Value Added Tax
Value added tax
Tax: Value added tax
Basic act - Law on Value Added Tax
Taxpayers:
Lithuanian and foreign natural and legal persons carrying out any economic activities in the Republic of Lithuania, as well as collective investment undertakings established in the Republic of Lithuania without legal personality, operating as investment funds.
In certain cases, persons not engaged in economic activities may also be treated as taxpayers.
Subject to tax:
Value added tax (hereinafter referred to as “VAT”) is levied on supply of goods and/or services by taxable persons for remuneration when according to Law on VAT the supply is deemed to have taken place in the Republic of Lithuania. The acquisition of goods and/or services in the Republic of Lithuania for remuneration from another Member State may also be subject to VAT.
The acquisition of goods in the Republic of Lithuania for renumeration from VAT payers from another Member State, when 0 VAT rate was applied to the purchase of goods, and the goods are delivered to Lithuania.
Imports are subject to import VAT where goods are deemed to have been imported into the territory of the Republic of Lithuania in accordance with the provisions of Law on VAT.
Tax rates:
Standard VAT rate is 21%.
Reduced VAT rates are fixed at 9% and 5%.
Reduced VAT rate of 9% applies to the following:
1. Thermal energy supplied for space heating (including thermal energy transmitted through hot water supply systems), to hot water or cold water used for the preparation of hot water, and to thermal energy used to heat water supplied to living quarters.
2. Printed and electronic books and printed and electronic non-periodical information publications (including textbooks, exercise books, encyclopedias, dictionaries, manuals, information leaflets, photo and reproduction albums, children's picture books, drawing and coloring books, music printed or in manuscript form, maps, diagrams and drawings, however, excluding calendars, notebooks and other similar publications). These provisions do not apply to publications in which advertising accounts for more than 4/5 of the entire publication or in which all or most of the content consists of music (sound) or video.
3. Accommodation services provided in accordance with the procedure laid down in the legislation governing tourism activities.
4. Passenger and luggage thereof transport services on regular transport routes established by the Ministry of Transport and Communications or an institution authorized by it or by municipal authorities.
5. Firewood and timber products intended for heating purposes, supplied to household consumers as defined in Republic of Lithuania Law on Energy.
6. Accessing all types of art and cultural institutions and events, when provisions of Article 23 of Law on VAT do not apply.
Reduced VAT rate of 5% applies to the following:
1. Supply of pharmaceuticals, medical aid equipment and food products for special medical purposes, when acquisition costs thereof are fully or partially reimbursed in accordance with the procedure established by Law on Health Insurance of the Republic of Lithuania, as well as to non-reimbursed prescription medicines.
2. Technical aids and repairs thereof for persons with disabilities.
3. Printed and/or electronic newspapers, magazines and other periodicals (including those published by electronic means), including electronic information documents and/or collections thereof periodically updated by the disseminator of public information or consisting of content substantially similar to that of a printed periodical (regardless of whether the electronic information documents and collections thereof are printed or not). The provisions thereof do not apply to technical, bibliographic and other similar databases, publications of erotic and/or violent nature, publications failing to comply with professional ethics as established by authorized institutions, and to publications where paid advertising makes up more than 4/5 of the total publication or where most of or all of the paid advertising is consisting of music or video content.
Taxable period:
The standard taxable period for legal entities coincides with a calendar month, while the taxable period for natural persons coincides with a calendar half year.
Both legal and natural persons may request a different duration of their respective taxable periods.
Legal persons may request the taxable period to coincide with a calendar quarter if their turnover from economic activity did not exceed EUR 300,000 during the previous calendar year.
Newly established legal persons who anticipate that in the current calendar year their income from economic activity will not exceed the amount specified above have the right to apply to the tax administrator with a request to consider a calendar half year/quarter as a tax period.
Natural persons may request the taxable period to coincide with a calendar month without any turnover constraints.
In certain cases Lithuanian legal persons and foreign natural and legal persons may request a specific taxable period duration (i.e. neither calendar month nor calendar half year).
In case that Lithuanian natural and legal persons and foreign natural and legal persons acquire goods and/or services from states other than the Republic of Lithuania, VAT liability arises according to Article 95 of Law on VAT and the taxable period coincides with a calendar month.
Tax relief:
Cases in which supply of goods and services is exempt from tax (without the right to deduction) are set out in Articles 20 to 33 of Law on VAT.
The following are exempt from tax (without the right to deduction) (certain conditions may apply):
healthcare goods and services;
social services and goods thereof;
education and training services;
cultural and sporting services;
goods and services of non-profit legal entities;
postal services;
radio and television public information services;
activities of independent groups;
insurance services,
financial services;
special marks;
gambling and lotteries;
rental, sale or other transfer of immovable property.
Articles 34 to 40 of Law on VAT set out the cases in which imported goods are exempt from import VAT.
Cases in which supply of goods and services is exempt from tax (with a right to deduction) are set out in Articles 41 to 53 of Law on VAT.
The following are exempt from tax (with a right to deduction), i.e. subject to a VAT rate of 0% (certain conditions may apply):
supply of goods leaving the European Union;
supply of goods exported from the European Union by passengers;
supply and chartering of vessels and aircrafts, other transactions linked to vessels and aircrafts;
supplying vessels and aircrafts;
transportation services and other related transactions;
insurance and financial services linked to the export of goods;
supply of goods and services to diplomatic missions, consular posts and international organizations or their representations as well as staff of the missions and institutions and their family members;
supply of gold to the European System of Central Banks and the European central bank;
supply of goods to another Member State;
supply of goods to beneficiaries when the goods are transported out of the European Union;
supply of goods and services intended for disaster victims;
servicing and processing of movable items when such items are temporarily brought into the European Union;
intermediation services in above mentioned cases;
certain transactions linked to international trade.
Registration:
Lithuania has a dedicated scheme for small enterprises. Taxable persons in the Republic of Lithuania are allowed not to register as VAT payers if their turnover from the sales of goods and/or services during the last 12 calendar months does not exceed EUR 45,000. However, it should be emphasized that if the value of goods acquired by a taxable person of the Republic of Lithuania from other Member States exceeded EUR 14,000 during the previous calendar year or is expected to exceed this threshold in the current calendar year, then the taxable person must submit an application to be registered as a VAT payer, even if the annual turnover of EUR 45,000 was not exceeded.
Foreign taxable persons carrying out economic activities in the Republic of Lithuania are not subject to the above scheme. Foreign taxable persons must register as VAT payers from the start of their economic activity in the Republic of Lithuania.
Exceptions when foreign taxable persons are not obliged to register as VAT payers despite their economic activity taking place in the Republic of Lithuania:
1) foreign taxable persons supply goods and/or services in the Republic of Lithuania which are exempt from VAT (without a right to deduction) under Law on VAT;
2) foreign taxable persons supply goods and/or services which are not subject to VAT;
3) foreign taxable persons supply goods and/or services which are subject to a VAT rate of 0% under Law on VAT, except for cases set out in Articles 41, 49, 53 (1) (1)(2)(5)(6), 53 (5), 53 (6), 53 (10), 531 of Law on VAT.
4) foreign taxable persons supply goods and/or services where the obligation to calculate and pay VAT on the goods and/or services lies with the purchaser/customer in accordance with Article 95 (2), (3), (4) of Law on VAT.
5) Taxable persons who are subject to the dedicated VAT schemes provided for in Law on VAT (non-EU scheme, EU scheme, Import scheme) and who supply, within the territory of the Republic of Lithuania, goods and/or services referred to in Chapter XII, Section 5 (non-EU scheme) and/or 6 (EU scheme) and/or 7 (Import scheme) of Law on VAT respectively, and are already registered as VAT payers in a Member State in accordance with the legislative provisions thereof which are substantially equivalent to the provisions of Sections 5 and/or 6 and/or 7 of Chapter XII of Law on VAT, are not obliged to register as VAT payers in the Republic of Lithuania, however, only in the case where the obligation to register as VAT payers arises solely as a result of supplying such goods and/or services.
It should be noted that in some cases where foreign taxable persons are not obliged to register as VAT payers in the Republic of Lithuania, input VAT can only be refunded through VAT deduction, i.e. foreign taxable persons must register as VAT payers. For example, a foreign taxable person purchased goods in the Republic of Lithuania from a Lithuanian taxable person and this purchase was subject to a Lithuanian VAT rate, then the foreign taxable person used those goods for supplying vessels (a VAT rate of 0% applies here in accordance with Article 44 of Law on VAT). In such case, according to Article 71(3) of Law on VAT, the foreign taxable person is not obliged to register as a VAT payer, however, according to Article 117 of Law on VAT, the VAT deduction can only be done on VAT return.
Registration is done by submitting VAT registration application via Lithuania’s State Tax inspectorate’s online service system My STI, under section: Services -> VAT payer registration, change of data -> VAT payer registration, change of data -> Fill in the application. Please note that in order to register as a VAT payer you must be registered as a Lithuanian taxpayer as well. For more information on VAT registration procedure as well as on registration as Lithuanian taxpayer see here.
Please note that in cases where the economic activity in the Republic of Lithuania is to be carried out temporarily, meeting VAT obligations and claiming deductions may also be carried out temporarily, without having to register as a VAT payer. In such cases VAT Return Form FR0608 is used. However, registration as a Lithuanian taxpayer is mandatory.
Tax return and payment:
- If the taxable period for natural or legal persons coincides with a calendar month, then VAT return for the taxable period must be submitted no later than the 25th day of the following month.
- If the taxable period for legal persons coincides with a calendar quarter, then VAT return for the taxable period must be submitted no later than the 25th day of the first month of the following quarter.
- If the taxable period for legal persons coincides with a calendar half year, then VAT return must be submitted no later than the 25th day of the first month of the following half year.
- If the taxable period is specific, then VAT return must be submitted no later than the 25th day of the first month following that specific taxable period.
- If provisions of Section 5 in Chapter XII of Law on VAT apply (non EU scheme), then the time for submitting VAT return is set in Article 115(3) of Law on VAT.
- If provisions of Section 6 in Chapter XII of Law on VAT apply (EU scheme), then the time for submitting VAT return is set in Article 115(8) of Law on VAT.
- If provisions of Section 7 in Chapter XII of Law on VAT apply (Import scheme), then the time for submitting VAT return is set in Article 115(13) of Law on VAT.
The amount of VAT payable into the national budget in respect of the taxable period must be paid no later than the due date for submitting VAT return for the applicable taxable period above. Persons deregistered as VAT payers must submit VAT return for the previous tax period no later than 20 days after deregistration. If liquidation is in process, VAT return must be submitted before the end thereof. The amount of VAT due calculated in such returns thereof must be paid at latest on the day on which the return is submitted, no later than the due date for the submissions of such VAT returns.
Annual VAT Return Form FR0516 (unofficial translation of the Form is available here) with rules for completion thereof was approved by Order No V-140 of the Head of the State Tax Inspectorate on 6 May 2003 (valid Order No VA-77 of 17 October 2022). Form FR0516 is usually used for pro-rata adjustment, it must be submitted no later than 1 October of the following year, and the VAT must be paid no later than 1 October of the following year as well.
Please note that in cases where the special VAT Return Form FR0608 is used (unofficial translation of the Form is available here), taxable periods differ depending on respective obligations. When goods are acquired through intra-EU trade and are subject to excise duty or new means of transport are to be used, Form FR0608 must be submitted and VAT paid within 5 working days from the day on which the goods were brought into the Republic of Lithuania. In other cases, Form FR0608 must be submitted and VAT paid by the 25th day of the following month.
VAT Return Forms FR0600, FR0516, FR0608 must be submitted via the Electronic Declaration System (EDS).
Other cases:
In certain cases, foreign taxable persons may claim a refund of VAT paid in the Republic of Lithuania.
Foreign taxable persons established in another Member State must submit an electronic refund application via the system provided by the respective Member State.
Foreign taxable persons established outside the European Union must submit a refund application electronically via My STI or by post directly to the Vilnius County State Tax Inspectorate. Currently, VAT is refunded to taxable persons established in Armenia, Iceland, Norway, Canada, Switzerland, United Kingdom, and Turkey.
Restrictions above do not apply to foreign taxable persons established outside the European Union who are engaged in e-commerce, if the refundable VAT was paid on goods and/or services used for the e-commerce activities.
Foreign taxable persons established in a Member State of the Organization for Economic Co-operation and Development which does not have VAT (or equivalent thereto) may apply for a refund of VAT paid in the Republic of Lithuania.
Lithuanian taxable persons who wish to refund VAT pain in another Member State must submit electronic requests for VAT refunds to other Member States through the Electronic Request Registration Information System (EPRIS).
Law on VAT sets out special cases where purchasers must deduct and pay VAT on goods and/or services supplied to them:
1) VAT on objects of property taken over as contribution or as a result of reorganization of another VAT payer;
2) VAT on substantial improvement to a building (structure), when goods are supplied and transferred as defined in Article 9(4) of Law on VAT.
3) VAT on construction works referred to in Article 7(4) of Law on VAT, as defined in Article 2(90) of Republic of Lithuania Law on Construction (valid from 1 January 2019);
4) VAT calculated in other cases established by the Government of the Republic of Lithuania or an institution authorized by it, where VAT on supply of goods and/or services is deducted and paid to the state budget by the purchaser of those goods and/or services, provided that the purchaser is registered as a VAT payer (e.g. ferrous and non-ferrous metal waste and scrap, used materials and certain types of timber, etc.).
Other information:
Binding ruling instrument is available in Lithuania. Lithuania is participating in a test case for private VAT ruling requests relating to cross-border situations (CBR) as well (more information is available here).
Rules for submitting a binding ruling request were adopted by the Order of the Head of the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania No. VA-105 of 19 October 2011.