LAW ON VALUE ADDED TAX

LAW ON VALUE ADDED TAX Official translation REPUBLIC OF LITHUANIA LAW ON VALUE ADDED TAX 5 March 2002 No IX-751 Vilnius CHAPTER ONE GENERAL PROVISIONS Article 1. Purpose of the Law This Law establishes the imposition of the value added tax (hereinafter referred to as VAT) and the obligations of taxable persons, VAT payers and other persons incidental to the payment of the tax. Article 2. Definitions For the purposes of this Law: 1. "Taxable person" shall mean any taxable person  of the Republic of Lithuania or a foreign state. 2. "Consideration" shall mean everything which has been or is to be obtained in money or in any other form as payment for the supply of goods and services from the purchasers/customers and/or third party. Subscription fees and/or donated funds received by non-profit-making legal persons shall not be treated as consideration provided the receipt thereof cannot be linked to the supply for the benefit of a specific person of specific goods or services, i.e. the above-mentioned funds are obtained for financing the general activities of the non-profit-making legal person, linked to representation of the interests of its members and for their benefit. 3. "Disclosed agent" shall mean a taxable person acting as an intermediary in the transaction for the supply of goods or services in the name and for the account of another person.  4. "Employment" shall mean work carried out under the employment contract, also any other activity performed on the basis of legal ties creating the relationship of employer and employee (by agreement as regards remuneration for work , workplace and functions, work discipline, etc), corresponding to those created under the employment contract.  5. "Economic activities" shall mean activities (including all activities of producers, traders and persons supplying services, agricultural activities, fishing activities, mining, activities of the professions, exploitation of tangible and/or intangible property or property rights) seeking to obtain any income (regardless of whether or not the activity is aimed at making a profit). The following activities, however, shall not be considered as economic activities: 1) employment as it is defined in paragraph 4 of this Article; 2) activities of state and local government authorities as they are defined in paragraph 30 of the Article, even where they collect dues, fees or payments in connection with these activities; 3) holding of shares (interests, member shares) and other securities, even though income (interest, dividends, etc) is obtained therefrom on a continuing basis. The said exception shall not cover sale or any other transfer of shares (interests, member shares) even though income accrued from the holding thereof is obtained due to such sale or transfer; 4) keeping of a bank deposit, bank account or bank card account, even though income is obtained therefrom on a continuing basis; 5) transactions carried out on an occasional basis, i.e. not inter-connected transactions giving no grounds to believe that they are or will be carried out on a continuing basis. Where the transactions which are carried out are not uniform, this fact by itself does not give ground to treat them as being carried out on an occasional basis,  where other circumstances give grounds to believe  otherwise. 6. "Capital assets" shall mean tangible property and other objects of the right of ownership which are used in the economic activities of the taxable person (with the exception of natural persons) for a period exceeding one year and the price of acquisition whereof is not less than the price fixed by the taxable person (according to the groups of capital assets listed in Annex 1 to the Law on  Profit Tax). Capital assets acquisition price shall be included in the costs gradually in portions during the period of depreciation or amortisation. For the purposes of this Law, tangible capital assets of a natural person shall be tangible property of the types listed by the Government of the Republic of Lithuania or an institution authorised by it, which are  used in the economic activities of the natural person for a period exceeding one year. 7. "Import VAT " shall mean the amount of VAT which is calculated or must be calculated in the manner established by this Law and other legal acts on the imported goods due to which according to the Customs Code of the Republic of Lithuania customs debt on importation is incurred.       8. "Derivative " shall mean a financial instrument (future contract, forward contract, etc.) the value or price whereof is linked to the value or price of the goods on which the instrument is based as well as a financial instrument (future contract, forward contract, etc.) the value or price whereof is linked to the price of securities, exchange rate, interest rate, stock exchange index, determination of creditworthiness or any other variable. 9. "Movable" shall mean any property except for that referred to in paragraph 15 of this Article. 10. "Controlling person" shall mean any person controlling the taxable person if he: 1)  directly or indirectly holds over 50% of shares (interests, member shares) in the taxable person or other rights to distributable profit or pre-emptive rights to the acquisition thereof; 2) himself being the holder of not less than 10% of shares (interests, member shares) in the taxable person or other rights to a share of distributable profit or pre-emptive rights to the acquisition thereof, holds over 50% thereof together with the related persons, or 3) has the right to elect/appoint the majority of members of the managing body of the taxable person and/or actually is in control of the decisions made by the taxable person. 11. "Transport of cargo" shall mean transport of tangible property (mail including) by all forms of transport, also transport of goods by stationary transport installations (pipelines, electricity lines, etc.). 12. "Reduced rate of the VAT" shall mean the rate of VAT fixed in this Law below the standard rate,  except for the zero-rate. 13. "Taxable person of the Republic of Lithuania" shall mean a legal or natural person of the Republic of Lithuania who/which carries out economic activities of any type. 14. "Undisclosed agent" shall mean a taxable person acting as an intermediary in the transaction for the supply of goods or services in his own name but for the account of another person. 15. "Property immovable by nature" shall mean property which is immovable by nature, i.e., land or other property, that cannot be removed from one place to another without the change of  its purpose and  a material reduction of its value. 16. "Place where the person has his permanent address or usually resides" shall mean the country where he usually resides or, in the absence of such place, the country where he has a place of  personal, social and economic interests. 17. "Subdivision" shall mean a branch or a representative office of the taxable person set up according to the established procedure, also the permanent establishment  of the foreign taxable person through which the foreign taxable person is operating in the Republic of Lithuania. For the purposes of this Law the term "permanent establishment" shall be used as it is defined in the legislation on profit (income) taxation. 18. "Output VAT " shall mean the amount of VAT that has been or is due to be calculated on the supply of goods and/or services.      19. "Material improvement of the building/structure" shall mean construction works the value whereof exceeds 50% of the value of the building or structure before the completion of the works. 20. "Non-profit-making legal persons" shall mean legal persons established for other than profit-making purposes, whose generated profit under the legal acts regulating their activities shall not be distributable to their founders and/or members. 21. "Input VAT" shall mean the amount of VAT paid or payable on purchases of  goods and/or services, also the amount of VAT calculated on the tangible capital assets specified in Article 6 of this Law, manufactured by the taxable person himself. 22. "A good" shall mean any thing (including notes and coins of numismatic interest), also electricity, gas, heat and other types of energy. 23. "VAT deduction" shall mean the proportion of input and/or import VAT , deductible under the provisions of this Law. 24. "VAT payer" shall mean a taxable person registered by the tax administrator as the VAT payer. 25. "Open market value" shall mean the amount of consideration which a purchaser  would have to pay for the goods or services to a supplier thereof at arm's length where each one of them is seeking maximum economic benefit for himself. 26. "Related persons" shall mean: 1) a natural person and his spouse, fiancé or cohabitant; 2) a natural person and persons connected to him by blood relationship (up to the fourth degree) or by  marriage (a natural person and the relatives of his spouse (up to the fourth degree), also natural person and the relatives (up to the second degree) of the relatives of his spouse (up to the second degree); 3) a natural person and the person connected to him by guardianship relations; 4) a taxable person  and a person who holds an interest in the latter (shareholder, holder of member share, etc.); 5) a taxable person  and a member of its management body; 6) a taxable person  and its employees; 7) a taxable person  and a natural person who is related to the person holding an interest in the taxable entity or is a member of the taxable entity's  management body by the links or relationship specified in subparagraphs 1, 2 or 3 of this paragraph; 8) taxable persons that are subsidiaries of the same taxable parent entity; 9) a taxable parent entity and a person holding an interest in its taxable subsidiary; 10) a taxable subsidiary and a person holding an interest in its taxable parent entity; 11) a taxable parent entity and a member of the management body of its taxable subsidiary; 12) a taxable subsidiary and a member of the management body of the taxable parent entity;  13) a taxable parent entity  and a natural person connected to a person holding an interest in its taxable subsidiary or to a member of the management body of its taxable subsidiary company by the links or relationship specified in subparagraphs 1, 2 or 3 of this paragraph; 14) a taxable subsidiary and a natural person connected to a person holding an interest in its taxable parent entity or to a member of its management body by the links or relationship specified in subparagraphs 1, 2 or 3 of this paragraph; 15) two taxable persons if one of them directly or indirectly (through one or several intermediaries) controls over 25% of shares (interest, member shares) or has a right to over 25% of decisive votes in the other person or has undertaken to co-ordinate his business decisions with that other person or has assumed liability for the performance of obligations of that other person to third persons or has undertaken to transfer to that other person  all or part of the profit or has granted that other person the right to use over 25% of its assets; 16) two taxable persons if the same persons holding an interest in them (alone or together with persons connected with them by the links or relationship specified in subparagraphs 1, 2 or 3 of this paragraph) directly or indirectly hold over 25% of shares (interest, member shares) in each one of them; 17) two taxable persons if one of them has the right to elect (appoint) the majority of members of that other person's management bodies and/or actually controls the decision making of that other person. 27. "Standard rate of VAT" shall be 18 %. 28. "Territory of the country" shall mean the territory of the Republic of Lithuania and the area adjacent to the territorial waters of the Republic of Lithuania where, under the laws of the Republic of Lithuania and international law, the Republic of Lithuania has the right to carry out exploration and to exploit the sea-bed and underground natural resources.  29. "Foreign taxable person" shall mean any of the following persons engaged in any form of economic activity: 1) a legal person or organisation of a foreign state, having its seat in a foreign state and incorporated or otherwise organised in accordance with the legal acts of the foreign state, or    2) any other entity incorporated, established or otherwise organised abroad, or 3) a natural person who has a permanent address or usually resides outside the Republic of Lithuania. 30. "Activities of the state and municipalities" shall mean the activities of the state, municipalities, state or municipal institutions and offices and, in the cases specified by laws, also the activities of other public legal persons, which the said persons are obligated under laws to engage in. For the purposes of this Law the following  activities engaged in by the said persons shall not be considered as state and municipality  functions: 1) supply of new goods (except for the supply of seized, ownerless goods (or goods recognised as ownerless property), or goods acquired by inheritance by the state or goods or treasure taken or transferred to state income), which are or may be in competition with goods supplied by taxable persons; 2) supply of electricity, gas, heat and other forms of energy, supply of water, steam; 3) supply of transport services and ancillary transport services; 4) supply of services of trade fair and business exhibition organisation; 5)  supply of advertising, market survey and/or public opinion polling and other similar services; 6) supply of tourist services; 7) supply of telecommunication services; 8) supply of public information services;   9) supply of catering services; 10) activities of agricultural market economic regulation agencies; 11) lease; 12) any activities carried out by the above persons, that are not specified in paragraphs 1-11, if the goods and/or services supplied thereby by the said persons are or may be in competition with goods and/or services supplied by the taxable persons. 31. Other concepts used in this Law shall be interpreted as they are defined in the Law of the Republic of Lithuania on Tax  Administration (hereafter - the Law on Tax Administration), the Customs Code of the Republic of Lithuania (hereafter - the Customs Code), as well as the Civil Code of the Republic of Lithuania (hereafter - the Civil Code) to the extent this is in conformity with this Law (with the exception of the cases authoritative under the Civil Code). Article 3. Scope of VAT 1. The supply of goods or services shall be subject to VAT provided the following conditions are satisfied: 1) the supply of goods and/or services is effected for consideration; 2) the supply of goods and/or services according to the provisions of this Law is considered to be effected within the territory of the country; 3) the goods and/or services are supplied by a taxable person in the performance of his/its economic activities, i.e. acting as such.  A natural person shall not be considered a taxable person in respect of the supply of goods and/or services if the transactions concluded by the natural person are not related to the economic activities carried out by him. 2. The scope of import VAT shall be importation of goods where under the Customs Code customs debt on importation is incurred due to the imported goods. Article 4. Supply of Goods 1. Supply of goods shall mean the transfer of goods to another person where under the conditions of the transaction this person or a third party is transferred the right to dispose of the goods as their owner. 2. The actual handing over of goods, pursuant to a contract for the sale of goods on deferred terms or under a contract of  payment in instalments, if under the terms of the transaction ownership shall pass to the person to whom the goods have been handed or to the third party upon payment of the final instalment shall also constitute supply of goods for the purposes of  this Law. For the purposes of this Law, the handing over of goods, if under the terms of the transaction ownership of goods may  (but not necessarily shall) pass upon the payment of the final instalment, shall be treated as supply of  services (lease).  3. For the purposes of this Law, the establishment or transfer of the rights in rem over the property immovable by its nature (easement, usufruct, right of development, long-term lease) shall also be considered as supply of goods (of the property immovable by its nature in respect whereof they have been established). The transfer of interest or a share, where the transfer of the interest or share gives the holder thereof the  right to dispose of the  property immovable by its nature (or part thereof) as its owner shall also be considered supply of goods (property immovable by its nature) within the meaning of this Law.   Article 5.  Private use of goods by a VAT payer 1. For the purposes of this Law private use of goods by a VAT payer, as it is defined in paragraph 2 of this Article, shall also constitute supply of goods for consideration. 2. Unless otherwise provided by this Article, private use of goods by VAT payer  shall be considered to have occurred  where goods at the disposal of the VAT payer, input and/or import VAT on which (if the goods are manufactured by the VAT payer itself/himself - on other goods and/or services used for the manufacture of the said goods) was  wholly or partly deductible by the VAT payer, are subsequently : 1) transferred free of charge, whereas the person to whom the goods are transferred or the third party acquires the right to dispose of the goods as their   owner , or 2) used in any other manner where input and /or import VAT  on goods and/or services intended for the above use would not be deductible by the VAT payer under this Law.  3. In derogation from provisions of paragraph 2 of this Article, the transfer or use of goods shall not be treated as private use of goods by  the VAT payer, where the goods are transferred or used as samples, i.e. goods forming part of the VAT payer's regular business are transferred or used for examination, analysis or test. In this case goods may be transferred or used in the amount required in order to ensure the quality of the examination, analysis or test, having regard to the nature of the goods and character of the examination, analysis or test, as well as pursuant to relevant provisions of the legal acts regulating the above (provided it is regulated by legal acts). 4. In derogation from provisions of paragraph 2 of this Article, the transfer or use of goods shall not be treated as private use of goods by  the VAT payer, where the goods are transferred or used for the making of gifts of small value (for advertising, representation, charity and/or support purposes). The Government of the Republic of Lithuania or an institution authorised by it shall establish the conditions and limitations of the application of the provisions of this paragraph, including the limitations relating to  the value of goods transferred or used for the purposes specified herein.   5. In derogation from provisions of paragraph 2 of this Article, the loss of goods shall not be treated as their private use  by the VAT payer. 6. Where a natural person who is a VAT payer attributes part of the acquired tangible capital assets to his/her economic activities pursuant to the provisions of this Law, the provisions of this Article shall apply only to the part of the assets attributed in the said manner. The provisions of this Article shall not be applicable to any transfer or use of the remaining part of the assets regardless of the fact that input and/or import VAT on the  property became partly deductible.  Article 6. Manufacture of Tangible Capital Assets by a VAT Payer himself 1. For the purposes of this Law, supply of goods for consideration shall include manufacture of tangible capital assets by a  VAT payer himself. In this Law, manufacture of tangible capital assets by the VAT payer himself shall mean  the entirety of operations of processing of acquired and/or imported raw materials and materials, manufacturing and other operations performed by the VAT payer himself and/or services acquired by the VAT payer, the result whereof is a new unit of tangible capital assets. Material improvement of the building/structure used in the economic activities of the VAT payer shall also be treated as manufacture of tangible capital assets by the VAT payer himself, regardless of whether or not the VAT payer is the owner of the building/structure or uses it on other grounds, unless otherwise provided in Article 9 of this Law, and regardless of whether the VAT payer made improvements in the building/structure by himself or by acquiring services from other taxable persons. 2. The provisions of this Article shall be applied only in the cases where the input and/or import VAT  on the goods and/or services used for such manufacture of tangible capital assets was  wholly or partly deductible by the VAT payer.  Article 7. Supply of Services Unless otherwise established in this Law, supply of services shall mean any transaction in respect of any civil rights object, provided this transaction is not treated as supply of goods  within the meaning of this Law. Such transactions shall  include, inter alia: 1) sale or any other transfer of software; 2) lease; 3) assignment of intangible property and title, except for the cases provided in Article 4 (3) of this Law; 4) construction works, including the handing over of a constructed new building or structure to the client/contractor; 5) obligation to refrain from an act or to tolerate an act or situation. Article 8. Private use of  Services by  a VAT Payer 1. For the purposes of this Law,  private use of services by a VAT payer, as it is defined in paragraph 2 of this Article, shall also constitute supply of services for consideration. 2. The following shall be treated as private use  of services by  a VAT payer: 1) giving another person the right to use for a certain time free of charge the object of the right of ownership of the VAT payer. The above provision shall apply only where input and/or import VAT on  the object of the right of ownership  (where it is manufactured by the VAT payer himself - on the goods and/or services used for the manufacture thereof) was wholly or partly deductible by the VAT payer, or 2) the object of the VAT payer's right of ownership which is not considered as a good within the meaning of this Law, is  transferred or used in the ways specified in Article 5(2) of this Law. The provision shall be applicable only where input and / or import VAT on  the object of the right of ownership (where it is manufactured by the VAT payer himself - on the goods and/or services used for the manufacture thereof) was wholly or partly deductible by the VAT payer. 3. Where a natural person who is a VAT payer attributes part of the acquired tangible capital assets to his/her economic activities pursuant to the provisions of this Law, the provisions of this Article shall apply only to the portion of the assets attributed in the said manner. The provisions of this Article shall not be applicable with respect to the use of any other part of the assets regardless of the fact that the input and/or import VAT on  the assets became  partly deductible. Article 9. Special Rules Applied in respect of Certain Transactions 1. For the purposes of  this Law the transfer of an undertaking into the ownership of another person where the undertaking is transferred into the ownership of one person as a complex shall not be treated as supplies of either goods or services. The provisions of this paragraph shall not apply with respect to the sale or any other transfer of shares (interests, member shares) in the undertaking. 2. If a natural person who has carried out economic activities in accordance with the procedure laid down by legal acts without having established an undertaking (registered a farmer's farm, etc.), later transfers the activities as a complex (i.e. the entirety  of  the objects of the right of ownership, acquired and used for the activities, also other property and non-property rights, debts and other obligations related to the said activities) to another taxable person who continues the activities that are transferred  to him/it, for the purposes of this Law such transfer of activities shall not be considered as supplies of either goods or services.    3. Any transfer of an object of the right of ownership, where it is transferred as a property contribution to a company  and the input and/or import VAT on the object of the ownership right (and in case of manufacture thereof by the  VAT payer himself - on the goods and/or services used for the manufacture) was wholly or partly deductible by the VAT payer, shall be treated for the purposes of this Law as supply of goods for consideration (in case of transfer of an object considered as a good within the meaning of this Law) or as supply of services for consideration (where the transferred object is not treated as a good for the purposes of this Law). 4. Transfer of any object of the right of ownership due to the winding up of the legal person-VAT payer by way of  reorganisation, where  input and/or import  VAT on  the object of the ownership right (and in case of manufacture thereof by the  VAT payer himself - on the goods and/or services used for the manufacture) was wholly or partly deductible by the VAT payer being wound up shall be treated for the purposes of this Law as supply of goods for consideration ((in case of transfer of an object considered as a good within the meaning of this Law)  or as supply of services for consideration (where the transferred object is not treated as a good for the purposes of this Law)). 5. Return to the owner of a building/structure  materially improved  by the VAT payer who/which used it on the grounds other than the right of ownership prior to the expiry of the period of adjustment of VAT deductions fixed in this Law shall be treated as supply of goods for consideration provided that the input and /or import VAT on  goods and/or services used for the improvement was  wholly or partly deductible by the VAT payer. The parties shall have the right to make an agreement that material improvement of the building/structure shall be considered to be  supplied to the owner of the building/structure not at the moment of return thereof,  but right after the completion of the improvement works and in such case the provisions of this Law related to the manufacture of tangible capital assets by the taxable person himself shall not be applied to the VAT payer who carried out the improvement with respect to this building/structure. Article 10. Barter Where consideration for the supplied goods and/or services is given (wholly or in part) in goods and/or services, each party to the transaction shall be considered as supplying goods and/or services. Article 11. Agency 1. For the purposes of this Law, a disclosed agent shall be considered as supplying the service of agency (agent's service) to the person in whose name and for whose account he is taking part in the transaction. 2. Where an undisclosed agent takes part in the transaction, it shall be considered that  the goods or services were at first supplied to the undisclosed agent  and later by the undisclosed agent, even in the case where the same goods or services  are in fact supplied directly to the final purchaser/customer. Article 12. Criteria for Determination of  the Place of Supply of Goods 1. If the supplied goods have to be transported, the place of supply of goods shall be deemed to be the place where the goods are at the time when transport of the goods begins regardless of who is transporting the goods (supplier, purchaser  of the goods or the third party). 2. If the goods are not transported, the place of supply shall be deemed the place where the goods are when the supply takes place.         Article 13. Criteria for Determination of the Place of Supply of Services 1. Unless otherwise established in this Article, the place where a service is supplied shall be deemed to be the place where the supplier has established his business, i.e. where the supplier of service has its seat (if it is not a natural person) or the place where he has his permanent address or usually resides (if he is a natural person), however, when services are performed through the subdivision of the taxable person established in the country other than that where the taxable person himself has established his business, the place of supply of service shall be deemed to be the place where the specified subdivision is located. 2. In derogation from the provisions of paragraph 1 of this  Article, the place of the supply of services connected with property immovable by its nature shall be the place where the property with which the services are connected is situated or will be constructed. For the purposes of this provision, services connected with the property immovable by its nature shall include: 1) construction, design and exploration works; 2) lease of property immovable by its nature; 3) services of agents in the sale and/or purchase of immovable property,  services of valuation of the property, services of architects, engineers, services of supervision of the property immovable by its nature and other services  connected with the property. 3. By way of derogation from the provisions of paragraph 1 above, the place of the supply of services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activities of the organisers of such activities, and where appropriate, the supply of ancillary services shall be  the place where the services are physically carried out. 4. By way of derogation from the provisions of paragraph 1 above, ancillary transport services (loading, unloading, handling of cargo, driving of empty wagons and/or containers, arranging transportation of goods by stationary transport installations and other ancillary services connected with the transportation of cargo by certain means of transport or stationary transport installations) shall be considered supplied in the place where the services are physically carried out. 5. By way of derogation from the provisions of paragraph 1 above, the services of valuation of movable property, also work thereon (repair, maintenance, adjustment, etc.) shall be deemed supplied in the place where the services are physically carried out. 6. By way of derogation from the provisions of paragraph 1 above, the services listed in this paragraph shall be considered supplied in the place where the purchaser of services (customer) is established , i.e. where the seat of the purchaser is located (if the purchaser is not a natural  person) or where the purchaser has his permanent address or usually resides (if the purchaser is a natural person), however, in the cases where the services are supplied to a subdivision  of  a taxable person located in a country other than that in which  the taxable person himself has his seat, the services shall be considered supplied in the place where the specified subdivision is located.  The above provisions shall apply to: 1) transfers and assignments of copyrights and related rights, patents, industrial design, semiconductor topography, trade marks, firm names, secret processes and formulae, transfer of rights under the franchise agreement and other similar rights; 2) services of consultants, lawyers, auditors, accountants, engineers (not referred to in this Article, paragraph 2, subparagraph 3), technical control and analysis, market survey, public opinion polling and other similar services; 3) development, sale and other transfer of software, data processing, transmission of information; 4) insurance and financial services (with the exception of the hire of safes), when supplied by insurance companies, banks, other credit institutions, pension funds, collective investment entities or intermediaries of public trading in securities; 5) the supply of staff (with the exception of teaching and training of staff); 6) advertising services; 7) telecommunications services; 8) obligation to refrain from performing the activities specified in this paragraph, subparagraphs 1-7 or from exercising any of the rights specified in the said subparagraphs; 9) the services of agents when they procure for their principal any of the services referred to in subparagraphs 1-8 above. 7. By way of derogation from the provisions of paragraph 1 above, in the case of lease  of movable tangible property, the place of supply of the service shall be the place of actual utilisation of the leased  property. The property shall be considered utilised in the territory of the country if the supplier of the service or the purchaser/customer is unable to submit evidence confirming that the leased  property has been exported from the territory of the country. 8. By way of derogation from the provisions of paragraph 1 above, the place where transport services are supplied shall be the place where transport takes pace. If the transport services are carried out both inside and outside of territory of  the country, it shall be considered that the share of the service supplied within the territory of the country is proportionate to the part of the route running through the country's territory.    CHAPTER TWO CHARGEABLE EVENT AND TAXABLE AMOUNT Article 14. Chargeable Event 1. Unless otherwise provided in this Article, VAT on the good or service supplied shall become chargeable upon the issue, in the manner established in this Law, of the VAT invoice or any other accounting document serving under this Law as invoice for the supply of goods or services. 2. Where a VAT invoice or other document serving as an invoice for the supply of goods or services is not issued, VAT shall become chargeable upon the occurrence of that of the specified events, which occurs first, when: 1) the good is delivered or the service is supplied, or 2) the consideration for the supplied good or service is received. 3. Where, in accordance with the provisions of this Law, obligation to calculate and pay VAT on the good delivered or service supplied by a foreign taxable person lies with the purchaser/customer, VAT on said good or service shall become chargeable  upon the occurrence of that specified event, which occurs first: 1)when the purchaser/customer receives the  invoice for the supply of goods or services; 2) when the purchaser/customer pays the consideration for the supplied goods or services; 3) on the last day of the tax period following  the tax period when the goods or services were in fact supplied, provided no event specified in subparagraphs 1 and 2 of this paragraph occurred by the said day. 4. By way of derogation from the provisions of paragraphs 1, 2 and 3 of this Article, where payment for the goods or services is made in full or in part before the delivery of goods or supply of services, VAT shall become chargeable  upon the receipt of the above-mentioned full or partial consideration on the amount received, provided that according to the terms of the contract the goods will be delivered or all services will be supplied not earlier than 12 months after the date of conclusion of the contract (hereinafter in the Law full or partial consideration payable before the delivery of the good or supply of the service shall be referred to as payments on account ). The provisions of this paragraph shall not be applicable in the cases where the taxable amount is the margin calculated in the manner laid down in Articles 102 and 107 of this Law. 5. By way of derogation from other provisions of this Article, in the cases where goods are supplied as specified in Article 4 (2) of this Law , VAT shall become chargeable  upon the issue, in the manner laid down in this Law, of the VAT invoice or any other accounting document serving as invoice  for full or partial consideration for the goods supplied, whereas in the cases where the invoice or any other accounting document serving as invoice is not issued - upon the receipt of the consideration, however, in the cases where payment on account  is received for the good supplied in the above manner, the provisions of paragraph 4 of this Article shall apply. 6. By way of derogation from other provisions of this Article, in the case where long-term services are supplied (i.e. services which are supplied for a certain continuous period (telecommunications, lease, etc.), also in the case of long-term supply of electricity, gas, heat, and other types of energy VAT shall become chargeable  not later than upon the issue, in accordance with the procedure laid down in this Law, of the VAT invoice or any other accounting document serving as invoice  for the supply of goods or services during the accounting period, and in case the invoice or any other accounting document serving as invoice for the supply of goods or services is not issued - upon the receipt of the consideration for the amount of goods or services supplied during the accounting period. If, upon the expiry of the time period fixed in the legal acts regulating accounting, neither the invoice or any other accounting  document serving as invoice  for the supply of goods or services during the accounting period  has been issued, nor the consideration has been received, the obligation to calculate VAT shall arise on the day following the expiry of the said time period within which the document had to be issued.  Where under the contract of lease the leased property is to be delivered to the lessee not earlier than after 12 months from the date of conclusion of the contract and the payment on account  is received, the provisions of paragraph 4 of this Article shall apply. If the services or goods specified in this Article are supplied by a foreign taxable person and,  according to the provisions of this Law, the obligation to calculate and pay VAT on the good delivered or service supplied by a foreign taxable person lies with the purchaser/customer, VAT on said good or service shall become chargeable upon the occurrence of that of the below-specified events, which occurs first: 1) upon receipt by the purchaser/customer of the  invoice for the amount of goods or services supplied during the relevant accounting period; 2) upon payment of the consideration by the purchaser/customer  for the amount of goods or services supplied during the relevant accounting period (including the payments on account  payable under the contract of lease providing for the transfer of the leased property to the lessee not earlier than 12 months after the date of conclusion of the contract); 3) on the last day of the month following the accounting period, provided none of the events specified in subparagraphs 1 and 2 of this paragraph has occurred by the said day. 7. VAT on private use of goods and/or services  by the VAT payer shall become chargeable  at the moment of such use  of the good or  of the service.  8. The VAT shall become chargeable on the tangible capital assets manufactured by the VAT payer himself when the VAT payer starts to use the assets in his economic activities (in case of material improvement of a building/structure - upon the completion of the improvement works). 9. Import  VAT  shall become chargeable  when, in accordance with the Customs Code, customs debt on importation is incurred. Article 15. Taxable Amount 1. The taxable amount which is the base for calculation of VAT shall comprise the consideration (excluding the VAT itself) which has been or is to be obtained by the supplier of goods or services (hereinafter in this Article - the seller) or, on his behalf, a third party. Where other goods and/or services are obtained in payment for the goods or services supplied, the consideration that would have been obtained if obtained in money shall constitute the taxable amount which is the base for calculation of   VAT. 2. In the cases specified in Article 5 (2)  or subparagraph 2 of Article 8 (2)  of this Law  the acquisition price of the transferred or used object of the right of ownership, i.e. the purchase price (excluding the VAT itself) or the cost price of manufacture by the VAT payer himself (excluding the VAT itself) shall constitute the taxable amount. Where the transferred or used object of the right of ownership was the VAT payer's capital assets, the taxable amount shall be equal to the non-depreciated/non-amortised share of the assets' value at the time the tax becomes chargeable, calculated in accordance with the laws regulating the taxation of profit (income). 3. In the case specified in subparagraph 1 of Article 8 (2) of this Law, the taxable amount shall be the expenses of the VAT payer (excluding the VAT itself) incurred upon giving the object of the right of ownership for use. When the object of the right of ownership given for use is the VAT payer's capital assets, the amount of depreciation of the assets, which would be calculated under the laws regulating the taxation of profit (income) for the period during which the assets were given for use in the said manner, shall be attributable, inter alia, to the expenses incurred by the VAT payer. 4. In the case specified in Article 6 of this Law the taxable amount shall be the cost price of the capital asset manufactured by the taxable person himself (in case of material improvement of the building/structure - the value of the said works) (excluding the VAT itself). 5. The taxable amount shall in all cases include: 1) all taxes, duties,  levies and charges, excluding the VAT itself; 2) expenses incidental to the supply of a good or service and charged to the purchaser (such as packing, transport, insurance costs, etc.); 3) any subsidies or grants directly linked to the final price of the good or service. 6. A subsidy or grant shall be considered as directly linked to  the final price of  the good/service provided all the following conditions are met: 1) it is paid to the seller; 2) it is paid by a third party; 3) the amount constitutes the consideration for the good/service or a part thereof.       7. The taxable amount shall not include: 1) price discounts and rebates allowed at the time of the supply of the good or service; 2) the amounts received by the seller as repayment for expenses paid out for the third persons in the name, for the benefit and on the account of the purchaser. The amount of the repayment in this case must be equal to the actual amount of the seller's expenditure in the above transactions; 3) default interest. 8. Where, after the occurrence of the chargeable event, the good or service is refused or returned or the seller allows discounts or rebates (upon compliance with certain additional terms and conditions or for other reasons), the taxable amount in respect of the good or service shall be reduced accordingly.  9. The value  of packing in which the goods are supplied (bottles, crates, containers or other packing necessary for keeping the goods) shall be excluded from the taxable amount of the supplied good only in the case where there is an agreement between the seller and purchaser to return the packing to the seller; however, if the packing is not returned within 12 months, the taxable amount in respect of the goods calculated by the seller must be increased by the amount equal to the value of the unreturned packing. Where the value of the returned packing are lower than the amount specified in the agreement, the taxable amount calculated by the seller must be increased by the amount equal to the difference in the values of packing. Where there is no agreement regarding the return of the packing, the value of the packing shall be included in the taxable amount of the goods supplied. Where the packing, the costs whereof have been included in the taxable amount of the goods supplied, is later returned, whereas the person returning the packing is refunded or is due to be refunded the amount equal to the value of the packing, the taxable amount of the goods shall be reduced by the amount equal to the value  of the returned packing. 10. Where in case of the supply of goods or services it is provided that the purchaser must pay interest (for the deferred time of payment, also in case of financial lease (leasing), etc.) the amount whereof is specified in the contract, the sum of interest shall not be included in the taxable amount of the goods or services supplied. In such case it shall be considered for the purposes of this Law that two transactions have been effected - the principal transaction  of supply of goods or services and the ancillary transaction - that of granting of credit, the taxable amount whereof comprises the above-specified interest.        11. Where the natural person who is  the VAT payer transfers the property to another person and the person or the third party acquires the right to dispose of the property as its owner, whereas the property has been the person's tangible capital asset and he/she has attributed a part thereof for the performance of his economic activities in accordance with the provisions of this Law, the  taxable amount shall be the part of the consideration (excluding the VAT itself) corresponding to the part of the asset attributed for the performance of economic activities. 12. The provisions of this Article shall not be applied in the cases specified in Chapter XII of this Law where the taxable amount in respect of supplies of goods and services shall be that which constitutes the margin calculated according to the procedure laid down in the Chapter.     13. The taxable amount in respect of imported goods on which the VAT on importation is levied shall be calculated by adding the following amounts (insofar as they are not already included in the customs value of the goods) to the customs value determined on the basis of the Customs Code and the legal acts regulating the application thereof: 1) the paid or payable duties, taxes and other charges due outside the Republic of Lithuania and duties and taxes on the products due in the Republic of Lithuania by reason of importation (excluding the VAT itself); 2) costs of transportation of goods, also ancillary transport services and insurance, costs of paid or due commission for agency services and packing costs, incidental to transportation of goods up to the first place of destination within the customs territory of the Republic of Lithuania. For the purposes of this Article, first place of destination within the customs territory of the Republic of Lithuania shall mean the place of delivery of goods indicated on the consignment notes or, in the absence of such an indication, the first place of transfer of goods into the customs territory of the Republic of Lithuania; 3) incidental expenses, such as costs of services specified in subparagraph 2 of this paragraph, where they result from transport to the first place of destination within the customs territory of the Republic of Lithuania, if that place is known when the chargeable event occurs. 14. For the purposes of Article 9 (3) and (4) of this Law, the taxable amount  shall be the value of the object of the right of ownership which is transferred. 15. For the purposes of Article 9 (5) of this Law the taxable amount shall be the total costs of the works of material improvement of the building/structure (where the material improvement of the building/structure is handed over to the owner thereof immediately after the completion of the works) or a portion thereof corresponding to the number of years remaining until the expiry of adjustment period for VAT deductions, fixed in the this Law (where the material improvement of the building/structure is handed over to the owner at a later date). Article 16. Taxable Amount in Case of Agency Services 1. The taxable amount in respect of the services supplied by the disclosed agent shall be the amount of consideration for agency (commission) calculated according to the procedure laid down in Article 15 of this Law. 2. The taxable amount in respect of supplies of goods  and services both to the disclosed agent and by the agent himself shall be determined as the total value of the supplied goods or services calculated according to the procedure established in Article  15 of this Law. Article 17. Calculation of the Taxable Amount on the Decision of the Tax Administrator 1. In the cases where the tax administrator has grounds to suspect that the taxable amount of the supplied good or service has been artificially increased or reduced,  it shall have the right to calculate the taxable amount . The taxable amount of the supplied good or service may be considered artificially reduced or increased in the case where  upon giving due consideration to all conditions of the transaction the taxable amount does not correspond to the open market value of the good or service (it has been fixed having regard to an individual purchaser - related person, etc.). 2. The taxable amount shall be calculated, on the decision of the tax administrator, on the basis of the open market value determined in accordance with the methods approved by the Government of the Republic of Lithuania or an institution authorised by it and following the procedure of their application. 3. The provisions of this Article shall not apply to the supply of goods or services effected for a consideration fixed by state or municipal institutions and agencies or in the international agreements of the Republic of Lithuania. CHAPTER THREE RATES OF VAT Article 18. Application of the Rate of VAT The rate of VAT applicable to the supply of goods or services and the importation of goods shall be that rate of VAT fixed in this Law which was in force the at the time when VAT became chargeable on the goods or services supplied or customs debt on importation was incurred.  Article 19. Rates of VAT 1. In the cases of supply of goods and services, which are not provided in paragraphs 3,4 and 5 of this Article and Chapter IV of this Law, standard rate of VAT shall be applied. 2. Standard rate of VAT shall apply to imports of goods which are not indicated in paragraph 3 of this Article and in Chapter V of this Law. 3. The reduced rate of VAT of 5% shall be applied to: 1) passenger transport by regular routes determined by the Ministry of Transport and Communications or an institution authorised by it,  passenger transport by passenger trains as well as  transportation of passenger  luggage referred to in this subparagraph; 2) books, newspapers and magazines, except for publications publicising eroticism and violence, which have been recognised as such by an institution authorised by legal acts; 3) pharmaceuticals and medicinal products (special purpose food products for children, special medicinal purpose food products and special medicinal body and dental care products,  pharmaceutical products, medical devices, compensatory equipment, medical aid devices and articles of personal hygiene). The list of medicinal products indicated in this subparagraph, on which VAT is chargeable at the reduced rate of 5%, shall be approved by the Government of the Republic of Lithuania; 4) accommodation at hotels and other special accommodation services supplied according to the procedure laid down in the legal acts regulating tourist activities; 5) organic food products (the requirements for organic food products shall be laid down by the Government of the Republic of Lithuania); 6) chilled meat and edible offal (with the exception of meat and edible offal of poultry) if it conforms to the standards approved by the Department of Standardisation under the Ministry of the Environment of the Republic of Lithuania;    7) chilled, frozen and deep frozen meat and edible offal of poultry if it conforms to the standards approved by the Department of Standardisation under the Ministry of the Environment of the Republic of Lithuania. 4. Reduced 9% rate of VAT shall be applied to supplies of services relating to construction, renovation, insulation and design of residential houses, engineering network building and territorial management, which are financed with state and municipal budget resources as well as with soft credits granted by the state and resources of state special funds. 5. Zero-rate of  VAT shall be charged on the supplies of goods and services specified in Chapter VI of this Law. CHAPTER IV SUPPLIES, EXEMPT FROM VAT Article 20. Goods and Services Related to Health Care 1. Personal and public health care services provided by health care institutions within the meaning of relevant laws, as well as natural persons who have acquired, according to the procedure established by legal acts, the right to provide the above services shall be exempt from VAT. 2. Supplies of goods by the persons specified in paragraph 1 of this Article as well as supplies by the said persons of services other than those referred to in paragraph 1 of this Article shall be exempt from VAT provided all the following conditions are met: 1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article; 2) the supply of the above goods and services is linked to  the supply of services referred to  in paragraph 1 of this Article.  3. The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article. 4. Therapeutic substances of human origin and human milk, also dental prostheses supplied by dentists and dental technicians shall be exempt from VAT. 5. The supply of transport services for sick or injured persons or other persons in need of medical aid in vehicles specially designed for the purpose shall be exempt. Article 21. Social Services and Connected Goods 1. Exempt from VAT shall be the supply of social services by children and young people care institutions, by old people's homes and/or by the care/guardianship institutions for the disabled or by other non-profit making legal persons. 2. The supplies of goods and services other than those specified in paragraph 1 of this Article by the persons referred to in paragraph 1 of this Article shall be exempt from VAT provided the following conditions are met: 1) the goods and services are supplied for the users of services specified in paragraph 1 of this Article; 2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article. 3. The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article. Article 22. Education and Training Services 1. Pre-school education, primary, general, secondary, tertiary and higher education,  additional training of children and young people (in art, music, other spheres), studies at higher educational establishments, vocational training shall be exempt from VAT if provided by legal persons who are qualified under laws to provide the above services, also exempted shall be in-service training and retraining, where the services are supplied by non-profit making legal persons who have acquired the right to supply the services according to the procedure prescribed by legal acts. 2. Supplies of goods by the persons specified in paragraph 1 of this Article as well as supplies by the said persons of services other than those referred to in paragraph 1 of this Article shall be exempt from VAT provided all the following conditions are met: 1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article; 2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article..  3. The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article. 4. Scientific research carried out by the institutions of science and studies referred to the paragraph 1 of this Article, the type whereof is linked to the supplied services of higher education and/or studies shall be exempt from VAT. 5. Tuition given by natural persons shall be exempt from  VAT provided their syllabi  correspond to the general, secondary and higher education syllabi in the respective subject. Article 23. Cultural and Sports Services 1. Cultural services supplied by non-profit making legal persons shall be exempt from VAT. For the purposes of this Article, the following shall be considered as cultural services: 1) activities of museums, zoological and botanical gardens, circus; 2) various cultural events (theatre performances, choreographic performances, cultural events for children and young people, art exhibitions and exhibitions of folk art, etc.), film production (including ancillary activities - dubbing, subtitling, etc.), film rent and demonstration; 3) services in the field of bibliography and information supplied by libraries. 2. Supplies of goods by the persons specified in paragraph 1 of this Article as well as supplies by the said persons of services other than those referred to in paragraph 1 of this Article shall be exempt from VAT provided all the following conditions are met: 1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article; 2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article.  3. The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article. 4. Supply of services linked to physical education and sport by non-profit making legal persons shall be exempt from VAT. For the purposes of this Law, the following services shall be considered linked to physical education and sport: 1) granting of the right to participate in a cultural or sport event. The provisions of the subparagraph shall not be applicable to the sale of tickets to physical education or sporting events; 2) supply of services to the participants in  physical education or sporting events directly linked to their participation, i.e. the granting of the right to use special premises, territories and/or inventory for physical education and sport, the services of training of participants and other similar services. The services relating to provision of accommodation, catering and transport shall not be attributable to the above-mentioned services. Article 24. Activities of Non-profit Making Legal Persons, not Specified in Articles 20, 21, 22 and 23 1. Services supplied to their member by political parties, trade unions and other non-profit making legal persons set up and operating on the membership basis shall be exempt from VAT provided that the services conform to the aims of the legal person determined in the bylaws/regulations thereof and no consideration  is obtained for the above services in addition to membership fees. The provisions of this paragraph shall be applied to the activities of non-profit making legal persons only where the payment of members' fee may be linked to the specific service supplied for the benefit of …