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Official translation Official translation Republic of Lithuania Law on Value-Added Tax 22 December 1993 No.I-345 (As amended by 2 June, 1998 No. VIII-615) 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 to imported goods. The imported goods as the object of tax shall be goods, not Lithuanian goods, which, under the Customs Code of the Republic of Lithuania (the Customs Code hereinafter), create an import debt to the customs. Article
  2. A good, as the object of tax, shall include things, coins meant for numismatics, energy of all types and real property with the exception of land. Article
  3. Services, as the object of 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 the contract of employment. Article
  4. VAT shall be levied on the value of all goods and services, added to them in the process of their production or rendering and on imported goods excluding: 1) services provided by the state and municipal public or supported from the budget health care institutions and veterinary services provided by state veterinary institutions, medicines (including veterinary medicines), medical equipment and raw materials used for the production of medicines and pharmaceutical goods. The list of medical equipment, raw materials used for the production of medicines and pharmaceutical goods which are not subject to VAT shall be established by the Government of the Republic of Lithuania; 2) social services rendered by nursery schools, day care centres and homes for the disabled and the elderly; 3) services of education, science and studies rendered by institutions of education, science and studies, registered in a manner established by the Government of the Republic of Lithuania as well as non-commercial cultural services, the list of which shall be compiled by the Government of the Republic of Lithuania; 4) postal services (with the exception of sending of parcels and telecommunication services, as well as collectable postal stamps and envelopes); 5) financial services rendered by insurance, banking and credit institutions, the list of which shall be compiled by the Government of the Republic of Lithuania, and trading in securities and lotteries; 6) coffins, wreaths, temporary tombstones, and funeral services; 7) printing, publishing, and distribution of magazines (according to the list approved by the Government of the Republic of Lithuania), newspapers, books with the exception of publications which have been assigned to the category of publications of erotic and violent character, also newsprint; 8) services and operations for which stamp and consular duties are imposed, also local and state levies and taxes which are included in state and municipal budgets or entered in special accounts opened with the state treasury and in privatisation funds; 9) the state-owned property under privatisation; 10) work and services rendered to the traditional religious communities and societies which are paid for from donations; 11) rent for residential houses and apartments let for a period longer than 2 months; 12) land rent; 13) services provided by the traditional Lithuanian religious communities and societies for which donations are made, traditional articles of fine crafts designated, in accordance with a prescribed manner, as such by the interdepartmental experts commission of traditional fine crafts; 14) fixed-route passenger transportation services on the routes established by the Ministry of Transportation and local authorities; 15) charges for the services of sea ports, airports, air traffic control and aeronavigation; 16) construction, renovation, insulation, and design works of residential houses, including the construction of engineering networks and territory improvement financed from the state and municipal budgets, with soft credits provided by the government and from special state funds; 17) articles bearing UNICEF mark according to the list compiled by the Government of the Republic of Lithuania; 18) restoration and conservation work of movable and immovable cultural monuments financed from the state and municipal budgets. 19) goods sold at duty-free shops. 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, subdivisions of foreign economic entities operating in the Republic of Lithuania, and natural persons. Farmers to whom the compensatory rate of VAT is applicable shall not pay into the budget the VAT received for the sold products or services rendered, whereas the VAT paid by them for the goods bought and services received shall not be refunded from the budget. The compensatory rate may be applied to farmers whose annual (of the last 12 months) sales proceeds do not exceed 100,000 litas. Article
  6. Persons whose income (proceeds) from sales of goods and services, with the exception of sales of capital goods used for more than one year, are not in excess of 10,000 litas per year (during the last 12 months), shall not calculate and pay VAT into the budget. The VAT paid by the said persons for the acquired goods or services obtained shall not be refunded. Persons whose income (proceeds) specified in paragraph 1 hereof, is between 10,000 and 100,000 litas per year (during the last 12 months), shall be granted the right, should they request so, to get registered for VAT. The said persons shall start paying VAT into the budget (VAT shall be repaid to them from the budget) as of the month following their registration. If the income (proceeds) of these persons from the annual (the last 12 months) sales are in excess of 100,000 litas, the persons who have registered for VAT shall be required to calculate and pay VAT into the budget according to the general procedure, starting from the month in which the proceeds exceeded the designated amount. Persons who have not registered as VAT payers, starting from the month in which their income (proceeds) specified in paragraph 1 of this Article exceeded 100,000 litas, shall calculate and pay into the budget VAT for the sum in excess, and in subsequent months, for the monthly income (proceeds) from the sold goods and services, by the 25th of the month following the taxable month. The procedure of registration of VAT payers shall be established by the Government of the Republic of Lithuania or an institution authorised by it. Enterprises of free economic zones shall not calculate and pay VAT into the budget. Article
  7. Persons who under the provisions of Article 6 are payers of VAT must get registered with the State Tax Inspectorate as VAT payers. The State Tax Inspectorate shall also register newly established companies, institutions and organisations which anticipate that their sales proceeds shall exceed the sum specified in Article
  8. Farmers in respect of which compensatory rate of VAT is applied must also get registered with the State Tax Inspectorate. Article
  9. Persons who are not VAT payers shall not have the right to charge this tax to their customers, with the exception of farmers in respect of whom the compensatory rate of VAT is applied. If the said persons have charged this tax, they must transfer it into the budget by the 25th of the next month. III. Taxable Value and Time for Computation Article
  10. The taxable value of goods (with the exception of the imported goods) and services shall consist of: 1) the production cost of goods and the cost of providing services; 2) expenses for packaging, transportation, insurance and other similar expenses; 3) payments for the assembly of equipment; 4) payments for mediation, commission and auction fees; 5) various discounts and additional charges not entered in the invoices; 6) expenses for the hire 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 costs of goods or providing services, which the customers (recipients of services) pay to the seller of goods or provider of services. Article
  11. The taxable value of imported goods (bartered goods included) shall be the sum of customs value, the customs duty and the excise. The customs value of the imported goods shall be calculated in the manner prescribed by the Customs Code. Article
  12. While exchanging goods (with the exception of imported goods) or services the taxable price shall be the price of bartered goods or services. Article
  13. VAT on goods and services shall be computed: when the seller (supplier of a service) issues an invoice or other document to the customer (recipient of service) for the goods which are being sold ( the services which are being provided); upon payment of the money at the cash desk when no invoice is issued; in the cases specified by the Customs Code, when calculating the import debt to the customs where the goods are imported. IV. Tax Rates Article
  14. 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 and 23 and item 1 of paragraph 1 of this Article. The rate of VAT for farmers in respect of which compensatory rate is applied, shall be established by the Government of the Republic of Lithuania. The rate may not exceed 9 percent. Article
  15. 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. For the purpose of the computation of 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 of taxable goods (services); 4) in other cases established by the Government of the Republic of Lithuania. V. Computation of the Tax Article
  16. Upon the expiry 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
  17. 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 in accordance with the provisions of Articles 18, 19 and
  18. Article
  19. 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 taxpayer may file an application in the established form with a territorial tax inspectorate, requesting to refund the difference. The difference shall be refunded not later than within 10 days from the filing of a written application of the taxpayer and not prior to the beginning of the period established in Article 35 for the payment of the determined VAT into the budget and only in the case if such difference occurred due to : 1) export of goods and service; 2) acquisition of capital goods for the use in the activities referred to in sections A, B, C, D, E, F, G, H, and I of the Classifier of the Types of Economic Activities; 3) formation of the stock of seasonal goods and raw materials and other materials for the production of taxable goods; 4) utilisation of services and material values for the production of taxable goods if the cycle of their production exceeds six months. The list of such industries shall be approved by the Government of the Republic of Lithuania; 5) different rates of VAT. 6) acquisition of coal, liquefied and natural gas, oil, furnace fuel, fuel oil, fire wood, and nuclear fuel for utilisation in the activities listed in sections A, B, C, D, E, F of the Economic Activities Classifier. The difference that occurred for reasons other than those specified in items 1-6 of Par.1 of this Article, shall be credited towards the regular payments of VAT to the budget. If such a difference occurs during the three tax periods in succession, the territorial state tax inspectorate must examine such a taxpayer and, upon establishing violations, may cancel the registration of the taxpayer for the period of twelve months, terminating the further crediting of said difference. If no violations are disclosed, the territorial state tax inspectorate shall refund the difference of VAT within 10 days from the date on which an examination was carried out. 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. If the purpose of the use of capital goods is changed and consequently the right to deduct VAT ceases to exist, or an enterprise is being liquidated or it is removed from the register of the taxpayers of VAT, the deducted sum of VAT shall be paid back to the budget according to the procedure established by the Government of the Republic of Lithuania. This provision shall apply only in the cases where 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 due to be paid by other taxpayers only if such sums are indicated separately in the invoices or, in the cases established by the Government of the Republic of Lithuania, in other accounting documents. Sums of VAT for imported goods may be deducted only if the import documentation has a special mark of the customs, evidencing the computation of tax and this tax has been paid by the importer into the budget. For the imported fuel oil to be utilised in the activity referred to in DF subsection and E section of the Economic Activities Classifier, and for the imported productive assets, oil, nuclear fuel, liquefied and natural gas VAT shall be set off in the manner established by the Government of the Republic of Lithuania. 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 for goods sold and services rendered, recorded in the accounts shall not be deducted from the sum of VAT due, if such goods or services have been used: 1) for the production of goods or rendering of services (specified in Articles 4 and 38 of this law) which are not subject to VAT); 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 centres, rehabilitation centres, accommodations (residential houses), 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 utilisation of passenger vehicles with a seating capacity not exceeding 10 passengers (excluding the driver), provided that said utilisation is not related with the carriage of passengers for a consideration in money and is not subject to VAT. The VAT, recorded in the accounts, for bought passenger vehicles (including cars) with a seating capacity not exceeding 10 passengers (excluding the driver), shall not be deducted either if their utilisation is not related with the carriage of passengers for a consideration in money and is not subject to VAT. Article
  22. If the taxpayer produces both VAT taxable and non-taxable goods (or renders such services), the sum of VAT accounted for in the books, 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 refunded to: 1) 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 according to the list compiled by the Government of the Republic of Lithuania; 2) international organisations for goods acquired and services obtained, as well as officers thereof and their family members for goods acquired for personal consumption, if the agreements concluded by said organisations with the Republic of Lithuania provide that VAT or other comparable tax shall not be levied that such taxes shall be refunded according to the list compiled by the Government of the Republic of Lithuania; 3) 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 loans granted to the state, as well as with the loans to budgetary institutions, guaranteed by the state. If the term for the payment of VAT has not expired and the tax has not been paid, it may be revoked. This tax may be also refunded in the manner established by the Government of the Republic of Lithuania, for goods and services acquired under technical assistance programmes as well as with the loans granted to the state and the loans granted to budgetary institutions, guaranteed by the state. If international agreements provide for other rules of the imposition of VAT, and these agreements are ratified in the Republic of Lithuania, the rules provided in these agreements shall apply. 4) in the cases specified by the Customs Code. VI. Taxation of Imports and Exports Article
  24. The imported goods shall be charged VAT at the rate established in item 2 of paragraph 1 of Article 13 which shall be paid into the budget according to the procedure established by the Government of the Republic of Lithuania. Article
  25. The following imported goods shall be exempt from VAT: 1) goods received as charity; 2) goods brought in by natural persons (passengers), if their amount does not exceed the amount permitted to be brought in without import duties; 3) goods brought in by foreign diplomatic and consular missions also by international organisations for the purpose of official activities provided the agreements of those international organisations with the Republic of Lithuania provide for VAT exemptions; 4) goods which under the Customs Code are exempt from import duties; 5) goods enumerated in Articles 4 of this Law; 6) parcels sent by mail to the customs territory of the Republic of Lithuania, provided their weight does not exceed 31.5 kilograms and the value does not exceed 400 Litas; 7) received as aid to the institutions supported from the budget; 8) related to defence and security of the Republic of Lithuania in isolated cases established by the Government of the Republic of Lithuania. Article
  26. Recovery of VAT for imported goods shall be waived in cases specified by the Customs Code. Article
  27. Zero-rating provided for in Article 13 of this Law shall apply to the following goods: 1) exported goods, including goods that have been temporarily imported for processing or compensatory products made from them, which have been returned abroad; 2) 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 by international routes; 4) goods brought into customs warehouses, duty-free shops, free economic zones and free warehouses; 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, related with the production of goods meant for export or re-export. VII. Accounting of Value- Added Tax Article
  29. Buyers must be issued special documents of accounting for the goods dispatched and services provided - invoices registered at the territorial state tax inspectorates, or other accounting documents having the requisites laid down in Article 10 of Law of the Republic of Lithuania on the Principles of Accounting and the code of the VAT payer.
  30. The time limit for the introduction of VAT invoices, specified in Articles 6, 9, 14, 15, 16, and 17, shall be established by the Government of the Republic of Lithuania.
  31. The invoices provided for in the Law on Value-Added Tax of the Republic of Lithuania shall be valid from 1 April 1996 until VAT invoices are introduced. Article
  32. If after making out an invoice or another accounting document the prices of goods (services) or their amount change, a new VAT invoice or another accounting document must be made out revising the earlier documents. Article
  33. If the made out invoices or other accounting documents contradict the requirements of Articles 26 and 27 of this Law, the sums of VAT payable to suppliers according to these accounting documents shall not be deducted when calculating the sum of VAT payable into the budget. Article
  34. 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
  35. The payers of VAT must keep separate accounts of purchase and sale of taxable goods and services, according to which VAT shall be calculated. Farmers in respect of which a compensatory rate of VAT is applied shall keep the books of sold products and services taxable with VAT and shall keep the invoices in accordance with the procedure prescribed by the Law on the Principles of Accounting of the Republic of Lithuania. VIII. Procedure for Payment of VAT into the Budget Article
  36. The tax period of VAT shall be a calendar month. The Government of the Republic of Lithuania may establish the amount, period of and procedure for advance payment of VAT into the budget, as well as other procedure for the calculation and payment of VAT for alcoholic beverages, tobacco and oil products, produced in the Republic of Lithuania and imported from abroad. Article
  37. 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
  38. 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 or shall reduce by 1% refundable sum of VAT. Article
  39. If a taxpayer fails to file a declaration by the expiration of the due date for the payment of VAT into the Budget, the territorial state tax inspectorate shall, without suit, recover into the Budget from the taxpayers -enterprises, institutions and organisations, the sum of tax showed on the declaration for the previous month, increased temporarily by 10% until the declaration is filed. Article
  40. 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 a declaration, with the exception of alcoholic beverages, tobacco and oil products produced in the Republic of Lithuania and imported from abroad, for which the Government of the Republic of Lithuania may establish different procedure for the calculation and payment of VAT. Calculated refundable sum of VAT must be refunded from the budget in accordance with the procedure and time limits prescribed by Article 17 of this Law. Upon failure to pay (to remit) VAT when due, default interest shall be charged in accordance with the procedure specified by Law of the Republic of Lithuania on Tax Administration. The same procedure shall be used when calculating default interest for a late payment of VAT advance contributions. If the violation of the approved customs procedures established by the Customs Code results in an import debt to the customs, default interest shall be calculated from the day when the import debt was contracted. IX. Control of Tax and Economic Sanctions Article
  41. If during the examination it is established that persons specified in par. 3 of Article 6 and Article 8 have not paid VAT and the taxpayers understated the calculated sum of VAT in the declaration or deducted a greater amount than due and therefore paid too little of it into the budget, the calculated deficiency, default interest and the penalty must be paid into the budget in a manner prescribed by Law of the Republic of Lithuania on Tax Administration. Payment of VAT for goods (with the exception of imported goods) and services shall be controlled by territorial state tax inspectorates which shall recover the unpaid sums, default interest and penalties prescribed by Law of the Republic of Lithuania on Tax Administration in a manner prescribed by Law of the Republic of Lithuania on Tax Administration. Payment of VAT for imported goods shall be controlled by territorial customs which shall recover unpaid sums and default interest in accordance with the procedure prescribed by the Customs Code. In the cases specified by this Law, and in cases established by the Government of the Republic of Lithuania, the control of payment of VAT for imported goods may be delegated to territorial state tax inspectorates. X. Final Provisions Article
  42. This law comes into effect as of 1 August,
  43. 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
  44. Article
  45. An application for the refund of an unjustified VAT paid or recovered may be handed in within 2 years from the day of payment (recovery) of the tax. The unjustified VAT sums paid (recovered) (including the refundable import VAT sums acknowledged by the communications of territorial customs) shall be refunded by territorial state tax inspectorates in a manner prescribed by Law of the Republic of Lithuania on Tax Administration. Article
  46. Manufacturing enterprises employing students of higher educational institutions, colleges and vocational training schools who do practical work or practical training, disabled persons of Group III shall reduce the computed difference payable into the budget between the sum of VAT for goods sold and services rendered, and the deductible sum of VAT by the amount of employment related income factually computed to the said persons during the taxable period, without exceeding for each person one average monthly pay before tax published in “Valstybës þinios”(National Gazette).by the Department of Statistics at the Government Manufacturing enterprises employing disabled persons of Groups I and II shall reduce the computed difference payable into the budget between the sum of VAT for goods sold and services rendered, and the deductible sum of VAT by the amount of employment related income factually computed to the said persons during the taxable period, without exceeding for each person one and a half average monthly pay before tax published in “Valstybës þinios” (National Gazette) by the Department of Statistics at the Government. The procedure for attributing enterprises to the category of manufacturing enterprises shall be established by the Government of the Republic of Lithuania. Public and private companies of public organisations of the disabled, in which all shares are owned by public organisations of the disabled, also other types of enterprises the founders whereof are only public organisations of the disabled and which were founded prior to the day of entry into force of this Law, correctional institutions in which convicted persons work, occupational therapy workshops of health care institutions in which patients work shall reduce the computed difference payable into the budget by 100%. The company "Puntukas" of the Society of the Disabled shall reduce the computed difference of VAT payable into the budget in proportion to the percentage of the capital owned by the society. Article
  47. The Government of the Republic of Lithuania shall establish: 1) by 15 April 1995, the compensatory rate of VAT and the procedure of its application with respect to farmers, the annual receipts of which does not exceed 50 000 litas. This procedure shall start to be applied for the products sold and services rendered from 1 July
  48. Article
  49. The Government of the Republic of Lithuania, proceeding from this Law, shall issue by 20 April 1994, instructions for the calculation and payment of VAT. Article
  50. The Government of the Republic of Lithuania may establish other time limits for the payment of the computed sum of VAT into the budget (refunding from the budget) than those provided for in Article
  51. I promulgate this Law passed by the Seimas of the Republic of Lithuania. Algirdas Brazauskas President of the Republic

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