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How to protect business from becoming involved in tax fraud?

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:

  • input VAT deduction;
  • recognition of expenses as deductible for the corporate income tax purposes;
  • applying 0% VAT rate.

How could the Company check business partners’ reliability?
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);
  • additional 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.


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