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Important information for business related to quarantine

00:00 16 March 2020, quarantine regarding coronavirus (COVID-19) spread in Lithuania was announced. The quarantine is currently valid till 30 March 2020.

Due to this, we have prepared a summary of information which may be relevant to business in Lithuania.


I. LABOUR RELATIONSHIPS


Considering to the announcement of quarantine in the territory of the Republic of Lithuania and restrictions of business activities, the employers have following options:

 

I.                 Remote Work (Article 57 of Labour Code)

 

The parties are able to agree regarding remote work (i.e. work from home) under the mutual agreement. The Lithuanian Government recommends to organize employees’ work from home in this case. However, considering to some business specific, not all companies have possibilities to work remotely. Thus, the employers should also consider other options.

 

II.               Annual Leave (Articles 126-130 of Labour Code)

 

If the employees have unused annual leave, they can use them now. However, please note that the employer is not able to force employees to take their annual leave in such cases ex-parte. However, if the employer and the employee agree regarding annual leave during this time on mutual agreement, the annual leave can be granted to the employees.

 

III.               Non-paid Leave (Article 137 of Labour Code)

 

Non-paid leave can be granted to the employee only under the request of the employee.

 

IV.             Idle Time (Article 47 of Labour Code)

 

Idle time due to the extreme situation or quarantine is a status when the employer is unable to provide any work for the employee due to announced extreme situation or quarantine. Thus, if there are no possibilities to work from home or in any other way employer cannot propose work to the employee, idle time is the option in this case.

 

The idle time due to extreme situation or quarantine is compensated as follows: 

  • during the idle time the employer pays to the employee salary which shall not be less than minimum monthly salary (i.e. 607 EUR/month (gross)) if working time norm set in the Employment contract is 40 hours/week.

E.g. if employee’s salary prior announcement of idle time due to extreme situation or quarantine was 2000 EUR/month (gross), the employer has the right to pay minimum monthly salary to this employee during the idle time (when idle time is announced due to the extreme situation or quarantine and employer’s inability to grant the work).


Employer will have the right to request paid remuneration compensation (state subsidies) for the idle time from the Employment Authority of the Republic of Lithuania. Compensation amounts (state subsidies) will be as follows:

  • 60% from the remuneration of the employee, but no more than EUR 607 gross;
  • 90% from the remuneration of the employee, but no more than EUR 607 gross (in sectors subject to government restrictions during extreme situation or quarantine).

NB: In order to get the state subsidies, the employer undertakes not to terminate employment contracts with employees at least three months after the end of paying subsidies.

 

V.               Partial Work (Article 48 of Labour Code)

 

When the volume of the employees‘ work is reduced up to 50 % due to objective economic reasons approved by Government and the employer is not able to grand full time work to employees, the partial work can be established in the company, if the State Social Insurance Fund Board (SODRA) adopts the decision to pay partial work allowances to the employees. Unfortunately, there are not still adopted necessary legislation regarding implementation measures.

 

This problem should be solved by Government in near future and the employers will be able to apply to SODRA regarding partial work allowances.

 

VI.             Reduction of working hours (Article 45 of Labour Code)

 

The employer can initiate the reduction of working hours, however, the employee’s consent is needed in this case. The employer can offer the employee to change the employment contract, when reducing of working time norm and if the employee accepts this offer within 5 working days, the Employment contracts can be changed accordingly.

 

VII.             Termination of Employment contract (Article 57 of Labour Code)

 

The termination of the Employment contract can be done under this ground due to reduction of work volume. In this case, the employee has to be informed in advance (1-3 months depends on the employee) and severance pay has to be paid out. The employee raising a child under 3 years old cannot be dismissed under this ground.



II. FORCE MAJEURE

 

Article 6.212 of Lithuanian Civil Code regulates Force Majeure conditions when parties might be exempt from contractual liability. However, business should know that Force Majeure can be applied only in specific cases and it is not absolute right without any limitations. Following conditions are necessary in order to apply Force Majeure circumstances:

  • party shall prove that contract obligations were not performed due to the circumstances which could not reasonably have been foreseen prior concluding the contract;
  • party failing to perform contract obligations cannot prevent it;
  • party failing to perform contract obligations shall inform other party due to Force Majeure circumstances and its influence for contract fulfilment.

 

Based on above mentioned, in case your business is affected by Force Majeure circumstances – contract counterparties shall be informed immediately about it.  

 

Moreover, Parties can request for the official Certificate confirming Force Majeure circumstances in Lithuania. According to Article 5 Paragraph 11 of the Lithuanian Law on Chambers of Commerce, Industry and Crafts, the Certificates confirming Force Majeure circumstances in Lithuania are issued by the Chamber of Commerce, Industry and Crafts.

In case of a dispute - Lithuanian Courts may confirm Force Majeure circumstances after evaluating objective actions of each contract party, therefore in case of contract obligations unfulfillment due to COVID-19, the parties shall take active actions and:

  • follow the general legal duties such as contract party cooperation as well as the general legal principles of integrity and reasonableness;
  • inform other contract party about contract unfulfillment due to the Force Majeure circumstance;
  • collect evidence on the Force Majeure occurrence.

 

Based on above mentioned, Force Majeure is not an automatic ground to terminate the contract or not to fulfil the contract obligations, i.e. parties shall take active actions, communicate and be fair to one another.



III. TAXES 

 

Please note that the Lithuanian Tax Authority has published some news/reminders related to COVID-19:

  • the possibility to postpone the reporting and paying of advance Corporate Income Tax (CIT) till 30 March 2020 (previously 16 March 2020). The Company may choose to report advance CIT based on past results or based on the best estimate of future results. If the advance CIT return has already been submitted, it may be adjusted by choosing the other method.
  • the possibility to conclude tax loan agreement, i.e. to agree with the Tax Authority the schedule of tax payments which the company cannot pay on time. Please note that based on current legislation, the process is quite burdensome, therefore, it is expected by businesses that the requirements for tax loan may be reconsidered by the Tax Authority.

 

Additionally, the following considerations which are under discussions were publicly announced: 

  • the possibility to conclude tax loan agreement related to personal income tax (PIT) payment which deadline is 16 March 2020. The Tax Authority does not plan to start PIT debt recovery procedure, till the legal acts are prepared regarding the possibility to conclude loan agreements for PIT.
  • the possibility to extend annual personal income tax return for 2019 reporting deadlines.


IV. STATE AID


Lithuanian government has prepared economic stimulation and corrective measures plan for COVID-19. Overall scope of government measures is EUR 2.5 billion with the possibility to increase it to EUR 5 billion together with the bank’s expansion of its lending potential. Therefore, please find corrective measures prepared by the Lithuanian government.

 

Please note that Government is under the preparation of legal acts on approved below stated measures implementation. When special legal acts on measures implementation will be prepared, Leinonen team will inform about those immediately.


OBJECTIVE

MEASURES

 

 

Assistance in preserving jobs and income of residents

The state will provide assistance to businesses in order to preserve jobs for up to 3 months by covering part of the idle time allowance for employees. In order to get the state’s assistance, the employer undertakes not to terminate employment contracts with employees at least three months after the end of paying subsidies. Proportions of state subsidies:

·       60% from the remuneration of the employee, but no more than EUR 607 gross;

·       90% from the remuneration of the employee, but no more than EUR 607 gross (In sectors subject to government restrictions during emergency situation or quarantine).

Please note that subsidies will be paid by Lithuanian Employment Authority (Lietuvos Respublikos Užimtumo tarnyba).

State will provide sick pay and sickness benefits to parents and guardians of children (kindergartens, preschoolers and primary school students) and children with disabilities up to 21 years when educational institutions or social care centers declare regime limiting the spread of infections. Parents and guardians have to get a certificate of temporary incapacity in order to receive sickness benefits.

State will pay self-employed workers a flat rate of EUR 257 per month for up to 3 months when they are unable to carry out their activities due to the regime limiting the spread of infections.

State will extend the grace period (except interest) for residential mortgage installments from 3 to 6 months for those who have lost their job, with a state guarantee.

State recommends to municipalities to permit postponing or distribution of payments for utilities, electricity, natural gas and heat bills.

 

 

Assistance in helping businesses to save their liquidity

1.       State will provide tax loans in order to postpone the payment of taxes or to set the payments on an agreed schedule. Lithuanian tax authority comments that the procedure for the tax loan has not changed, the rules and the required documents are the same as before. However, if the Company is not able to provide all the required documents for objective reasons, the Lithuanian Tax Authority will continue the process of the request provided and will decide whether the tax loan agreement could be made or not.

2.       The Lithuanian Tax Authority will expand the support measures by proposing a tax loan agreement for Personal Income Tax (PIT) arrears which due date was 16 March, 2020. The payment of PIT would be postponed or the payments would be set on an agreed schedule. Please be noted, that the tax loan agreement for PIT could be made via ManoVMI electronic system – services – inquiries.

State should provide the possibility to postpone the payment or set the payments on an agreed schedule for UAB "Ignitis" clients, which use electricity or natural gas.

State will increase Agricultural Credit Guarantee Fund and Invega guarantee fund by EUR 500 million and will extend the conditions of warranties. We would like to note that it is unclear what part of the financial support will go to Agricultural Credit Guarantee Fund and what part to Invega guarantee fund. Please be informed that from 50% to 100% interests paid by small or medium sized businesses will be compensated.

 

 

Stimulation of economy

State will accelerate investment programs, accelerate payments and will increase the intensity of funding.

State will redistribute EU investment funds for health, employment and business sectors.

State will start a COVID-19 fund which will be responsible for reducing the consequences done by the virus. Furthermore, the fund will provide a possibility to make donations for natural and legal persons.

State will set an additional guarantee limit, which will help to create or to supplement the existing financial instruments.

State will recommend the Lithuanian bank to increase bank lending potential by EUR 2.5 billion.

 

 

Ensure State Treasury's liquidity

The state will be allowed to borrow an additional amount of EUR 5 billion.

 

 

Personal income reporting

Personal income reporting deadline is postponed from 4 May 2020 to 1 July 2020

The financial support of 2% or more can be dedicated for a longer period of time as well, until 1 July 2020. The financial support can be dedicated right now via Electronic Declaration System.

 

 

Providing the necessary resources for the effective functioning of healthcare and public protection systems

State will provide additional social guarantees for health care professionals and officials working at the outbreak areas of contagious diseases

State will ensure the funding of additional health care costs and public authorities involved in emergency management costs, including bonuses for health care professionals and public authorities staff.

To ensure public health in the event of an emergency, public procurement may be subject to special urgency considerations for a negotiated procedure without publication of a contract notice

State will ensure the purchase of personal protective equipment, reagents, medical and other equipment.


If you have additional questions, do not hesitate to contact us by the contacts below.


18.03.20


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Evelina Dausėnaitė

Evelina Dausėnaitė

Head of Tax & Legal

Mobile: +370 699 77637

Email: evelina.dausenaite(at)leinonen.lt

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