Lithuania VAT Guide

Introduction

EU-wide VAT legislation was introduced to harmonize the VAT principles of all EU Member States and remove conflicts. Consequently, most Lithuania VAT rules correlate with EU VAT Directive 2006/112/EC.

Should you collect VAT in Lithuania?

You must collect the Lithuania VAT in Lithuania if your business is engaged in the following types of activities:

1. Supply of Goods: Supply of goods means transferring the right to dispose of a tangible property as owner.
2. Intra-EU acquisition: Acquiring or purchasing goods within Lithuania from another EU Member State as a VAT-registered person (typically known as the Reverse Charge Mechanism).
3. Supply of Services: Supply of services covers any transaction not covered in the supply of goods.
4. Import of Goods: Any transaction that imports goods from a non-EU state to an EU Member State.

To learn more, it is recommended that you visit the VAT Act of Lithuania. On top of that, because the VAT laws of most EU Member States are harmonized with the overall EU VAT law (i.e., Directive 2006/112/EC) and also of Lithuania, you can refer to Articles 14-30 of the EU tax directive for detailed information on taxable transactions.

When should you register for VAT in Lithuania?

Normally, the value-added tax is destination-based (owing to place of supply rules – discussed separately in the One Stop Shop article), requiring every person (whether registered anywhere or not) to register for VAT when making any taxable sales in Lithuania. VAT registration in Lithuania is necessary for the following types of transactions:

• Supply of Goods or Services in Lithuania to non-taxable persons: Sellers must register in Lithuania and pay VAT only if they have not opted for One Stop Shop (see Notes 1 and 2 below).
• Supply of Services in Lithuania to a taxable person: The recipient of services must register and pay VAT in the country if the supplier is not established in Lithuania (under Article 196 of the EU VAT Directive (pg.39)).
• B2B Acquisition of Goods: Where the goods are sold by a taxable person from any EU Country to a taxable person in Lithuania, the buyer should register for Lithuania VAT (reverse charge basis under Article 197 of EU VAT Directive (pg. 39)).
• Import of Goods in Lithuania: The importer must pay and register for VAT (if not covered in the Import One Stop Shop–see our OSS article for details).
• Export of Goods/ Services: Exporting goods/ services to non-EU countries would require a VAT number.

Important Note 1: If you supply goods from other EU Member States to Lithuania, you would be required to attain registration for Lithuania VAT only if your total annual sales (goods/ services) in the EU are more than EUR 10,000; in contrast, they should be taxed in the supplier’s member state owing to the EU-wide VAT threshold specified for TBE services and distance sale of goods. Refer to our EU One Stop Shop Article for more details, which contains information about the EU-wide VAT threshold and distance sale of goods.

Important Note 2: When you opt for EU One Stop Shop registration, you are exempted from separate registration for Lithuania VAT. One Stop Shop applies to the B2C sales made by taxable persons from other EU countries to Lithuania of over EUR 10,000 and the import of goods in Lithuania below EUR 150. Visit our EU One Stop Shop article for more details.

“Example 1: Company A, a Spain-based company, sells goods to a non-taxable buyer B in Lithuania. Company A’s total annual sales exceed EUR 10,000 in the EU, excluding sales in Lithuania.

Company A must either register for Lithuania VAT (if it does not opt to register for One Stop Shop) or the One Stop Shop.”

Lithuania VAT Threshold Summary

To read the official guidance, visit the Lithuanian VAT law.

How can you Register for VAT in Lithuania?

To register for VAT in Lithuania, you can apply online or by submitting a hard copy of the Forms (FR0227 or REG812), available on the State Tax Inspectorate website. The application can be processed in a couple of weeks. The following details must accompany the VAT application:

• Name, address, and nature of business.
• Details of Offices/ facilities including branches, warehouse, etc.
• Bank Account details.
• If a Company is registered elsewhere (or in another EU Member State), the tax office and VAT number under which the Company is registered must be provided.
• Articles of Association.
• Certificate of Incorporation.
• VAT Certificate.
• Power of Attorney when appointing a fiscal representative in Lithuania.

Please visit the official website of the Lithuania Tax Authority for additional information about registration in Lithuania. The registration process may sometimes involve cumbersome formalities, so you can use TaxDo’s streamlined software without going anywhere else. Just fill out the required information on our software, and we will do the rest.

How should you collect and calculate VAT in Lithuania?

VAT is generally charged on a destination-based principle (see the place of supply rules described in the OSS Article), which includes all taxable transactions (described earlier in this article) except those that are otherwise exempt; thus, the VAT Rate is applied to any sales made to Lithuania.

VAT Rates

You must charge the VAT Rate of 21%, other than the products/ services you are supplying that are covered under the reduced rates of 9%, 5%, and 0%. Below is an illustrative list of items covered under the reduced VAT Rates:

For a complete list of reduced-rate goods/ services, refer to the Lithuanian VAT Act (Article 19). Alternatively, the VAT rates in Lithuania are available on the EU Commission website.

Certain conditions may apply to the reduced rates, where things get trickier. TaxDo is here for you! Our experts are well-equipped with VAT laws and will resolve all your concerns.

Below is the simple formula you can use to calculate your VAT collection on each merchandise/ service sold:

VAT collectible = Sale value * (Standard Rate or reduced Rate as may be applicable)

Digital Products/ Services

Digital Products are those stored, used, or delivered in electronic format or any such form. You must charge Lithuania VAT for such digital products since Lithuania’s VAT laws align with EU VAT rules.

The digital products include the following:

• E-books, images, newspapers, movies, periodicals, videos, etc.
• Software-as-a-Service (SaaS), Platform-as-a-Services (PaaS) or Infrastructure-as-a-Service (IaaS).
• Online ads and affiliate marketing.
• Websites, site hosting services, and internet service providers.

VAT Exemptions

The legislation provides certain exemptions from the VAT, such as:

• Human organs, blood (preserved blood and blood components), and milk.
• Dental prostheses are supplied by dentists and dental technicians.
• Certain agricultural products, seeds, and fertilizers.
• Laboratory animals and biological and chemical substances intended for use in scientific research.
• Funeral articles.
• Natural gas and electricity are imported via the natural gas and electricity supply systems.
• Supply of goods to an entrepreneur for his business (B2B).
• Exports.

Please visit the VAT Act (Articles 34-40) to see what exemptions are covered.

B2B and Reverse Charge Mechanism in Lithuania?

If you are a taxable person from another EU Member State and sell the goods/ services to a VAT-registered person in Lithuania, then the transaction is considered a B2B Intra-Community supply, and you are not required to charge the VAT on an invoice raised to the buyer. On the other side of the pond, the Lithuanian buyer will account for VAT on the intra-community acquisition (under the reverse charge mechanism). The buyer will calculate the input VAT on purchase from another state in the VAT return and show the output VAT for the same amount, allowing him to adjust the tax liability, resulting in a zero VAT payment. Reverse charge is applied under Articles 196 & 197 of the EU VAT Directive.

Likewise, suppose you maintain a warehouse in Lithuania from another EU Member State and transfer the goods. In that case, you will need a VAT number in Lithuania and should account for Lithuania VAT as an Intra-Community acquisition under the reverse charge. When filing the return in Lithuania, he will show the deemed purchase (input VAT) and deemed sale (output VAT), leading to zero tax being paid.

“Example 2: Company A in France sells goods in Europe. For this purpose, it has set up a warehouse in Lithuania. It transfers the goods from France to Lithuania Warehouse and sells them in Lithuania.

Company A must register and account for Lithuania VAT on the stock transfer (considered an Intra-community B2B acquisition). While filing the VAT return in Lithuania, Company A will show the input VAT on the intra-community acquisition and report the output VAT for the same amount. This way, the VAT liability would become zero on the stock transfer. Later, Company A must charge and pay Lithuania VAT for goods sold to consumers in Lithuania.

Should you appoint a fiscal representative in Lithuania?

Appointing a fiscal representative is mandatory when you do not have an establishment, registered office, or branch office in the EU and carry out any VAT-exempted or taxable transaction in the country. However, it is optional for businesses based in another EU Member State.

The appointed fiscal representative shall require a power of attorney from the taxable person registered in another EU Member State.  

Fiscal representative appointment and carrying out the transaction may be complex, as any defaults can attract heavy fines and penalties. TaxDo can help you by appointing a fiscal representative and handling all the duties, as we work with leading tax partners in Europe, so we can find it easily.

To learn more about fiscal representatives, visit the official Lithuanian VAT law.

How should you file VAT in Lithuania?

The VAT declaration frequency in Portugal is as follows:

* Newly established legal entities VAT payers 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.

For more information, refer to the Lithuania Official Website.

Filing dates are sometimes extended in exceptional circumstances through a notification by the Lithuanian tax authority.

Note: If your tax due date is a holiday or weekend, the next business day would be considered the final due date.

You can file the VAT return in Lithuania through the online portal or using TaxDo’s specialized software, which seamlessly files, calculates, and reports your taxes. Additionally, if you are selling to other EU Member States and opted for One-Stop-Shop, you must file an OSS return. Refer to our OSS article for further details.

Are there any fines or penalties for default when filing or paying VAT?

The legislation levies a penalty of up to EUR 300 for late submission of a VAT return. Penalty for non-payment of VAT is levied from 10% to 50% of VAT due. Interest can also be chargeable at the rate of 0.03% per day.

However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines Lithuania issued for penalties and interest.

VAT Invoice in Lithuania

A VAT invoice is a testament to how much VAT is charged and collected and evidence of the B2B/B2C supply basis for applying the other rules. Accordingly, the Lithuania VAT invoice must include the following information:

• Business Name and Address of buyer and seller.
• Business VAT number issued to the supplier.
• Date of issue.
• Quantity and type (customary trade name) of the goods supplied or the scope and nature of the other service.
• Time of delivery or other service.
• The applicable VAT rate and the amount of tax are attributable to the consideration.

For more details, refer to the VAT Act (Article 80).

Important Note 3: For any sales made to a country outside Lithuania, you must convert the amounts to your official currency. For this purpose, you can use the European Central Bank’s official exchange Rates.

Keeping Records: You must keep the VAT records for at least ten years under Article 369 of the EU VAT Directive.