Below are provided the main aspects of the recommendations:
When does the Company need
to check its business partner?
It is recommended to analyse the Company’s
business partner’s economic activities, before acquiring/supplying goods or
services to a business partner.
What kind of tax risks could
the Company face?
If it is established, that the Company’s
business partner is connected with fraudulent transactions, the taxpayer could have
tax risks related to:
How could the Company check
business partners’ reliability?
- input VAT deduction;
- recognition of expenses as
deductible for the corporate income tax purposes;
- applying 0% VAT rate.
Purchasing or supplying goods/services to a new
business partner, the Company should gather additional information in order to ensure,
that its business partner's economic activity is not connected with VAT fraud
or other illegal practices. The Lithuanian STI recommends to collect
information and execute some actions:
- the Company could gather information regarding the business partner's branches
or other places of economic activity. As well, the Company could verify natural
persons (check the validity of power of attorney), who have the right to
represent the entity (i.e. communicate and sign documents);
information regarding future business partner could be verified at STI internet webpage and State Enterprise Center of
Registers webpage (i.e. whether a future business partner is included
into the list of entities, who do illegal economic activities or are included in
the list of entities, that are required to pay additional taxes);
- the Company could ask its business partner to provide its extract from the
commercial register, its company’s registration certificate, a VAT registration
certificate, and other documents or licences.