Value Added Tax (VAT) Guidelines: Lithuania

Value Added Tax or VAT (Pridėtinės vertės mokestis, PVM) is due on any supply of goods or services made within the territory of Lithuania, when it is a taxable supply made by a taxable person in the course of an entrepreneur carried on by the said person.

 

Taxable supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are also deemed to be supplies (e.g. the private use of business assets). The standard VAT rate is 21 percent. In addition, the reduced rates of 5 percent and 9 percent apply.

 

There are some transactions VAT is not applicable. However, it is important to distinguish which transactions are zero rated and which are VAT exempted as only for zero rated supplies the input VAT incurred in making such transactions is deductible.

 

For certain types of transactions, a taxpayer is granted with a right to choose to treat such transactions as VAT taxable supplies but only when the purchaser is a taxpayer/entrepreneur. 

 

Intra-Community supply of goods may be subject to zero rate VAT in Lithuania if the following conditions are met: 

 

If a Lithuanian entrepreneur sells goods to a client who is not VAT registered in another EU Member State and the sale involves the transportation of these goods from Lithuania, it has to charge the Lithuanian VAT. If due to such supplies the Lithuanian entrepreneur is VAT registered as a distance seller in that EU Member State, it has to charge the VAT of that EU Member State.

 

Export of goods may be subject to zero rate VAT in Lithuania as well if the following conditions are met:

 

According to the general rule for business to business supplies (so-called B2B services) the place of supply of services is Lithuania provided that the recipient of these services is established in Lithuania. In addition, if such services are provided to a fixed establishment of the foreign company, the place of supply of services is where such fixed establishment is located.

 

The general rule for business to private customer supplies (so-called B2C services) is that the provision of services is taxable in the state where the supplier of these services is established. Thus, on such supplies the Lithuanian VAT is charged. 

 

The general rule for B2C services has some exceptions.

 

Also, supplies of some services are subject to domestic reverse charge, in particular:

Entrepreneurs are obliged to register for VAT purposes if they perform taxable supplies of goods and/or ser­vices within the territory of Lithuania (except if they only carry out transactions subject to the reverse charge mechanism) and their supplies have exceeded EUR 45,000 within the twelve-month period. If the said threshold is not exceeded, they can register voluntarily.

 

Besides, a person (including a non-taxable person) is obliged to register for VAT purposes if it acquires goods from the other EU Member States in the territory of Lithuania and the value of all such acquisitions (except for new means of transport or excise goods) has exceeded EUR 14,000 in a calendar year.

 

Non-residents are obliged to register for VAT purposes in Lithuania from the beginning of their taxable supplies and the registration threshold for small business is not applicable.

 

Non-resident taxable persons that supply and deliver goods to Lithuanian non-taxable persons must register in Lithuania if the value of goods supplied has exceeded EUR 10,000 in a calendar year. If such threshold is not exceeded, those persons can be registered voluntarily. Non-residents may also use the OSS simplification to avoid VAT registration. 

 

There are several cases when the VAT registration in Lithuania can be escaped by shifting VAT due to Lithuanian customers:

Non-resident entrepreneurs established in other EU Member States are allowed but not obliged to appoint a VAT representative. The requirement to appoint a VAT representative is obligatory for taxpayer established outside the EU.

 

Rödl & Partner in Lithuania also provides VAT compliance/declaration services for foreign companies, which are obliged to register for VAT in Lithuania.

All VAT returns of Lithuanian taxable persons must be submitted electronically as of 1 October 2016.

 

The standard tax period is a calendar month (except for natural persons). If the turnover of a taxable person did not exceed EUR 300,000 in the preceding calendar year, it can apply to the tax authorities to change the tax period into a quarter. As regards natural persons, the standard tax period is half a year. On request, the tax authorities may change it into a calendar month.

 

VAT returns for a tax period must be filed not later than by the 25th calendar day of the next tax period. If at the end of the calendar year the deductible input VAT must be adjusted, taxpayers must file an annual VAT return. It has to be submitted no later than 1 October of the following calendar year. 

 

A taxpayer is obliged to submit a recapitulative statement on goods and/or services supplied to another EU Member State to taxable persons registered there. 

 

A recapitulative statement has to be submitted for each calendar month by the 25th day of the next calendar month. 

 

Intrastat reports have to be submitted by taxpayers when the total value of the goods supplied to and acquired from other EU Member States (dispatches and arrivals) has exceeded certain thresholds. These thresholds are defined for each calendar year. For the year 2022, the threshold for dispatches is EUR 200,000 and for arrivals EUR 280,000. Intrastat returns must be submitted within 10 working days after the end of the reporting period.

  

The imposition of penalties is governed by the rules laid down in the Law on Tax Administration and the Code on Administrative Offences but not by the VAT law.

 

The penalty for non-registration, late registration or submission of false data regarding the registration is EUR 200 to EUR 390. If the taxpayer not maliciously does not submit invoice registers or VAT returns, then there are no penalties or sanctions. However, if such behavior is found to be maliciously, then the TA sends notifications and a fine can be imposed, depending on the level and format, from EUR 200 to EUR 1,040. 

 

Additionally, the late payment interest and penalties may occur. If the tax authorities determine that a person has failed to declare VAT or has illegally applied a lower VAT rate which has resulted in an illegal reduction of the VAT payable, a penalty equal to 10 percent to 50 percent of the amount of the unpaid tax is imposed. 

 

Late payment interest is set by the Minister of Finance for each calendar quarter and currently it equals to 0.03 percent of the unpaid amount. It is calculated for each day of delay for a period not exceeding 180 days. In case the unpaid amount is calculated by the tax authorities as a result of the tax audit, this period can be longer.

 

A taxpayer registered as a VAT payer in Lithuania is entitled to a refund of VAT paid on purchases of goods and services in Lithuania or on imports of goods into Lithuania if it reports and deducts such input VAT within a VAT return.

  

In order to obtain a refund, the taxable person has to submit a special application for refund. The excess input VAT may be refunded provided that it was accrued not earlier than during the current and three preceding calendar years counting back from the date of the application submission.

  

A taxable person not-registered as a VAT payer in Lithuania is also entitled to claim a refund of input VAT paid on goods and/or services acquired or imported into Lithuania. An application must be submitted electronically to the tax authorities of the EU Members State where such person is established. It has to apply no later than by the 30 September of the year following the calendar year for which it wishes to get a VAT refund.

 

For taxable persons established outside the EU an application must be submitted to the tax authorities of Vilnius Region no later than by the 30 June of the calendar year following the calendar year for which it wishes to get a VAT refund. 

 

There are certain items that businesses cannot recover the input VAT. For example: input VAT for exempt supplies (where VAT relates to both taxable and exempt supplies, an allocation is needed), input VAT for non-business (including private) activities (where VAT relates to both business and non-business activities, an allocation is required), input VAT falling within the margin schemes (e.g. the margin scheme applied by travel agents, the margin scheme for second-hand goods; etc.) and the compensatory VAT rate scheme (applied by farmers.

The particulars of a VAT invoice (PVM sąskaita faktūra) are stated in Art. 80 (1) of the Lithuanian VAT Act. Invoi­ces have to be issued in the Lithuanian language or in two languages (one of them – Lithuanian). In case they are issued in any other language, the tax authorities have a right to ask for translation.

 

An invoice that contains all requirements provided for by law and is issued and received in any electronic for­mat is treated as an electronic VAT invoice. Written and electronic VAT invoices are treated equally.

 

However, the supplier is allowed to use electronic VAT invoices only upon the purchaser’s prior consent and has to ensure the authenticity of the invoice origin (the supplier’s identity) and the integrity of their content (statutorily established requirements) by using not only an advanced electronic signature or a respective data interchange system but also any other internal control means.

 

A credit note is designed to document the following circumstances:

 

A credit note has to be issued by the person who issued the initial document recording the supply of goods and/or services. Only by the mutual agreement of the parties, such above listed changes may be documented by a debit note issued by the purchaser if it is a taxable person.