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Official translation Official translation Republic of Lithuania Law on Value-Added Tax 22 December 1993 No.I-345 (As amended 20 July 1994) Vilnius I. The Object of Tax Article

  1. The object of value-added tax (hereinafter referred to as VAT) shall be the value added to the product and services at each stage of production, distribution and sales, as well as imported goods. Article
  2. A good, as the object of tax, shall include things, coins meant for numismatics, real property (with the exception of land), and energy of all types. Article
  3. Services, as the object of the tax, shall include services of all types and other activities provided for a consideration of money, excluding those provided by the employees to their employers under employment contract. Article
  4. The following goods and services shall be exempt from VAT: 1) medical and dental services, medicines, medical goods and medical equipment; 2) social services rendered by day care centers and homes for the disabled and the elderly; 3) educational, scientific and cultural services rendered by institutions of education, science and studies, as well as non- profit cultural institutions; 4) services of route passenger transport; 5) postal services (with the exception of transmission of parcels and telecommunication services, as well as postal stamps and envelopes meant for collecting); 6) insurance and banking services (excluding storage facility services) and turnover of securities; 7) coffins, wreaths, temporary tombstones, and funeral services; 8) publishing, printing and circulation of newspapers, magazines and books; 9) services and works for which taxes are paid into the budget; 10) state-owned property subject to privatization; 11) works and services paid for with donated funds; 12) rent for houses and apartments being leased for more than 2 months; 13) land rent; and 14) articles of traditional art. 15) veterinary services, veterinary medicines and medical goods. 16) services provided by travel agencies to tourists coming into the Republic of Lithuania (Amended 20 July 1994). II. Payers of VAT Article
  5. VAT shall be calculated and paid into the budget by: legal persons, enterprises without the rights of a legal person, sub-units of foreign economic entities operating in the Republic of Lithuania, and natural persons. Article
  6. Persons whose proceeds from the sale of goods and services not including the sale of capital goods used for more than one year are, excluding VAT, not in excess of 5,000 litas per year shall not calculate and pay VAT into the budget. VAT paid by these persons for acquired goods or obtained services shall not be repaid. Persons whose income specified in paragraph 1 hereof, is between 5,000 and 15,000 litas per year, shall be entitled, if they wish, to be the payers of this tax. Said persons shall pay VAT into the budget ( VAT shall be repaid to them from the budget) beginning from the month following the registration.(Amended 7 April 1994) If the annual proceeds of these persons from the sale of goods and services are in excess of 50,000 litas, they shall be required to calculate and pay VAT into the budget according to the general procedure, starting from the month when the proceeds exceeded the designated amount. Article
  7. Persons who under the provisions of Article 6 are payers of VAT must register with the State Tax Inspectorate as payers of VAT. Newly established companies, institutions and organisations which expect that their sales proceeds shall exceed the sum specified in Article 6, must register with the State Tax Inspectorate at least 10 days prior to the commencement of the activities. Article
  8. Persons who are not payers of VAT shall not have the right to charge this tax to their customers. If said persons do charge this tax, they must transfer it into the budget. III. Taxable Value and Time for Computation Article
  9. The taxable value of goods and services shall consist of: 1) the production cost of goods and the rendering price of services; 2) expenses for packaging, transportation, insurance and the like; 3) payments for the installation of equipment; 4) payments for mediation, commission and auction charges; 5) various discounts and additional charges not entered in the invoice; 6) expenses for the purchase or sale of goods on credit; 7) various taxes related with the sale of goods (customs duties, excise duties), excluding VAT; and 8) service expenses or other sums not included in the production cost of goods or rendering of services, which the customer pays to the seller of goods or services. Article
  10. The taxable price of goods imported into the Republic of Lithuania shall be determined according to the same procedure as for assessing customs duty (customs duty shall also be included therein). Article
  11. While exchanging goods (or services) the taxable price shall be the price of exchanged goods or services. Article
  12. VAT on goods and services shall be computed: when the seller (supplier of services) issues an invoice or other document to the customer for the goods sold (services rendered); upon paying the money at the cash desk, when goods (or services) are paid for in cash and an invoice is not issued; upon presenting the goods declaration when said goods are imported. IV. Tax Rates Article
  13. VAT shall be charged at a rate of: 1) 0% -- for exported goods and services; or 2) 18% -- for all goods and services with the exception of those referred to in Articles 4, 23 and 38 and item 7 of Article 39 of this Law (Amended 20 July 1994). Article
  14. VAT shall be computed by applying an 18% tax rate when charging it on the taxable value of goods sold or imported (or services rendered), or a 15.25% tax rate when charging it on the value of goods and services including VAT. When computing VAT, 15.25% rate shall be applied: 1) when goods are sold (services rendered) for cash without issuing an invoice; 2) when the amount of prices of goods (services) are established by state government institutions; 3) when in the invoice VAT is included in the price (is not provided separately) of taxable goods (services); 4) in other cases established by the Government of the Republic of Lithuania (Amended 20 July 1994). V. Computation of the Tax Article
  15. Upon expiration of the tax period, the payers of VAT must transfer into the budget the difference between the computed sum of VAT for goods sold and services rendered and the deductible sum of VAT. Article
  16. The deductible sum of VAT shall be the sum of VAT recorded in the accounts for goods delivered by the suppliers and services rendered and the sum of VAT paid for imported goods which shall be used for the production and sale of goods subject to VAT and for the rendering of services subject to VAT. This sum shall be determined taking into account the provisions of Articles 18, 19 and
  17. Article
  18. If during the tax period the deductible sum of VAT is in excess of the sum of VAT for goods sold or services rendered, the difference, at the request of the taxpayer, shall be refunded by the State Tax Inspectorate not later than within the period established in Article
  19. If such difference occurs during the three tax periods in succession, the State Tax inspectorate may not refund said difference. If the sum of VAT deducted during the calendar year is in excess of the sum of VAT for goods sold or services rendered, the State Tax Inspectorate shall, upon examination, recover the groundlessly refunded sum and may cancel the registration of the taxpayer. The provisions of paragraphs 2 and 3 hereof shall not apply if the difference occurred due to : 1) export of goods and service; 2) acquisition of capital goods; 3) formation of inventory of seasonal goods and raw materials and other materials for the production of taxable goods. 4) utilization of services and material values for the production of taxable goods if the production is seasonal or long lasting. (Amended 20 July 1994) If the purpose of capital goods is later changed and therefore the right to deduct VAT is terminated, the deducted sum of VAT shall be adjusted according to the procedure established by the Government of the Republic of Lithuania. This provision shall apply only in the case when no more than 10 years have elapsed from the deduction of VAT from real property, and 5 years from other capital goods. Article
  20. It shall be permitted to deduct sums of VAT which must be paid by other taxpayers only if such sums are indicated separately in the invoice. Sums of VAT computed for imported goods may be deducted only if there is a special mark of the customs office in the import documentation evidencing the payment of tax. The payer of VAT may calculate and deduct the tax according to the procedure established by the Government of the Republic of Lithuania for goods acquired in retail trade enterprises, but not in excess of 2,000 litas per year. Upon selling purchased second-hand items, special shops may, according to the procedure established by the Government of the Republic of Lithuania, calculate and deduct VAT according to the price of the purchased items. Article
  21. VAT recorded in the accounts for goods and services shall not be deducted from the sum of VAT due for the goods sold and services rendered, if such goods or services have been used: 1) for production of goods or rendering of services which are not subject to VAT (specified in Articles 4 and 38 of this Law); 2) for catering of the employees of the taxpayer; 3) for payment in kind for work done by the employees of the taxpayer; 4) for the maintenance of day care centers, rehabilitation centres, accommodations, holiday homes, or summer camps used for the needs of the employees of the taxpayer; 5) for gifts, representation, and various entertainment; 6) for the exploitation of passenger vehicles with a seating capacity not exceeding 10 passengers excluding the driver, provided that said exploitation is not related with the carriage of passengers for a fee and is not chargeable with VAT. Article
  22. If the taxpayer produces both taxable and non- taxable (VAT) goods (renders services), recorded in the accounts sum of VAT payable to suppliers during the tax period for goods and services (except those specified in Article 19) shall be deducted in proportion to the value of taxable and non- taxable goods (the value of the supplied services) delivered to the purchasers within that period. The Government of the Republic of Lithuania may establish a different procedure for deducting VAT in cases provided for in this Article. Article
  23. Paid VAT shall be repaid to: 1) foreign nationals who have acquired more goods at special shops than are permitted by the Government of the Republic of Lithuania to bring into the Republic of Lithuania free of charge and who took them out of the Republic of Lithuania; 2) foreign diplomatic and consular missions on parity basis for goods acquired and services obtained, as well as officers thereof and members of their families for goods acquired for personal consumption; 3) international organisations for goods acquired and services obtained, as well as officers thereof and their family members for goods acquired for personal consumption, if in the agreements concluded by said organisations with the Republic of Lithuania there is a stipulation that VAT or other comparable tax shall not be charged or that such taxes shall be refunded; 4) according to the procedure established by the Government of the Republic of Lithuania for goods and services paid for by foreign states, international organisations and foundations as well as with the funds of loans granted to the state. If the term for the payment of VAT on imports has not expired and the tax has not been paid, it may be revoked (Amended 20 July 1994). VI. Taxation of Imports and Exports Article
  24. VAT shall be levied on imports at the rate established in item 2 of Article 13, which shall be paid into the budget according to the procedure and on the terms established by the Government of the Republic of Lithuania. Article
  25. The following imported goods shall be exempt from VAT: 1) electrical energy; 2) goods received as charity or humanitarian relief; 3) temporarily imported goods that are under the Customs' control; 4) goods controlled by the Customs imported temporarily for processing according to the checklist established by the Government of the Republic of Lithuania. If said goods or a portion thereof or products made from them are not exported from the Republic of Lithuania by the date established by the Government of the Republic of Lithuania, VAT shall be levied on them according to the general procedure; 5) temporarily exported goods controlled by the Customs, as well as goods exported for processing or products made from them, provided they are reimported within the time period established by the Government of the Republic of Lithuania; 6) goods brought in by natural persons, if their number does not exceed the designated number of goods permitted by the Government of the Republic of Lithuania to be imported free of duty; 7) goods returned for warranty repair or exported goods which have been rejected; 8) goods enumerated in Article 4, part 2 of item 1 of Article 38 and in parts 5 and 6 , and item 7 of Article 39 (Amended 20 July 1994). Article
  26. The value of imported goods shall be assessed by taking into consideration the provisions of Article 10 of this Law and the Law on Customs Tariffs of the Republic of Lithuania. Article
  27. Zero-rating provided for in Article 13 of this Law shall apply to the following goods: 1) exported goods including goods that had been imported temporarily for processing and products made from them, which have been re-exported; (Amended 20 July 1994) 2) goods, works and services relative to the carriage, loading, unloading of exported goods, and the transit of foreign cargo through the Republic of Lithuania; 3) provision, completion, repair, exploitation and rent of aircraft and ships which carry goods and passengers on international routes; 4) goods brought into customs warehouses and shops which are located outside the customs territory of the Republic of Lithuania; 5) services performed by the taxpayers -- enterprises, institutions and organisations -- beyond the boundaries of the Republic of Lithuania. 6) goods and services paid for by foreign entities, associated with the production of goods meant for export or re- export (Amended 20 July 1994). VII. Value- Added Tax Accounting Article 26.Customers must be issued invoices of goods dispatched and services rendered to them. The invoice must contain mandatory requisites provided for in Article 10 of the Law on the Principles of Accounting and the code of the payer. Article
  28. If after the issue of an invoice the prices of goods or their amount have been changed, a new invoice must be issued. Article
  29. If the issued invoices do not comply with the requirements of Article 26 and 27 of this Law, sums of VAT payable to suppliers according to these invoices shall not be deducted when calculating the sum of VAT payable into the budget. Article
  30. If the payer has calculated and included VAT for goods and services in the invoice, which pursuant to this Law are outside the scope of VAT, said payer must pay this VAT into the budget according to the established procedure. Article
  31. The payers of VAT must keep a separate record of purchase and sale of taxable goods and services, according to which VAT shall be assessed. VIII. Procedure for Payment of VAT into the Budget Article
  32. The tax period of VAT shall be a calendar month. The Government of the Republic of Lithuania may establish the period of and procedure for advance payment of VAT. Article
  33. Upon the expiration of the due date of payment, each taxpayer must, before the 15th day of the next month, file with the State Tax Inspectorate a declaration of the computed and deductible sum of VAT. Article
  34. If a taxpayer fails to file a declaration when due, the State Tax Inspectorate shall increase the sum of VAT due during that tax period by 1%, which shall be recovered into the budget. Article
  35. If a taxpayer fails to file a declaration by the expiration of the due date of the payment of VAT into the Budget (Amended 20 July 1994), the State Tax Inspectorate shall, without suit, recover into the Budget the sum of tax showed on the declaration for the previous month, increased temporarily by 10% until the declaration is filed. Article
  36. The computed sum of VAT must be paid into the budget (refunded from the budget) within 10 days from the date prescribed by Article 32 of this Law for filing the declaration. Upon failure to pay VAT when due, the unpaid (or not refunded) tax shall bear interest at the rate of 0.3% for each day thereafter, including the day on which the tax was paid into the budget. The unpaid VAT shall be recovered for the current year and 5 preceding years. IX. Control of Tax and Economic Sanctions Article
  37. If during the examination it is determined that the taxpayer showed in the declaration an amount of tax less than the correct sum of VAT or has deducted too much of and therefore paid too little into the budget, said taxpayer must pay the assessed deficiency and the penalty in an amount equal to the deficiency into the budget within 5 days after the date of the determination of default. The State Tax Inspectorates shall recover sums of taxes and penalties from enterprises, institutions and organisations without suit and from natural persons in court. X. Final Provisions Article
  38. This Law shall come into effect as of 1 August,
  39. VAT shall be refunded to foreign diplomatic and consular missions, as well as international organisations according to the procedure provided for in Article 21 hereof for goods and services acquired after 1 May 1994.(Amended 20 July 1994) VAT paid pursuant to item 1 of part 2 and part 5 of Article 38 for the period between 1 May 1994 and 1 August 1994 shall be refunded to the taxpayers from the Budget (Amended 20 July 1994). Article
  40. Until 1 January 1996 a temporary 9% rate of VAT ( and in cases specified in part 2 of Article 14 -- 8.26% rate) shall be charged on mixed fodder produced by Lithuanian producers, agricultural produce and fish, with the exception of canivorous soft fur animals, nutrias and their fur, food stuffs made from these products, which were not subject to general excise tax until the introduction of VAT. The list of these goods shall be established by the Government of the Republic of Lithuania. The following goods and services shall, until 1 January, 1996, not be charged with VAT:: 1) nuclear fuel, coal, liquefied and natural gas, oil, furnace fuel, and mazut; 2) water, electricity, thermal power, sewage and other public utilities supplied to residential houses; Upon the consent of VAT payers, organisations supplying services, housing and design works, including the construction of engineering networks and territorial management shall be exempt from VAT until 1 January
  41. Until 1 January 1996 VAT shall not be charged on services rendered by agricultural companies and agricultural cooperative to their members. Until 1 January 1996 VAT shall not be charged on imported tractors, engines, other agricultural machinery and spare parts thereof, which are sold on local market. Until 1 January , 2000 VAT shall not be charged on raw materials used for the production of medicines, as well as raw materials, materials and completing parts used for the production of basic medical goods and medical equipment. Lists of these raw materials, materials and completing parts, as well as enterprises that are entitled to receive them without VAT, shall be established by the Government of the Republic of Lithuania (Amended 20 July 1994). Article 38-
  42. Manufacturing enterprises hiring employees with the limited capacity for work shall reduce the difference between computed in 1994 and payable into the budget sum of VAT for goods sold and services rendered, and the deductible sum of VAT in the following manner: The ratio of persons with limited capacity for work The sum of VAT shall be to the general number of employees reduced by: more than 50 % 100% 40-50% 90% 30-40% 80% 20-30% 70% The computed difference payable into the budget by a private enterprise of public organizations of the invalid persons shall be reduced by 100%. For the purpose of this relief the following persons shall be considered as of limited capacity for work: invalid persons of Group 1,2 and 3; persons with II and III degree of deafness (according to Neumann scale) convicted persons working at correctional institutions; patients working in the labour therapy workshops of medical institutions. The procedure for attributing enterprises to manufacturing enterprises shall be established by the Government of the Republic of Lithuania. Article
  43. The Government of the Republic of Lithuania shall, by 1 March 1994, establish: 1) lists of goods and services for which VAT shall not be calculated; 2) the procedure for the registration of the payers of VAT; 3) the procedure for adjustment of sums deductible for acquired capital goods if they are used for other purposes; 4) the procedure for deducting VAT for goods acquired from retail trade and second-hand goods purchased by special shops; 5) the procedure for and the beginning of the repayment of VAT -- for foreign nationals, for goods bought at special shops and exported from the Republic of Lithuania; for officers of foreign diplomatic and consular missions and their family members, for goods acquired for personal consumption and for services obtained; 6) the procedure for the transition from excise tax to VAT. 7) the amount of imported sugar and the raw material of sugar for which VAT shall not be computed in
  44. Article
  45. The Government of the Republic of Lithuania, on the basis of this Law, shall, by 1 March 1994, issue instructions for the calculation and payment of VAT. Article
  46. For the payment of the computed sum of VAT into the budget (repayment from the budget) the Government of the Republic of Lithuania may establish for 1994 other terms than those provided for in Article 35, and for agricultural enterprises and farmers it may establish for the period up to January, 1997 other terms for the payment of VAT for sold agricultural produce. (Amended 20 July 1994) I promulgate this Law passed by the Seimas of the Republic of Lithuania. President of the Republic of Lithuania Algirdas Brazauskas

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