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VAT in Lithuania

The VAT Law came into effect on 1 July 2002 and on 1 May 2004 it has been adjusted to the norms of the EU including the 6th VAT Directive. Since then all amendments of the VAT on internal supplies have been used.

Every natural and legal person performing commercial activity has a tax liability as well as domestic or foreign natural and legal persons who must, in any case, pay attention to the threshold values. The Lithuanian natural or legal persons must be VAT- registered if their annual income exceeds turnover of the last 12 months, more than 100,000 LTL (28,962 EUR).

Foreign legal or natural persons must immediately be VAT-registered if they perform business activity in Lithuania; if they are the supplying firms with companies in Lithuania which do not have the VAT registration; more than 125,000 LTL (36,203 EUR) per year or when buying goods from other state of the EU. A registration of a foreign person or a foreign company must be realized through a financial attorney, except for the companies VAT-registered in one of the states of the EU or having an agency or a branch office in Lithuania.

A voluntary VAT-registration is also possible.

The principle is to define a place of job performance and speaking of services - a place of delivering services. Generally, there are many exceptions to the definition for different services with a permanent place of job performance and a place of receiving of services. These services are included and exhaustingly listed in the VAT Law and among which we can mention: advertising, personal distribution, advisory services, engineering and translation services, accounting and data processing, etc.

The VAT rate used in Lithuania is 0 %, 5 %, 9% and 18 %. The common tax rate is 18 %. 5 % VAT rate is used on following products and services:

1.Certain services dealing with transport of passengers ;
2.Books, newspapers and magazines;
3.Pharmacy and medical products;
4.Hotel accommodation;
5.Specific foodstuff and agricultural services.

9 % VAT rate is applied on the building of social flats; financial participation of states or towns is a decisive criterion.

0 % VAT rate is applied on export, internal supplies and on related services.

Exemption from the VAT is given to following products and services: certain services in the area of education, science and culture when these are performed by organizations registered in this sphere and services in the area of post, insurance companies and banks, trades stocks, etc.

The income-tax return on the VAT, if there is a tax liability, must be realized up to 25 days from the end of tax assessment period. When the total annual income of a company is lower than 200,000 LTL (57,924 EUR) it can ask for a semi-annual tax assessment period which means the rendering of the income-tax return on the VAT at latest till the 25th day of the following month, after termination of a 6 months tax assessment.

On principle, natural persons have a semi-annual tax assessment but they can ask for the reduction. It is possible to claim for another tax assessment period, but only if it is on the basis of the system of accounting and at the same time more advantageous for a parent company. The tax period may not be longer than 60 days and the beginning of the first and the end of the last tax period must correspond with the beginning or the end of a calendar year.

It is necessary to give a summary report quarterly. In the course of 4 months the decision about a tax lien from turnover would be made, the equivalent payment is needed to remit throughout 10 to 14 days. In reality, a tax bureau advises to count in the refund as a credit note and realize no payment. However, if there is still a request for the payment, the time-limit is often exceeded.

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