of Seagoing Ships of the Republic of Lithuania, the boat is attributed to a group “Machinery and equipment” for CIT calculation purposes.

More information is available here.


REGARDING THE AMENDMENT AND SUPPLEMENT OF THE COMMENTARY OF ARTICLE 47 OF THE LAW ON VALUE ADDED TAX


STI under MF has prepared an amendment and supplement of the Commentary of Article 47 of the Law on Value Added Tax (hereinafter – VAT), with regard to Order No.VA-51 of the Head of STI under MF dated 30 May 2012.

Amendments of the Commentary of Article 47 Paragraph 2 Subparagraph 6 explain, that in order to reclaim input VAT on purchased goods (services) the diplomatic missions, consular institutions and representations of international organizations as well as the members of representations and organizations, except service staff, and their family members, have to submit an application (with an accompanying note) to the STI until the15th day of the first month of the next calendar quarter. Prior to the amendments, the applications of VAT refund had to be submitted to the Ministry of Foreign Affairs.

More information is available here.


REGARDING THE SUPPLEMENT OF ARTICLE 12 PARAGRAPH 17 OF THE LAW ON CIT


STI under MF has supplemented the Commentary of Article 12 Paragraph 17 of the Law on CIT.
Commentary has explained, that the direct or compensatory payments, received to maintain an income level of the agriculture activities or to compensate the loss of revenue, are regarded as non-taxable payments.

Payments for the compensation of costs incurred (investments made) are regarded as grants, therefore, the general accounting provisions for grants are applicable.

More information is available here.


REGARDING THE COMMENTARY OF ARTICLE 28 PARAGRAPH 2 OF THE LAW ON CIT


STI under MF has prepared a Commentary of Article 28 Paragraph 2 of the Law on CIT.

Commentary provides that the operating losses of an entity cannot be increased by the amounts of provided support. Considering the Law on Charity and Support and other existing legislation, the Commentary also explains, who can provide and receive support, what items can be a subject - matter, how charity or support should be formalized and explains the procedures of reporting to the tax administrator on support provided.

More information is available here.

 

REGARDING THE COMMENTARY OF ARTICLE 91 OF THE LAW ON VAT


STI under MF has prepared a Commentary of Article 91 of the Law on CIT, which comments on the main principles of VAT offset and refund from the budget.

Commentary explains that the VAT difference (overpayment) accumulated during tax period may be used to offset the tax arrears of taxes administered by STI or Customs without a separate request of a tax payer. The procedure can be executed if the tax payer has overdue liabilities to the State under loans funded from the State budget or loans guaranteed by the State.

The residual VAT overpayment (difference) remaining after the offset of tax arrears, may be refunded to the tax payer. In order to prove the accumulation of VAT difference, tax administrator may request the tax payer to provide the documents, which would prove:

• justification of application of 0 % VAT rate;

• supply of goods or provision of services, listed in Article 58 Paragraph 1 Subparagraph 2 of the Law on VAT;

• purchase (import) of fixed property;

• purchase (import) of raw materials or services for the production of fixed assets and (or) construction in progress;

• purchase (import) of fuel, fertilizers, seeds, feed, measures against pests and weeds;

• payment of import VAT.

Commentary also describes the amounts, which cannot be exceeded by the refundable VAT difference accumulated during tax period, as well as provides the examples for each of the cases.

More information is available here.


REGARDING THE COMMENTARY OF ARTICLE 25 OF THE LAW ON VAT


STI under MF has prepared the Commentary of Article 25 of the Law on VAT, which explains the provisions on exemption of universal postal services from VAT.

Commentary explains that VAT exemption is not applicable to the postal services, conditions of which have been negotiated individually. Services are regarded as negotiated individually, to the extent that they are specific, meet the needs of certain economic groups and are distinct from the postal services, satisfying the public needs. The following services are not considered as VAT taxable:

• services provided at the prices that have been set in advance;

• services provided at a discount, when the discount is applied for the recipients, who meet certain conditions;
• when a rate of universal postal services is reduced and other similar cases.

More information is available here.


REGARDING THE SUPPLEMENT OF THE COMMENTARY OF ARTICLE 18 PARAGRAPH 2 OF THE LAW ON CIT


STI under MF has prepared a supplement of the Commentary of Article 18 Paragraph 2 Subparagraph 1, in accordance with the Resolution No. 650 of the Government of the Republic of Lithuania “Regarding the Description of Research and Development Stage Classification” (hereinafter – the Description).

The Commentary explains the main provisions and the concepts of the Description.

More information is available here.


OTHER NEWS


REGARDING THE AMENDMENT OF THE RULES OF SERVING THE PERSONS IN STI


By the Order No. 75 of the Head of STI under MF, dated 1 August 2012, the new edition of the Rules of Serving the Persons in STI (hereinafter – the Rules) has been adopted.

New edition of the Rules has been supplemented with the new concepts of administrative procedure and administrative decision. It is also established, that STI examines not only requests or complaints, but also the reports, i.e. the information on possible violations of tax legislation and (or) on possible tax avoidance, as well as information on the corruption offenses committed by a public servant or employee of STI.

The Rules have also established, that the requests and/or complaints of the persons are not examined, if the offenses referred in them have been committed at least six months before the submission of the request/complaint. The person is informed on the decision not to examine his/her request/complaint within 5 working days after the receipt of the request/complaint by the STI.

More information is available here.


REGARDING THE AMENDMENTS OF THE LAW ON TAX ADMINISTRATION


STI under MF has prepared the amendments and supplements of the Commentary of Article 2 Paragraph 4, Article 40 Subparagraph 9, Article 55, Article 102 and Article 106 Paragraph 1 Subparagraph 1 and 3 of the Law on Tax Administration.

The amendments of the aforementioned articles are related to the accounts of the natural and legal persons with payment institutions and electronic money institutions. The amendments explain that:

• Legal persons, registered as the tax payers in Lithuania, must inform the STI under MF on opening or closure of any type of the account(s) held in payment or electronic money institutions of the foreign country within 5 days of the opening/closure.

• Payment and electronic money institutions must provide the information to the Tax Authorities on the opened or closed account(s) within 3 working days after the opening/closure of the account(s) or by other ways and terms agreed by the parties in an agreement.

• Tax Authorities have a right to order payment or electronic money institutions to terminate the disbursement and transfer of the money from the tax payer’s account(s).

• Tax administrator has a right to order payment or electronic money institutions to write off the amounts of tax arrears from the account of person or his guarantor, if a person or his guarantor does not fulfil their tax obligations in a timely manner.

More information is available here.


LEGAL NEWS


REGARDING THE LAW ON SMALL PARTNERSHIPS


The Law on Small Partnerships (hereinafter – the Law) was adopted on 29 June 2012 and came into force on 1 September 2012. The main objective of the Law is to promote small business by creating legal conditions to set up the business with low maintenance costs.

The main provisions of the Law are the following:

• Small partnership (hereinafter – the Partnership) is a private limited liability legal entity;

• Only natural persons (private individuals) might be the partners of the Partnership (hereinafter – the Partner(s)). The maximum number of the Partners is limited to 10;

• Electronic incorporation of the Partnership (without necessity to obtain notary’s approval of the incorporation documents) will be available after the Ministry of Economy approves standard forms of incorporation documents as well as after the respective changes of the registration system will be implemented;

• The Partner shall not be in the employment relations with the Partnership, i.e., the employment agreements shall not be concluded with the Partners working in Partnerships. However, the Law provides a possibility to the Partners to receive funds for personal needs as an advanced payment of profit;

• The Law does not establish a minimum capital of the Partnership. The property of the Partnership includes Partners’ contributions, which shall be money or other property, owned by the Partners;

• Corporate bodies of the Partnership may be the following: (i) general Partners’ meeting or (ii) general Partners’ meeting and the managing director of the Partnership (being the Partner or other natural person);

• Civil (services) agreement shall be concluded with the managing director of the Partnership;

• In case there are more than two Partners and the general Partners’ meeting acts as a management body, then a representative of the Partnership shall be appointed. A representative, who shall always be the Partner, is not regarded as a management body.

Due to the adoption of the Law, the amendments to the following laws came into force on 1 September 2012: Civil Code, Company Law, Law on Social Security, Law on Company’s Financial Reporting, etc.

Contacts

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