The subject to VAT is the supply of goods and services by a taxable person in the performance of his/its economic activities within the territory of the country that are effected for consideration.

In addition, the subject to VAT is acquisition of goods for consideration within the territory of the country from another Member State.

Moreover, the subject of import VAT is importation of goods where the goods are treated as imported within the territory of the country.

The Standard VAT rate is 18%. In addition, reduced VAT rates (5% and 9%) are applied.

The following goods and services are taxed at a reduced 5% VAT rate:

• services of passenger carriage by the established regular communication routes, of passenger carriage by passenger trains, and of luggage carriage;
• books, newspapers, magazines and other periodicals;
• pharmaceuticals (including veterinary pharmaceuticals) and certain medical products;
• hotel and special accommodation services;
• organic foodstuffs;
• freshly chilled meat and edible by-products (except for poultry meat and edible by-products);
• freshly chilled, frozen and deeply frozen poultry meat and edible by-products;
• agricultural services provided by agricultural companies and cooperatives (agricultural entities) to their members;
• live, fresh and chilled fish;
• attendance of art, cultural and sports events of all types organised by profit based entities;
• creative or performance services provided by writers, composers or performers and services for which such persons receive royalties.

A reduced 9% VAT rate is applied to services of construction, renovation and thermal insulation of residential buildings paid by public and municipal funds, preferential credits extended by the State, and special public funds.

Payers of VAT. Taxable persons engaged in the provision of goods or services in Lithuania must register as VAT payers and calculate and pay VAT to the state budget.

However, a taxable person of the Republic of Lithuania does not have to register as a VAT payer and does not have to calculate nor pay VAT on the goods and/or services supplied (except for new vehicles supplied to other EU Member States), provided that the aggregate amount received from the goods and/or services supplied as part of routine business activities does not exceed LTL 100,000 during the last 12 months.

VAT registration must be obtained by taxable persons who are not, and must not be registered as VAT payers due to the supply of goods/services in the territory of Lithuania and also by legal persons who are not taxable persons and acquire goods in Lithuania from another EU Member State. Registration as a VAT payer is not mandatory where the aggregate value of all goods purchased from other EU Member States (except for new vehicles or goods subject to excise duty) does not exceed LTL 35,000 (excluding VAT) in the previous calendar year and it is not expected that this limit will be exceeded in the current calendar year.

An opportunity for voluntary registration as a VAT payer has also been provided in cases where the aforesaid limit amounts are not exceeded.

The tax period is one calendar month, however, in some cases it can be a calendar half-year period or another period. If one calendar month has been set as the tax period, VAT returns for the tax period must be filed and the VAT amount payable must be paid by the 25th day of the subsequent month.

The Republic of Lithuania Law on VAT also establishes cases where supply of goods or services and acquisitionof goods from another EU Member State are not subject to VAT and cases where imported goods are not subject to import VAT. The law establishes procedures for the application of special VAT taxation schemes (compensatory VAT rate for farmers, tourism services, second-hand goods, works of art, collectors’ articles and antiques, investment gold and electronic services).

Regulation in the European Union. There exists stringent regulation of VAT taxation in the European Union with regard to the fact that VAT as consumption tax has substantial impact on the development of the internal market without borders.

Council Directive of 28 November 2006 No. 2006/112/EB on the common system of value added tax is the main document governing VAT taxation on the EU scale. The scope of the directive covers practically all aspects of VAT application.

However, there are a number of directives for specific VAT areas such as:

1) cases of, and procedures for the application of reliefs from import VAT — Council Directive of 5 October 2006 No. 2006/79/EC on the exemption from taxes of imports of small consignments of goods of a non-commercial character from third countries and  Council Directive of 28 March 1983 No. 83/181/EEC determining the scope of Article 14 (1) (d) of Directive 77/388/EEC as regards exemption from value-added tax on the final importation of certain goods;

2) refunding of VAT to taxable persons —  Eighth Council Directive of 6 December 1979 No. 79/1072/EEC on the harmonization of the laws of the Member States relating to turnover taxes - Arrangements for the refund of value added tax to taxable persons not established in the territory of the country and Thirteenth Council Directive of 17 November 1986 No. 86/560/EEC on the harmonization of the laws of the Member States relating to turnover taxes - Arrangements for the refund of value added tax to taxable persons not established in community territory.

Regulation in Lithuania. VAT was introduced in Lithuania on 1 May 1994 upon enforcement of the Law on Value Added Tax No. I-345. The law remained in force until 30 June 2002. From 1 July 2002, a new version of Law on Value Added Tax  No. IX-751 came into effect; it implemented all the key provisions of the EU legislation governing VAT taxation; however those requirements — the application of which was subject to Lithuania‘s joining the EU and the common market — were not transposed to the law.  On 15 January 2004, Republic of Lithuania Law on Amending and Supplementing the Law on Value Added Tax No. IX-1960 was adopted; it took effect on 1 May 2004. This law represents the final transposition of provisions of the EU legal acts governing VAT taxation into Lithuanian law.

Clarification of Provisions of the Law on VAT

Summarised clarifications of the Law on Value-Added Tax are provided and published by State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania upon coordination with the Ministry of Finance.

Taxpayers wishing to obtain consulting on VAT payment or information about the application of the Law on Value Added Tax and relevant bylaws should approach the State Tax Inspectorate as provided for in the Law on Tax Administration.

Information from the website www.finmin.lt of The Ministry of Finance of the Republic of Lithuania.