Tax calculation and recalculation

 

 

Tax calculation

Article 66 of the Republic of Lithuania Law on Tax Administration establishes that taxes payable must be calculated by taxpayers themselves (persons withholding the tax, hereinafter referred to as “taxpayers”) in accordance with the tax laws, except for when respective exemptions apply. If taxpayers discover that their tax obligations have been calculated in error, then they must recalculate the payable amount.

Taxpayers are required to inform the State Tax Inspectorate about the calculated (recalculated) amount of taxes payable by filing (revising) their tax return. If taxpayers do not calculate the taxes payable in accordance with the tax laws, or do not recalculate the amounts which have been calculated in error, then the taxes payable are repeatedly calculated by the tax authorities on the basis of tax returns, accounting and other documents submitted by taxpayers, or by other appropriate tax calculation methods.

Taxes and related amounts are calculated in euros, and each pecuniary obligation is rounded as follows: 49 cents or less are rounded down by deduction, while 50 cents or more are rounded up to one euro. Taxpayers are required to pay the rounded amount of taxes to the budget.

Article 69 of the Republic of Lithuania Law on Tax Administration establishes that in cases where transactions, economic operations or any groups thereof are entered into by taxpayers with the aim of obtaining tax relief in calculating tax, such as:

  • to postpone, either directly or indirectly, the due dates for tax payment;
  • to reduce the tax amount due;
  • to completely avoid paying tax;
  • to increase the amount of tax overpayments (difference) to be refunded (credited);
  • to shorten the time limits for tax overpayment (difference) refund;

the tax authorities apply the principle of substance over form when calculating the taxes payable, i.e. the tax authorities do not take into account the formal expression of the activities of the taxpayer, and instead reconstruct the distorted or concealed circumstances which are taxable under the tax laws, calculating the taxes payable in accordance with the respective provisions of the respective tax law.

If taxpayers make mistakes in the preparation of their tax accounting records or in filing their tax returns, and in other cases where the activities of the taxpayers do not comply with the formal requirements of the tax laws, but instead comply with the substance and circumstances of certain activities taxable under the tax laws, then the taxes payable are calculated in accordance with the respective provisions of the respective tax law.

Article 70 of the Republic of Lithuania Law on Tax Administration establishes that in case taxpayers fail to meet their obligation to calculate taxes (or meet this obligation in error), to cooperate with the tax authorities, to keep income and expenses register, accounting or other documents, and for this reason the tax authorities are unable to determine tax obligations under the regular procedures (i.e. in accordance with the procedures established in the tax laws), then the tax authorities may calculate the amount of the taxes payable on the basis of assessment, taking into account all the circumstances relevant for the assessment, the information available and, where necessary, selecting other appropriate methods of assessment which comply with the criteria of reason, fairness, and objectivity.

LEGAL INFORMATION

Articles 66, 69, 70 of the Republic of Lithuania Law on Tax Administration.

Order No VA-103 of the Head of the State Tax Inspectorate under the Ministry of Finance of 24 May 2004 on the Approval of the Rules for Tax Calculation Based on Evaluation by the Tax Administrator.

Limitation period for tax calculation and recalculation

Article 68 of the Republic of Lithuania Law on Tax Administration establishes that, unless otherwise provided for in this Article or under the respective tax law, taxpayers or the tax authorities may calculate or recalculate taxes payable for no more than the current period and 3 preceding calendar years, counted backwards from 1 January of the year in which the calculation or recalculation of the taxes payable is initiated.

Where the tax authorities carry out a repeated inspection of the taxpayer in accordance with the procedure established in this Law, the provisions of Paragraph 1 of this Article do not apply. However, in the course of a repeated inspection, the tax authorities cannot calculate the taxes payable for a period longer than that during the initial inspection.

If taxpayers file their tax returns or revised tax returns less than 90 days prior to the expiry of the due date for tax calculation (recalculation) provided for in Paragraph 1 of this Article, then the tax authorities may verify the accuracy of the taxes payable calculated in the tax return, or recalculate the taxes payable altogether without taking into account the provisions of Paragraph 1 of this Article. In such case, the verification process is initiated by the tax authorities within 90 days from the date of submission of the respective tax return.

Calculating or recalculating the taxes payable for a period longer than that provided for in Article 68(1) of this Law is allowed in the following cases:

The limitation period for the current and 5  preceding calendar years applies to the calculation and/or recalculation of the taxes payable in the following cases:

  1. personal income tax is calculated or recalculated (except for the amount of income tax payable by natural persons on income sourced from self-employment);
  2. the tax authorities calculate or recalculate the taxes payable of taxpayers who did not meet the minimum criteria of a reliable taxpayer;
  3. the tax authorities calculate or recalculate the taxes payable on the basis of data obtained through automatic exchange of information, in accordance with Article 611 of this Law;
  4. the taxes payable are calculated or recalculated in application of Article 40(2) of the Republic of Lithuania Law on Corporate Income Tax, as well as in verifying the validity of the application of Article 5(7) and Article 46(1) thereof. In this case, calculating or recalculating the taxes payable for a period longer than the that provided for in Paragraph 1 of this Article is allowed only as far as it concerns the circumstance referred to in this paragraph;
  5. where the purpose is to prove insolvency of arrears and the efforts to recover such arrears in accordance with Article 891 of the Republic of Lithuania Law on Value Added Tax, Article 18 of the Republic of Lithuania Law on Personal Income Tax, Article 25 of the Republic of Lithuania Law on Corporate Income Tax. In this case, calculating or recalculating the taxes payable for a period longer than that provided for in Paragraph 1 of this Article is allowed only as far as it concerns the circumstance referred to in this paragraph;
  6. the taxes payable are calculated or recalculated after the court has declared the bankruptcy of the taxpayer to be intentional;
  7. fixed assets other than immovable property are deducted according to the provisions of Chapter VIII of the Republic of Lithuania Law on Value Added Tax. In this case, calculating or recalculating the taxes payable for a period longer than the that provided for in Paragraph 1 of this Article is allowed only as far as it concerns the circumstance referred to in this paragraph.

The limitation period for the current and 10 preceding calendar years applies to the calculation and/or recalculation of the taxes payable in the following cases:

  1. criminal proceedings are necessary to establish the damage caused to the State and the statute of limitations on convictions laid down in the Criminal Code are not yet expired;
  2. a deduction is made for immovable property categorized as fixed assets in accordance with Chapter VIII of the Republic of Lithuania Law on Value Added Tax. In this case, calculating or recalculating the taxes payable for a period longer than the that provided for in Paragraph 1 of this Article is allowed only as far as it concerns the circumstance referred to in this paragraph;
  3. the procedures for the settlement of double taxation disputes provided for in the respective treaties for the avoidance of double taxation concluded and applied by the Republic of Lithuania Law on the Settlement of Double Taxation Disputes, Convention 90/436/EEC on the elimination of double taxation in connection with the adjustment of profits of associated enterprises, or provided for in the Multilateral Convention, are carried out, including cases where the tax authorities calculate or recalculate the taxes payable. In this case, calculating or recalculating the taxes payable for a period longer than the that provided for in Paragraph 1 of this Article is allowed only as far as it concerns the circumstance referred to in this paragraph.

LEGAL INFORMATION

Article 68 of the Republic of Lithuania Law on Tax Administration

Agreement on the amount of tax and related amounts

Article 71 of the Republic of Lithuania Law on Tax Administration establishes that the tax authorities and taxpayers may sign an agreement on the amount of the taxes payable and the amounts related thereto, if neither party has sufficient evidence to substantiate its calculations of the taxes payable.

By signing the above agreement, taxpayers lose the right to challenge the accuracy of the tax calculation, and the tax authorities lose the right to calculate an amount higher than that stated in the agreement. The agreement may be signed during a tax investigation or a tax audit, as well as during all stages of a tax dispute.

Taxpayers who do not have sufficient evidence to substantiate their tax calculation, and wish to sign the agreement, are required to:

  1. during a tax investigation or a tax inspection (before the decision on the approval of the inspection act is taken), apply in writing to the tax authorities carrying out the respective tax investigation or tax inspection;
  2. during a tax dispute examined by the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania, the Tax Disputes Commission under the Government of the Republic of Lithuania or by a court of law, apply in writing to the State Tax Inspectorate for the signing the agreement, or submit the proposal thereof to the State Tax Inspectorate through the respective county State Tax Inspectorate which carried out the initial tax inspection.

LEGAL INFORMATION

Article 71 of the Republic of Lithuania Law on Tax Administration.

Order No VA-210 of the Head of the State Tax Inspectorate under the Ministry of Finance of 30 December 2004 on the Approval of the Rules for the Conclusion of an Agreement on Tax and Related Amounts between the Tax Administrator and a Taxpayer.