The primary purpose of this Tax & Legal Newsletter is to reflect the most important changes in the national legislation on taxes, finance and other issues that have been published in SeptemberJuly 2003. This newsletter is based on the official publications of the State News No84-91...
VALUE ADDED TAX
The State Tax Inspectorate at the Ministry of Finance has prepared amendments to comments on Section 1 of Article 83 of the Law on Value Added Tax. This comment is published on the website of the State Tax Inspectorate at the Ministry of Finance (
Order No 1K–234 of the Minister of Finance of 23 September 2003 on Amendment to the Order No 1K–10 of 10 January 2003 on the Procedure and the Cases of Adding the Amounts of Subsidies and Grants to a VAT Payer’s Income from Mixed Activities. (State News No 91 – 4134)
The Minister of Finance established that the Procedure of Adding Amounts of Subsidies and Grants to a VAT Payer’s Income from Mixed Activities is not applicable when the annual income received or receivable by the VAT payer from a VAT- taxable activity exceeds 95 percent of the total received or receivable income.
In addition, it was established that the subsidies directly related to a VAT-taxable activity should not be added to a VAT payer’s received or receivable income.
The amendments should be applicable from the year 2003 (i.e. upon specifying VAT deduction for the year 2002).
Order No V–252 of the State Tax Inspectorate under the Ministry of Finance of 11 September 2003 on Abolishment of the Order No 129 of 1 June 2001 on Approval of the Procedurethe Procedure for Issuing AdjustedIssuing AdjustedInvoices or VAT Adjusted VAT Invoices. (State News No 88 – 4015)
The Procedure for issuing adjusted invoices or VAT adjusted VAT invoices established by the Order of the Head of the State Tax Inspectorate under the Ministry of Finance No 129 of 1 June 2001 was abolished.
VAT REFUND FOR TO FOREIGNERS
Order No V–254 of the State Tax Inspectorate under the Ministry of Finance of 16 September 2003 on Amendment and Supplement to the Order No 369 of 23 December 2002 Concerning On the Forms Related to VAT Refunds and the Procedures of Filling them Them out. (State News No 89 - 4056)
This Order of the Head of the State Tax Inspectorate under the Ministry of Finance:
- Approved the following new forms – Form FR0570 of Certificate of Compliance with the Requirements Established for Enterprises; Form FR0575 of Decision to Grant the Right to a Trading Enterprise to Refund VAT to Foreign Persons; Form FR0576 of Decision not to Grant the Right to a Trading Enterprise to Refund VAT to Foreign Persons;
- Amended Form FR0421 of Certificate on VAT Refund to Foreign Persons;
- Partly amended the procedures of filling out the Forms FR0419, FR0420, FR0421 and FR0570 related to VAT Refund.
Order No V–253 of the State Tax Inspectorate under the Ministry of Finance of 15 September 2003 on Amendment to the Order No 339 of 25 November 2002 on Approval of the Form FR0445 for a Foreign Taxable Person’s Request for a VAT Refund , the Procedures of Filling It out and the Decision of the Head of Vilnius Regional Tax Inspectorate on Approval of the Form No FR0446 Regarding VAT Refund to Foreign Taxable Persons. (State News No 90 – 4095)
The Order abolished the requirement formerly applied to foreign taxable persons applying for a VAT refund that the certificate issued by an authorised foreign institution confirming the foreign person being a registered VAT- or a corresponding tax-payer should indicate the foreign taxable person’s activity and VAT registration number.
PROFIT TAX
The State Tax Inspectorate at the Ministry of Finance has prepared comments on Section 3 of Article 5, Articles 27, 41, 42, 44, Section 19 of Article 58; amendments to comments of Section 1 of Article 13, Section 11 of Article 18, Section 1 of Article 19, Section 3 of Article 20, Section 4 of Article 57, Sections 3, 4 and 16 of Articles 58, Article 59; amendments and supplements to comments of Articles 28, 31, 38; supplements to Articles 24 and 26.part These comments are published on the website of the State Tax Inspectorate (
The Government Resolution No 1133 of 5 September 2003 On Amendment to the Lithuanian Government Resolution No 99 of 28 January 2003 On Approval of the Procedure for Deduction of Business Trip Expenses from Income. (State News No 86-3911)
The resolution stipulates that daily allowances may be treated as business trip compensation provided that their total amount does not exceed 50 percent of the monthly salary or hourly rate for the actual work of the resident.
The rate of the daily allowance in Lithuania has been reduced from 25 percent to 12 percent of the minimum subsistence level.
The amendments became effective as of 1 October 2003.
It also should be noticed that starting from 4 October 2003 the Government Resolution No 1212 of 1 October 2003 came into force. This Resolution established that the above mentionedabove-mentioned limit of 50 percent is not applicable for to business trip daily allowances if an employer’s monthly salary or hourly rate for the actual work of exceeds:
- The minimal salary or minimal hourly rate – this provision is applicable untill 31 December 2003;
- The minimal salary or minimal hourly rate multiplied in by 1.3 times – this provision will be applicable from 1 January 2004.
Order No V–248 of the Head of the State Tax Inspectorate under the Ministry of Finance of 9 September 2003 on Approval of the Procedure for Using the Financial Stock Evaluation and Accounting Method for the Profit Tax Calculation Purpose. (State News No 88 – 4014)
The Order established the procedure that allows a taxable entity to use the same financial stock evaluation and accounting method for the profit tax calculation purpose, which is used when making its financial statements.
Entities that will present a requests to the local state tax inspectorates until 31 December 2003 and will get an agreementan approval, will be able to use another method for the profit tax calculation of for the year 2002 and later.
Order No V–275 of the Head of the State Tax Inspectorate under the Ministry of Finance of 22 September 2003 on Amendment and Supplement to the Order No V – 58 of 27 February 2003 on Establishment of the Annual Profit Tax Returns Forms and the Rules of Filling Them Out. (State News No 90 – 4097)
The Head of the State Tax Inspectorate under the Ministry of Finance according toFollowing the amendments to the Law on Profit Tax , the Head of the State Tax Inspectorate under the Ministry of Finance has partly changed the Rules of filling out the Annual Profit Tax Returns Forms FR0475 and FR0475A and their annexes. This Order changed the provisions of the Rules in line with the amendments to the Law on Profit Tax that has to be used for calculatingon of taxable profit for the year 2002. The Rules were supplemented in line with the provisions of the Law on Profit Tax, that will have to be used for calculatingon of taxable profit for the year 2003 as well.
Order No V–242 of the Head of the State Tax Inspectorate under the Ministry of Finance of 1 September 2003 on Amendment to the Order No 258 of 4 September 2002 on the Rules of Presenting Evidence of Disbursements to a Foreign Subject Registered or Otherwise Organised on a Tax Haven Territory by a Lithuanian Subject or a Permanent Establishment to a Local Tax Authority for the Purpose of Recognising Such Disbursements as Allowed Deductions. (State News No 91 – 4131)
The Rules of Presenting Evidence of Disbursements to a Foreign Subject Registered or Otherwise Organised on a Tax Haven Territory by a Lithuanian Subject or a Permanent Establishment to a Local Tax Authority for the Purpose of Recognising Such Disbursements as Allowed Deductions were amended in line with the amended Article 31 of the Law on Profit Tax. According to the Order, the set procedures on proving disbursements to a foreign subject registered or otherwise organised on a tax haven territory should not be applicable to disbursements on tangibles, if a Lithuanian subject or a permanent establishment can provide documents supporting import of the tangibles.
RESIDENTS’ INCOME TAX
The State Tax Inspectorate at the Ministry of Finance has prepared comments on Paragraphs 22–23, 25–26, 28, 30, 32–33, 35–42 of Section 1 of Article 17, Section 2 of Article 17, Articles 19, 33, supplements to comment of Section 26 of Article 2parts Sections 13 and 30 of Article 2, point part Section 1 of Article 17, Articles 6, 7, 13, 18, 21, 25, 36and 36 of the Law on Income Tax. These comments are published on the website of the State Tax Inspectorate (
Order No V – 238 of the Head of the State Tax Inspectorate at the Ministry of Finance of 29 August 2003 On Approval of the Form FR0471 of Payments to Residents Attributed to the Income Category B of Income According to the Tax Payment Procedure, Its Completion and Submission Rules. (State News No 84 - 38634)
The Order approved the form FR0471 of payments to residents, attributed to the income category B of income according to the tax payment procedure together with the supplementary sheet of this form FR0471P, as well as the rules on how to fill out and submit the form FR0471. The form forform forB category B of income paid during 2003 will have to be submitted until by 1 February 2004.
Order No V–342 of the Head of the Board of the State Social Insurance Fund of Lithuania of 17 September 2003 on Amendment to the Rules of Calculating Residents’ Income Tax on State Social Insurance Benefits in Local Offices of the Board of the State Social Insurance Fund. (State News No 90 – 4102)
The Order established that a non-taxable income amount (NTIA), an individual and the basic NTIAs are applicable only if the insured person presents the local office with a copy of his/her request to apply NTIA that had been submitted to the employer and only in case the benefit is paid for a full month.
TAX ON LAND
The Government Resolution No 1159 of 11 September 2003 on Amendment to the Resolution No 205 of 24 February 1999 On Land Evaluation Procedure. (State News No 88 – 3993)
The paragraph 5.3 of the Government Resolution No 205 of 24 February 1999 was abolished. The said paragraph had provided for that as of 1 January 2003 the tax on land should be calculated from the average market value of the immovable property which is established by way of massof mass evaluation, when developing maps of land values according to the established procedure.
The Government Resolution No 1162 of 11 September 2003 On Amendment to the Resolution No 603 of 3 August 2003 On the Tax on Land. (State News No 88 – 3995)
The Government established that the tax on land should be calculated from tobased on the land price equal to the land value, calculated according to the Land Evaluation Methodology (aexcept part thefor the land that was purchased during in an auctions).
EXCISE DUTIES
Order No V–249 of the Head of the State Tax Inspectorate under the Ministry of Finance of 9 September 2003 On Amendment to the Order No 157 of 17 June 2002 On Registration of Warehouses of Excised Goods, Approval of the Form FR0569 of Conclusion Rregarding Permission to Open a Warehouse of Excised Goods and the Form FR0571 of for Decisiona Decision not to Issue a Permission to Open a Warehouse of Excised Goods. (State News No 87 – 3966)
The Order of the Head of the State Tax Inspectorate under the Ministry of Finance:
- Approved the new forms - the Form FR0569 of for a Conclusion regarding Regarding Permission to Open a Warehouse of Excised Goods and the Form FR0571 of for a Decision not to Issue a Permission to Open a Warehouse of Excised Goods;
- Amended the Form FR0356 of a Request for Permission to open Open a Warehouse of Excised Goods and the Form FR0357 of a Request for Permission to open Open a Warehouse of Excised Goods in a liquifiedliquefied natural gas station;
- Partly amended the procedures of filling out the Form FR0356 of a Request for Permission to Open a Warehouse of Excised Goods and the Form FR0375 of a Request for Permission to Open a Warehouse of Excised Goods in a liquifiedliquefied natural gas station.
SOCIAL INSURANCE
The Government Resolution No 1142 of 9 September 2003 On Amendment to the Lithuanian Government Resolution No 530 of 15 April 2002 On Approval of the Procedures for Formation and Execution of the Budget of the State Social Insurance Fund. (State News No 87 – 3935)
The Government established that contributions to the State Social Insurance Fund would not be levideducted from on business trip compensations that are not subject to the residents’ income tax. This amendment came into force as ofon 1 October 2003.
CASH REGISTERS
Order No V–255 of the Head of the State Tax Inspectorate under the Ministry of Finance on the Rules of Cash Register Usage. (State News No 90 – 4096)
The Head of the State Tax Inspectorate under the Ministry of Finance changed the Rules of Registering Cash Registers. The Rules regulates the procedures of cash registers’ installation, usage, repair and technical servicesmaintenance. Additional requirements for cash registers in relation to payments in euro were established.
COUSTOUMS
Order No 1B–835 of the Head of the Customs Department under the Ministry of Finance of 18 September 2003 on the Rules of Data Correction in Documents Issued by the Customs, the Rules of Annulment of the Documents Issued by the Customs and the Form of a Certificate on Amendments (Supplements) to a Document. (State News No 90 – 4094)
The Head of the Customs Department under the Ministry of Finance established:
- The Rules of Data Correction in Documents Issued by the Customs;
- The Rules of Annulment of Documents Issued by the Customs;
- The Form of Certificate on Supplement (Amendment) to a Document.
The documents issued by the Customs could be corrected or annulled according the a person's’written requests to correct the documents or to annul them as well as according based on the Customs’ decision upon detection of errors in the documents. if the mistakes in issued documents were searched out. (nustačius, kad dokumentai įforminti klaidingai).
The Order comes into force on 1 January 2004.
INSURANCE
The Republic of Lithuania Insurance Law No IX-1737 adopted on 18 September 2003. (State News No 94 - 4246)
The objective of this law is to regulate insurance and insurance brokerage activities to ensure stability, safety, reliability and effectiveness of the insurance system. The law adds to approximation of the legal norms regulating insurance and insurance brokerage activities with the European Union Law and cancels all restrictions thus enabling the Republic of Lithuania insurance market to merge in the European Union internal market as of the date of EU accession.
The Law specifies persons eligible for engagement in insurance, reinsurance activities as well as insurance and reinsurance brokerage activities in the Republic of Lithuania, the main principles of state regulation, also regulates this activity and specific requirements imposed on companies engaged in insurance or independent insurance brokerage activities. The law also regulates specific requirements regarding relations between the parties of the insurance contract prior to concluding the contract, also specific provisions of the insurance contract, relations arising from or relating to the insurance contract and other relations provided for in the Law.
The current law includes new provisions that have been absent in the previous law:
- New classification of insurance contracts: apart from existing classification of life and non-life insurance contracts, the new classification is made according to the object under insurance and type of insurance payments;
- Terms of automatic insurance agreement renewal have been established;
- The principle regarding what significant circumstances must be taken into account when deciding on amount of the settlement upon termination of the insurance contract.
- The term of issuing a licence for engagement in insurance activities has been extended.
- The status of the Insurance Supervisory Authority at the Finance Ministry has been changed. It is envisaged that the Chairman of the Insurance Supervisory Commission shall be appointed by the Prime Minister on the proposal of the Minister of Finance for a five year period, while the deputy and other members of the Commission shall be appointed on the proposal of the Chairman of the Commission.
- If the company’s financial position becomes worse or there is threat of such worsening, the insurance company will have to present to the Insurance Supervisory Commission a plan on restoration of its financial position;
- Investigation of customer complaints has been entrusted to the Insurance Supervisory Commission, however, the customer is not obliged to appeal to the Insurance Supervisory Commission, and may well make use of his right to appeal to the court in accordance with the general procedure;
- The law states sanctions – fines on legal entities, warnings, seizure of assets, banning of business;
- The principle of compensation is stated in the law. The insurance contract can be concluded only in the interest of the person who is likely to incur loss as a result of the insurance event, the insurance payment shall exceed the amount of the loss, substantial imprudence of the insurer and the insured may serve as a basis for non –payment;
- The law includes the duty of the insurer to compensate expenses incurred as a result of acting in defence from a legitimate claim for damage compensation. Contrary to property insurance, negligence of the insurer and the insured shall not serve as a basis for insurance non-payment, since the principle civil objective of third party insurance is linked to protection of interests of the victim;
- New provisions relating to life insurance are included – those relating to rules of nomination and cancellation of beneficiaries, property rights arising from life insurance related to accumulation of capita, transfer and pledge of contracts that are recognised and widely used in the Laws on Insurance Contracts of other European countries;
- It was established that according to the type of payment, health insurance contracts may be loss insurance contracts (only losses are compensated – for example, incurred treatment expenses as a result of loss of employability), or contracts on insurance of amounts (the agreed insurance amount is paid taking account of the losses incurred).
LABOUR LAW
Government Resolution No 1196 on Approval of Provisions of Labour Arbitration and Provisions of Third Party Court adopted on 30 September 2003. (State News No 93 - 4206)
By this resolution the Government replaced its Resolution No 386 On Approval of Provisions of Labour Arbitration and Provisions of Third Party Court Provisions of 25 May 1992 and approved the new respective provisions regulating the procedure on composition of the arbitration and third party court, litigation procedures, requirements on the ruling taken and judgement execution procedure.
It is hereby established that in case of failure to reach an agreement on all or part of claims by the conciliation commission, this commission shall decide on transfer of the collective labour dispute for investigation by labour arbitration or third party court.
The labour arbitration shall consist of the district court judge nominated by the Chairman of the respective court and six arbitrators nominated by the parties of the collective labour dispute. It should be noted that the place of arbitration has been changed by this Resolution: labour arbitration shall be set under the district court that has the jurisdiction over the territory of location of the subject having received claims in relation to company or collective labour dispute. Before this Resolution, labour arbitration used to be set up under county courts. In the event of a collective labour dispute, third party court shall be set up each time separately following a specific written agreement of the parties of the collective labour dispute.