Vilnius GMT +2
EY Aukstaiciu 7 LT-11341 Vilnius Lithuania
Indirect tax contacts
Irmantas Misiunas
+370 (5) 274-2307 irmantas.misiunas@lt.ey.com
Raimonda Gaizauskiene +370 (5) 274-2155 raimonda.gaizauskiene@lt.ey.com
Martynas Banys +370 (5) 274-2112 martynas.banys@lt.ey.com
Agne Jablonskyte +370 (5) 274-2284 agne.jablonskyte@lt.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Pridetines vertes mokestis (PVM)
Date introduced 1 May 1994
Trading bloc membership European Union (EU)
Administered by Ministry of Finance (http://finmin.lrv.lt)
State Tax Inspectorate (http://www.vmi.lt)
Customs Department (http://www.lrmuitine.lt)
VAT rates
Standard 21%
Reduced 5%, 9%
Other
VAT number format
VAT return periods
Monthly
Quarterly
Other
Thresholds
Registration
Zero-rated (0%) and exempt
LT123456789 LT123456789012
Standard VAT return period
For legal persons with turnover not exceeding EUR300,000 in the preceding year
For members of international groups (period may not be longer than 60 days and the entity’s fiscal year must be the calendar year)
Established EUR45,000
Non-established None
Distance selling EUR10,000
Intra-Community acquisitions EUR14,000
Electronically supplied services
EUR10,000
Recovery of VAT by non-established businesses Yes
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods or services in Lithuania supplied for consideration by a taxable person performing economic activities
• The intra-Community acquisition of goods from another European Union (EU) Member State by a taxable person (see the chapter on the EU)
• The importation of goods into Lithuania (subject to import VAT)
• Certain other cases linked to the international traffic of goods (for example, the supply of goods that are intended to be produced to customs and placed in temporary storage, the supply of goods that are intended to be placed in a free zone and the supply of goods that are intended to be placed under customs warehousing arrangements or special inward processing procedure)
Quick Fixes. Pending introduction of a “definitive” system for the VAT treatment of intra-Com munity supplies of goods to taxable persons, the EU has adopted Quick Fixes for intra-Commu nity trade in goods. For an overview of the Quick Fixes rules, see the chapter on the EU.
The Quick Fixes were adopted by implementing the respective amendments of the Lithuanian Law on VAT in December 2019, which in general follows the Directive with few minor deviations and which came into force starting from 1 January 2020. The following amendments were implemented:
• Call-off stock arrangements
• Chain transactions
• Mandatory VAT identification number to apply the zero VAT rate to intra-Community supplies
• Documentary evidence of proof of intra-Community supplies
In regard to the regulation on the evidence (documentation) of cross-border transportation, the supplier has the right to choose whether to provide documents according to the current Lithuanian practice (concerning a set of coherent documents proving the transport, the destination docu ment, etc.) or the evidence specified in the Article 45a of the updated Council Implementing Regulation (EU) No. 282/2011. If the supplier chooses to prove intra-Community supplies based on the documents specified in EU Directive, the tax authorities should not require more docu ments to prove the intra-Community transport.
Effective use and enjoyment. To avoid instances of nontaxation or double taxation, EU Member States can apply use and enjoyment rules that allow a service that is “used and enjoyed” in the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed.
If a service is taxed in the EU under the use and enjoyment provisions, a non-EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU. In Lithuania, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. If the taxable person transfers a business or part of the business as a complex (i.e., including its assets and other related rights and obligations) to another taxable person as a going concern, such transfer of activities shall not be deemed to be neither a supply of goods nor services. The transaction is considered to be as a transfer of a going concern and thus not subject to VAT, if the following conditions are met:
• Both parties are considered as taxable persons
• The activities will be continued after the transfer
•
The transfer should constitute the totality of assets, rights and obligations related to the eco nomic activity (including, but not limited to tangible and intangible assets and liabilities related to the transferred activities)
C. Who is liable
Persons liable to VAT are:
• A taxable person, i.e., a business entity, an individual established in Lithuania or elsewhere or a collective investment undertaking (fund) that performs an economic activity in the course of its business in Lithuania
• A legal entity that is not a taxable person with respect to intra-Community acquisitions of goods or any person with respect to the intra-Community acquisition of new means of transport
The VAT registration threshold for Lithuanian entities is turnover in excess of EUR45,000 in the preceding 12 months. If the total turnover of all entities controlled by a single entity or by an individual exceeds EUR45,000, all entities are required to register for VAT, even if the turnover of each entity separately does not exceed the threshold.
The VAT registration threshold for farmers engaged in respective activities under a special scheme, legal nontaxable persons and taxable persons who are not eligible for input tax deduction is the amount of intra-EU acquisitions of goods exceeding EUR14,000 in the preceding 12 months (i.e., no threshold for taxable persons). Special rules apply to foreign or “non-established” busi nesses that have no fixed establishment in Lithuania.
Exemption from registration. There are no exemptions from the VAT registration for Lithuanian entities if their turnover in Lithuania exceeds the EUR45,000 threshold in the preceding 12 months.
Foreign entities are not required to register for VAT if their transactions are exempt, outside the scope of VAT or zero-rated (taxable at 0%). However, for certain supplies, VAT registration is required even though the zero rate of VAT applies. These supplies include the following:
• Exports of goods
• Supplies of goods that are intended to be produced to customs and placed in temporary storage
• Supplies of goods that are intended to be placed in a free zone or in a free warehouse
• Supplies of goods that are intended to be placed under customs warehousing arrangements or special inward processing procedure
• Services linked to the above supplies
• Intra-Community supplies of goods
• Supplies of new vehicles that are transported to another EU Member State
• Supplies of goods to a taxable person, who facilitates trade via e-commerce marketplace/plat form/portal or similar means for distance sales of goods imported from third territories or third countries with an intrinsic value not exceeding EUR150 and/or who creates via the mentioned means the conditions for a taxable person, established outside the EU, to supply the goods to nontaxable persons in the EU
Taxable persons to which non-EU scheme and/or EU scheme and/or IOSS scheme apply, and supply within the territory of the country the services and/or goods under those schemes, and are already registered for VAT purposes in any other EU Member State in accordance with the provi sions of the legal acts of that EU Member State are not obliged to register for VAT purposes in Lithuania. However, this only applies if their obligation to register for VAT purposes arises solely from the supply of such services and/or goods.
Voluntary registration and small businesses. Certain persons may register for VAT voluntarily. This possibility exists for 1) a business established in Lithuania that has turnover not exceeding the registration threshold (except when it is carrying out or intends to carry out only an activity
for which input and/or import VAT on goods and/or services used could not be deductible under the provisions of Lithuanian VAT law) and 2) a person that acquires or plans to acquire goods from another EU Member State (except new means of transport or excise goods). In practice, persons established outside Lithuania may also voluntarily register for VAT.
Group registration. Group VAT registration is not allowed in Lithuania.
Holding companies. In Lithuania, a pure holding company cannot be a member of a VAT group, as group VAT registration is not allowed in Lithuania.
Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC Article 132(1)(f) has been implemented in Lithuania. This provides an option to exempt support services that the cost-sharing group supplies to its members, providing certain conditions are met (in accordance with specific requirements laid out in Lithuanian VAT law).
The Lithuanian VAT law has adopted the provisions of cost-sharing exemption in accordance with the Article 132(1)f of VAT Directive 2006/112/EC. Respectively, the supply of services by independent groups to its members where those members are persons carrying out activities specified in Chapter 2 of Title IX of the VAT Directive 2006/112/EC, which are directly neces sary to the activities referred in this article, shall be exempt from VAT. The members of the independent group should not pay more for the service received than their share of the total costs.
Fixed establishment. In Lithuania, a fixed establishment is considered a structural or other divi sion of a taxable person through which a taxable person of one country supplies and/or acquires goods and/or provides and/or receives services in another country. The criteria of fixed establish ment defined in the Regulation No. 282/2011 are applied in Lithuania. No special guidelines are available from the tax authorities. The official Commentary of the Law on VAT only provides the general definition of a fixed establishment and gives the link to Regulation No. 282/2011.
Non-established businesses. A “non-established business” is a business that does not have a fixed establishment in Lithuania. A non-established business must register for VAT in Lithuania if it makes taxable supplies of goods or services in Lithuania. No VAT registration threshold applies to supplies made by foreign non-established businesses; that is, registration is required in the event a taxable supply is made in Lithuania, unless the reverse charge applies or unless the supply is outside the scope of VAT or is exempt. As mentioned above, for certain supplies, VAT registra tion is required even though the VAT zero-rate applies.
A non-established business must register for VAT in Lithuania if it makes distance sales of goods and/or supply of services to end customers (B2C) in Lithuania greater than EUR10,000 in the current or previous calendar year, unless it is registered for VAT with respect to a special taxation scheme (e.g., non-EU scheme, EU scheme or IOSS scheme) in another EU Member State. In the latter case, such business is not obliged to register for VAT in Lithuania with respect to the sup plies made under those taxation schemes to nontaxable persons in Lithuania.
Tax representatives. A non-established business must register for VAT through a fixed establishment in Lithuania or appoint a fiscal representative.
The requirement to appoint a fiscal representative is not applicable to non-established businesses that are based in other EU Member States, as well as to non-established businesses that register for VAT in Lithuania only for the application of special taxation schemes, i.e., non-EU scheme, EU scheme or IOSS scheme. The requirement to appoint the fiscal representative is also not applicable to non-EU established businesses that are based in the territories where the provisions of Mutual assistance agreements are applied, which essentially are equivalent to the provisions of Directive No 2010/24/EU and Regulation No. 904/2010. The fiscal representative becomes jointly liable for VAT obligations with the company they are representing. Based on the rules on
appointing the fiscal representative in Lithuania published by the Ministry of Finance, the fiscal representative must meet certain criteria, for example:
• The taxable person must be engaged in one of the following activities – legal, accounting, book keeping and/or audit, tax consulting
• Is registered for VAT purposes in Lithuania for at least three years
• Does not have tax arrears or debts to Customs over the past 12 months
• The management of the entity must have clean criminal record in terms of financial and tax matters
Reverse charge. A non-established business that makes taxable supplies in Lithuania is not required to register for VAT if the reverse-charge rule applies to all its transactions. Under the reverse-charge rule, a Lithuanian customer that is a taxable person established in Lithuania is responsible for the calculation and payment of VAT, unless either of the following circumstances exists:
• The supply is used by a fixed establishment of the person outside Lithuania
• The supply falls under the list of exceptions
Domestic reverse charge. Under the domestic reverse-charge rule, a customer that is a VATregistered person in Lithuania is responsible for the calculation and payment of VAT with respect to supplies of the following goods:
• Natural gas, electricity, as well as heating or cooling energy
• Goods installed and assembled in Lithuania
The Lithuanian VAT law also provides for a reverse-charge procedure with respect to supplies between persons established in Lithuania, including the following:
• Supplies of goods and services while a supplier is under bankruptcy or a restructuring proce dure
• Supplies of metal scrap and similar products
• Supplies of timber
• Supplies of construction services as detailed in the law on construction and supplies of certain construction materials
• Supplies of hard drives, provided that the customer is registered for VAT in Lithuania (effective 1 August 2019 until 28 February 2022)
• Supplies of mobile phones, tablets and laptops (classified under CN code 8471 30 00), pro vided that the customer is registered for VAT in Lithuania (effective 1 August 2019 until 30 June 2022)
Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice these are mostly private individuals), but we refer to these rules as e-commerce VAT rules because most of these transactions are con ducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see Section B, Effective use and enjoyment subsection above). Therefore:
• For supplies of services made by a nonresident supplier to a business customer (B2B), the busi ness customer is responsible for accounting for the VAT due, using the reverse charge.
• For supplies of goods made by a nonresident supplier to a business customer (B2B), where the goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due, as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.
• For supplies of goods or services made by a nonresident supplier to a final consumer (B2C), the supplier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling
threshold of EUR10,000 with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a “One-Stop-Shop” mechanism.
For more details about intra-EU distance sales, see the chapter on the EU. Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.
Local VAT registration. A nonresident supplier may choose to register for VAT in each EU Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). Non-EU businesses may be required to appoint a fiscal representative for accounting for the VAT due on these transactions.
In Lithuania, for the rules on the requirement to appoint a fiscal representative for non-EU busi nesses, see the Tax representatives subsection above. In addition, for the details on the registration procedures required for a nonresident supplier to register for VAT purposes in Lithuania, see the Registration procedures subsection below.
One-Stop Shop. Effective 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop-Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic services, telecommunication services and broadcasting ser vices.
The OSS is an electronic portal that allows businesses to:
• Register for VAT electronically in a single EU Member State for all intra-EU distance sales of goods and for B2C supplies of services
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly VAT return. The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies (goods as well as services) that fall under the OSS.
In Lithuania, for the EU scheme, the country of OSS registration shall be the EU Member State in which a taxable person is established or in which it has a division. If a taxable person, that is not established in the EU, has divisions in more than one EU Member State, the country of OSS registration is the EU Member State in which such taxable person has a division and in which it chooses to treat as the country of OSS registration. In case when a taxable person is not estab lished in the EU and does not have a division in the EU, the country of OSS registration is the EU Member State in which the dispatch or the transport of the goods begins.
Respectively, in the EU scheme the country of consumption shall be understood as below:
• In case of services – EU Member State in which the supply of services takes place
• In case of distance sales – EU Member State in which the transport of the goods to the final customer ends
• In case when a taxable person facilitates trade via e-commerce marketplace/platform/portal or similar means and the dispatch or transport of the goods begins and ends in the same EU Member State – that EU Member State
In Lithuania, for the non-EU scheme, the country of OSS registration shall be understood as the EU Member State in which a taxable person established outside the EU decides to register for OSS. Respectively, in the non-EU scheme, the country of consumption shall be understood as the EU Member State where the supply of services takes place.
The deadline to submit the VAT return via OSS and pay the VAT in case of EU or non-EU schemes is the last day of the month following the taxable period, which is a calendar quarter. When making payment, the identification number assigned to the VAT return in the OSS system shall be indicated. If no goods or services were supplied during the taxable period, nil-VAT return
shall be submitted. If it is necessary to correct the data of the VAT return submitted via OSS, all the corrections shall be made in the subsequent VAT return within three years after the date when the initial return had to be submitted.
To register for OSS, a taxable person must submit the respective registration application via OSS system (www.vmi.lt/oss).
For more details about the operation of the OSS, see the chapter on the EU.
Import One-Stop Shop. Effective 1 July 2021, the Import One-Stop-Shop (IOSS) scheme applies for B2C distance sales of goods from outside the EU.
Effective 1 July 2021, VAT is due on all commercial goods imported into the EU regardless of their value. The actual supply is subject to VAT in the country where the goods are imported (the country of destination). The IOSS facilitates the declaration and payment of VAT due on the sale of low-value goods (i.e., consignments valued at less than EUR150 per consignment). It allows suppliers selling low-value goods dispatched or transported from a non-EU country to customers in the EU to collect, declare and pay the VAT due. If the IOSS is used, the importation into the EU is exempt from VAT.
In Lithuania, the IOSS scheme can be used by the taxable persons established in the EU or outside the EU who perform distance sales of goods imported from third territories or third coun tries to the final customers in the EU.
In the view of IOSS scheme, the country of OSS registration shall be understood as below:
• When a taxable person is established outside the EU – the EU Member State in which such taxable person decides to register for OSS
• When a taxable person established outside the EU has a division in the EU Member State – that EU Member State
• When a taxable person is established in the EU Member State – that EU Member State
• When the import agent is established in the EU Member State – that EU Member State
• When the import agent established outside the EU has a division in the EU Member State – that EU Member State
Respectively, in the IOSS scheme, the country of consumption is the EU Member State in which the transport of the goods to the final customer ends.
A taxable person established outside the EU in the territory, where the provisions of mutual assistance agreements are not applied, which essentially are equivalent to the provisions of Directive No 2010/24/EU and Regulation No. 904/2010, that performs distance sales of goods imported from that territory shall appoint an import agent to use the IOSS scheme.
The deadline to submit the VAT return via OSS and pay the VAT in case of IOSS scheme is the last day of the month following the taxable period, which is a calendar month. When making payment, the identification number assigned to the VAT return in the OSS system shall be indi cated. If no goods were supplied during the taxable period, nil-VAT return shall be submitted. If it is necessary to correct the data of the VAT return submitted via OSS, all the corrections shall be made in the subsequent VAT return within three years after the date when the initial return had to be submitted.
To register for OSS, a taxable person shall submit the respective registration application via OSS system (www.vmi.lt/oss).
For more details about the IOSS, see the chapter on the EU.
Use of the IOSS special scheme is not mandatory. If VAT is not collected via the IOSS scheme, the importation of goods into the EU is subject to import VAT in the country of final destination,
and the Member State can decide freely who is liable to pay the import VAT, which could be the customer or the seller (or an electronic interface).
Postal Services and Couriers Scheme. If the IOSS is not used and the customer is liable for the import VAT due on the supply (and importation) of consignments with a small intrinsic value (i.e., less than EUR150), the VAT can be collected using the special scheme for postal services and couriers. For more details about the special scheme for postal services and couriers, see the chapter on the EU
In Lithuania, under this scheme, the obligation to pay the import VAT falls to the final customer to whom the goods are intended and who pays the import VAT to the taxable person, who declares these goods to customs. In other words, a taxable person that declares goods to customs (e.g., postal services provider or courier), collects the related import VAT from the final cus tomer of the goods and pays it.
Respectively, postal services provider or courier at the end of each calendar month shall submit to the customs the respective report via electronic means containing information on the import VAT collected under this scheme. Both the person declaring the goods to customs, as well as the person to whom the goods are intended are jointly and severally liable for the payment of import VAT.
Online marketplaces and platforms. Under the new EU VAT e-commerce rules, effective 1 July 2021, taxable persons that “facilitate” certain B2C sales of goods are deemed to have purchased and then supplied those goods themselves. This means that the single supply from the “underly ing” supplier to the final consumer is split into two deemed supplies:
• A supply from the supplier to the facilitator (deemed B2B supply)
• A supply from the facilitator to the final customer (deemed B2C supply). Any intermediation service provided by the facilitator is disregarded for VAT purposes
This provision does not cover all sales facilitated via the facilitator. It only covers distance sales of goods imported from non-EU jurisdictions in consignments with an intrinsic value not exceeding EUR150. The jurisdiction of residence of the supplier using the facilitator is irrelevant. The supply to the facilitating platform is VAT exempt and the supplies made by that platform follow the e-commerce VAT rules as described above. In addition, the provision also covers sales within the EU, if the supplier is not established within the EU. This applies to both local ship ments within one Member State, as well as intra-Community shipments. In both cases, the final customer must be a nontaxable person.
In Lithuania there are no additional specific local rules that apply.
For more details about the rules for online marketplaces, see the chapter on the EU.
Vouchers. Effective 1 January 2019, Lithuania adopted provisions of the Council Directive (EU) 2016/1065. Changes in the local legislation defined single-purpose vouchers (SPV) and multipurpose vouchers (MPV) and set the rules on taxation with VAT of transactions in both cases. New rules shall apply to all vouchers released from 1 January 2019 and onward.
SPVs are defined as vouchers where the place of supply of the goods or services to which the voucher relates, and VAT due on those goods or services is known at the time of issue of the voucher. An MPV is any voucher that is not a single-purpose voucher.
A transfer of an SPV shall be treated as a supply of goods or services to which the voucher relates (i.e., it is treated as a supply), and VAT shall be accounted for accordingly. MPVs shall only be subject to VAT when the voucher is redeemed, i.e., no VAT shall be due when the voucher is transferred through the supply chain. The value on which VAT should be accounted for is either the price paid by the consumer, or if that is not known, the face value of the voucher, less the amount of VAT relating to the goods or services supplied.
Registration procedures. Applications for registration as a Lithuanian taxable person and as a Lithuanian VAT payer can be filed electronically (recommended) or manually (paper) through the system Mano VMI. Registration as a Lithuanian taxable person takes up to five working days, and registration as a Lithuanian VAT payer takes up to three working days.
Please note that a taxable person is a person who performs economic activities in Lithuania and who has the obligation to declare its transactions but is not yet obliged to register for VAT pur poses. Meanwhile, a VAT payer is a taxable person, who was obliged to register for VAT pur poses due to its transactions in Lithuania and who has already done that. For example, Lithuanian entities are not obliged to register for VAT purposes when their turnover does not exceed a EUR45,000 threshold in the preceding 12 months. However, such entities are still obliged to register as Lithuanian taxable persons to be able to declare its transactions and to use the tax authorities’ electronic systems.
The registration is performed via the individual account of the electronic system Mano VMI. It is given automatically to each resident of Lithuania (taxable person who is natural person). In respect to the access to a business’s Mano VMI, it is provided to the representatives of the business as per registration application (e.g., head of the company, authorized persons). All other persons must be added manually. Note that the access to the business’s account is also possible to foreign individuals, however, it is more complex.
There is no requirement to register in the commercial register before registering for VAT unless the business is establishing a branch or a separate entity in Lithuania.
For a VAT registration, the following documents must be submitted to the tax authorities:
• Registration application for the taxable person’s register (form FR0227)
• Registration application for the VAT payer’s register (form FR0388)
• Commercial register extract issued by the competent authority of the country of establishment, approved by apostille and officially translated into Lithuanian
Deregistration. A Lithuanian taxable person has the right to deregister voluntarily if:
• The taxable person’s total turnover does not exceed EUR45,000 in the preceding 12 months.
• The value of intra-EU acquisitions does not exceed EUR14,000 in the preceding 12 months.
• The taxable person finishes its activities due to liquidation or reorganization.
• The taxable person terminates its taxable activities.
A foreign person who is a Lithuanian taxable person has the right to deregister voluntarily if:
• The taxable person finishes its activities in Lithuania.
• The taxable person finishes its activities due to liquidation or reorganization.
Lithuanian taxable persons may be deregistered on the initiative of the tax administrator if:
• The taxable person does not perform economic activities or intra-EU acquisitions (e.g., the Lithuanian taxable person does not submit the VAT returns or does not report taxable supplies), for two months in a row.
• The taxable person finishes its activities due to liquidation or reorganization.
• The taxable person (natural person) is dead.
Changes to VAT registration details. Changes to a taxable person’s VAT registration details must be notified to the tax authorities by completing a special form, within five working days from the data change. The special form can be submitted electronically via the tax authorities’ website (Mano VMI), in person at the tax authorities’ offices or by post.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 21%
• Reduced rates: 5%, 9%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides a reduced rate, the zero rate or an exemption.
Examples of supplies of goods and services taxable at 0%
• Exports of goods from the EU and related services
• International transport and related services
• Supplies related to ships and aircraft
• Supply of goods and services to diplomatic missions, consular posts and international organiza tions or their representations, as well as to the staff of the missions and institutions and their family members
• Supply of gold to the system of the European central banks, as well as to the European central bank
• Intra-Community supplies of goods
• Supply of goods to the recipients of sponsorship if the goods are transported out of the EU
• Work on movable tangible property (certain cases)
• Intermediary services for the above supplies
• Supplies of goods intended to be produced to customs and placed in temporary storage or to be placed in a free zone, free warehouse or under customs warehousing arrangements or special inward processing procedures as well as services directly linked to these supplies
• Supplies of goods to a taxable person who facilitates trade via e-commerce marketplace/plat form/portal or similar means for distance sales of goods imported from third territories or third countries with an intrinsic value not exceeding EUR150 and/or who creates the conditions for a taxable person, established outside the EU, to supply the goods to nontaxable persons in the EU
• Vaccines against COVID-19 (applicable until 31 December 2022)
• Invitro diagnostic medical devices of COVID-19 (applicable until 31 December 2022)
Examples of supplies of goods and services taxable at 5%
• Medicines and medical aid products, subject to full or partial compensation from the state medical insurance budget, as well as non-compensated prescription medicines (excluding medicines that are subject to 0% VAT rate)
• Technical equipment that is used to assist persons with disabilities as well as for the repair services of such equipment
• Printed and (or) electronic newspapers, magazines and other periodicals (even if they are pub lished through electronic communication), including the electronic information documents and (or) their sets, which content mainly would be made analogous to periodicals content (not taking into account, if those electronic information documents and (or) their sets are printed, or not and which are periodically updated by public information disseminators. This subparagraph does not apply to technical, bibliographic databases, publications of erotic and/or violent nature or pub lications failing to comply with professional ethics, recognized as such by an institution autho rized under the law. It also doesn’t apply to printed products in which paid advertising accounts for more than 4/5 of total area of the publication or in the case that the most or all of paid advertising is consisted of music or video content (with effect from 1 January 2021)
Examples of supplies of goods and services taxable at 9%
• Supplies of books and printed non-periodical materials, such as encyclopedias, dictionaries, chil dren’s books and maps
• Heating and hot water supplies to residential premises
• Passengers and their baggage transport services going on regular routes that are authorized by the Ministry of Transportation or the local authorities
• Accommodation services supplied according to the legislation regulating tourism activities (applicable until 31 December 2022)
• Fuel wood and wood products intended for heating households
• Supplies of catering services and take-away food provided by restaurants, cafes and similar catering services, with the exception of alcoholic beverages and services or parts of services related to alcoholic beverages (applicable until 31 December 2022)
• Visiting all types of artistic and cultural institutions or events, sports events, sports clubs and attendance of other persons providing services similar to those provided by sports clubs, when such services are not exempt from VAT under Lithuanian VAT law (applicable until 31 December 2022)
• Performance services provided by performers (actor, singer, musician, conductor, dancer or other person who plays, sings, reads, recites or otherwise performs literary, artistic, folklore or circus numbers) (applicable until 31 December 2022)
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Health care services and goods
• Real estate rent and disposals
• Insurance and reinsurance services
• Certain financial services
• Cultural and sporting activities
• Educational and training services
• Betting, gambling and lotteries
• Universal postal services
• Social services and related goods
• Supplies of special marks
• Radio and television services
• Goods and services supplied by nonprofit legal entities
• Imported goods (certain cases)
• Services supplied by independent groups, as in the Articles 132-134 of Directive 2006/112/EC
Option to tax for exempt supplies. A taxable person may opt to charge VAT on these supplies:
• Rent of real estate
• Disposal of real estate
• Certain financial services
The option is applied only if the above services are supplied to the taxable person. The tax authorities should be formally notified about the decision. A taxable person that has opted to charge VAT on any of the above services should charge VAT on all similar transactions for a period of not less than 24 months.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply for goods and services is when the VAT invoice is issued. If an invoice is not issued, the time of supply is when the earlier of the following events occurs:
• Goods or services are supplied
• Payment for goods or services is received
Deposits and prepayments. The time of supply for a prepayment received before the supply is made is when the prepayment or the total payment is received. This rule applies to contracts that provide for a supply after 12 months. If the prepayment is received and if the supply will be trig gered earlier than 12 months beginning on the date of the signing of the contract, the taxable person may choose the date of receipt of prepayment as the time of supply and calculate the VAT on this prepayment.
If the invoice is issued upon the receipt of prepayment, the remuneration indicated in the final invoice shall be reduced by the amount of prepayment. If special margin schemes for travel agents and for secondhand goods, works of art, collectors’ items and antiques are applied, the above treatment of prepayments does not apply.
Continuous supplies of services. In the case where long-term services are supplied, i.e., services that are supplied for a certain continuous period such as telecommunications, leases and also in the case of long-term supply of electricity, gas, heat and other types of energy, VAT shall become chargeable when the VAT invoice for the supply of goods or services during the accounting period is issued. In cases where the VAT invoice is not issued, VAT is chargeable upon receipt of the consideration for the amount of goods or services supplied during the accounting period.
Goods sent on approval for sale or return. There are no special time of supply rules in Lithuania for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above). Thus, businesses should consider other simplification measures that could possibly apply in these cases (e.g., call-off stock simplification), due to timing of charging VAT, issuing invoices and/or VAT registration obligations.
If the goods are returned to the seller and to the same EU Member State, the transaction is deemed as annulled, and it does not result in VAT obligations in Lithuania. If the goods are not sold but are not returned to the seller, the seller may be liable for VAT on the basis of making a fictitious intra-Community acquisition and a supply for private use.
Reverse-charge services. The time of supply for reverse-charge services is the date on which the invoice for the services is issued. If an invoice for the services is not issued, the time of supply for the services is when the earliest of the following events occurs:
• The services are provided
• The consideration is paid for the services provided
Leased assets. VAT shall become chargeable on the supply of leased assets when the goods are transferred in cases where goods are transferred under a lease contract or other contract that provides for payment on deferred terms or by installments and under the terms of this transaction a major part of risk and benefit relating to the ownership of the goods as well as the ownership of the goods shall pass to the person to whom the goods have been transferred.
Imported goods. Import VAT shall become chargeable upon the entry of the goods from a third country territory into the territory of Lithuania. Where the goods imported into the territory of Lithuania are subjected to certain actions, procedures or arrangements specified in VAT law, import VAT shall become chargeable upon cessation of the application of said actions, proce dures or arrangements within the territory of Lithuania.
Postponed accounting for imports applies to imports made by taxable persons. The import VAT due is calculated by the customs authority, but the VAT is included and recovered on the VAT return in the same taxable period.
Intra-Community acquisitions. The time of supply for the goods acquired from another EU Member State is the date on which the supplier issues an invoice, but not later than the 15th day of the month following the month during which the transport of goods began.
• 50% of VAT for entertainment expenses provided the expenses do not exceed 2% of revenues, 100% of VAT for entertainment expenses greater than this limit
• VAT paid on behalf of a third party
• Tourism services if a special VAT scheme applies
• Secondhand and cultural value goods if a special VAT scheme applies
Examples of items for which input tax is deductible (if related to a taxable business use)
• Accommodation
• Advertising
• Books
• Conferences
• Fees from professional advisors such as accountants, lawyers and tax advisors
• Land and property
• Lease/purchase of vans and trucks
• Mobile phones
• Parking (on and off street)
• Petrol
• Petrol and maintenance costs of trucks and vans
• Subscriptions for periodicals and magazines (related to the business of the company)
• Telephone/faxes used in the office
• Travel expenses (air, rail, bus, boat)
Partial exemption. Input tax directly related to making exempt supplies is not generally recover able. If a taxable person makes both exempt supplies and taxable supplies, it may not deduct input tax in full. This situation is referred to as “partial deduction.”
The amount of input tax that may be deducted is generally calculated using the following twostage calculation:
• The first stage identifies the input tax that may be directly allocated to taxable and to exempt supplies. Input tax directly allocated to taxable supplies is deductible, while input tax directly related to exempt supplies is not deductible.
• The second stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) that may be allocated to taxable supplies and recovered. The calcu lation is done using a pro rata method, based on the value of taxable supplies made in the period, compared with the value of total supplies made.
If a taxable person is not able to directly allocate VAT to taxable and exempt supplies, a pro rata calculation may be used for all input tax incurred.
A partially exempt taxable person may provisionally use the recovery percentage calculated for the previous year. If, at the end of the year, the taxable person’s actual recovery percentage differs by more than 5% from the provisional percentage used, an adjustment calculation must be made.
Approval from the tax authorities is not required to use the partial exemption standard method in Lithuania.
Special methods are allowed in Lithuania. However, if a special method is used for input tax deduction (e.g., alternative allocation criteria instead of regular income based pro rata is applied for fixed assets), this must be agreed in writing, in advance with the tax authorities.
Capital goods. Capital goods are items of capital expenditure that are used in a business for more than one year. Input tax is deducted in the VAT year in which the goods are acquired or first taken into use. The amount of input tax recovered depends on the taxable person’s partial deduction recovery position in the VAT year of acquisition or first use. However, the amount of input tax
recovered for capital goods must be adjusted over time if the taxable person’s partial exemption recovery percentage changes during the adjustment period or if the capital goods are either used for nontaxable supplies or written off, including the cases when the taxable person is deregistered from VAT and will not be using the capital goods in its future taxable activities. The adjustment may result in either an increase or a decrease of deductible input tax, depending on whether the taxable person’s recovery percentage increased or decreased in the year, compared with the year in which the capital goods were acquired or first used.
In Lithuania, the capital goods adjustment applies to the following assets for the number of years indicated:
• Property immovable by its nature, including improvement of buildings or structures: adjusted for a period of 10 years
• Other types of tangible capital assets legally required to be depreciated over a period of at least four years for purposes of the taxes on profit or income: adjusted for a period of five years
In Lithuania, the capital goods adjustment does not apply to any services, unless the respective services were capitalized into the asset value.
The adjustment is applied each year following the year of acquisition, to a fraction of the total input tax (1/10 for immovable property and 1/5 for other tangible capital goods).
Refunds. If the amount of input tax that is deductible for a VAT period exceeds the amount of output tax that is chargeable in the same period, the taxable person has a VAT credit. The credit must first be used to offset other taxes payable. If the amount of VAT credit exceeds all taxes payable, the excess is refunded either on a monthly or semiannual basis (when a taxable person does not meet the minimum requirements for a reliable taxable person). This means that if a tax able person meets the minimum requirements for a reliable taxable person, then the VAT over payment can be refunded monthly, and if it does not, it can only be refunded on a semiannual basis. The minimum requirements for a reliable taxable person are specified in Article 40-1 of the Lithuanian Law on Tax Administration and it came into force as of 1 January 2019. For details on the reliable taxable person status, see the Penalties for late registration and Penalties for errors subsections below.
Pre-registration costs. Input tax may be subject to VAT recovery in those cases where VAT was paid on goods or services acquired before an entity was registered as taxable person. Special rules and procedures apply, for example:
• Goods or services acquired before registering for VAT should have a direct link with the taxable activities after the registration and should be used in taxable activities.
• Where goods or services were acquired before registering for VAT, the input tax incurred on the purchase may be deducted only if the taxable person can prove the actual use of those goods or services in the taxable activities. Formally, it is also accepted to show the intention of the goods or services. However, it is often reviewed on a case-by-case basis and subject to sufficient sup porting evidence.
Bad debts. Suppliers may be able to reduce the calculated payable VAT with the output tax amount attributable to bad debts (not applicable to margin schemes and when the supplier of goods or provider of services is a related person). As indicated in VAT law, a receivable remuneration is considered as a bad debt (including output tax), if the person cannot recover such remuneration for at least 12 calendar months from the taxation moment of the supplied goods or provided services and if the output tax amount was calculated and declared.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Lithuania.