Leinonen Lithuania Newsletter

The major accounting and tax amendments that come into force since 1 January 2014.

22 Business Accounting Standard

Law on Corporate Income Tax (CITL)

Investment project tax reduction has been prolonged to the year 2018 (Art. 461). Since 2014 a list is extended for fixed assets in respect of which the said tax relief may be applied (investment project tax relief may be applied to trucks, trailers and semi-trailers, however, it will be possible to reduce the taxable profits for their acquisition only to LTL 1 million of incurred expenditure within the tax period).

In accordance with CITL Article 461, an entity carrying out an investment project may reduce the taxable profits if the assets are necessary for the entity to carry out the investment project and:

1. the assets are attributable to the following classes of fixed assets: plants and machinery, installations (structures, wells, etc.), computer and communications equipment (computers, computer networks and hardware), software, acquired rights, trucks, trailers and semi-trailers,and
2. the assets have not been used and were produced not earlier than two years ago (as calculated from the date when such fixed assets were put into use).

 The taxable profits may be reduced by not more than 50%,

Law on Income Tax of Individuals (ITIL)

Since 1 January 2014 in accordance with Item 2 of Part 4 of Article 5 any payment received by non-permanent Lithuanian residents for the activities in the supervisory council and the board shall be subject to an ITI rate of 15 percent (prior to amendment, just annual payments were subject to taxation).

Pt 2 of Art. 20 underwent amendments:

• Tax-exempt amount (TEA) of LTL 570 is applicable to resident‘s income related to employment relationships which is less than or equals LTL 1000;
• TEA applicable to resident‘s income related to employment relationships which exceeds LTL 1000 shall be calculated according to the following formula:

TEA = 570 – 0.26 * (income related to employment relationships - 1000)

Since 2014, TEA shall not be applicable to an employee whose monthly income related to employment relationships equals or exceeds LTL 3192 (before 2014 – LTL 3150 Lt.)

In accordance with an amendment to Pt 8 of Art. 20 of ITIL, additional TEA of LTL 200 per child shall be applicable to parents and adoptive parents raising children (adopted children) until 18 years of age, also senior children, if they study at schools according to general education programmes  (the previously valid procedure – for the first child – LTL 100, for each other – LTL 200).

Since 2014 an income tax rate of 15 percent shall be applied to income from distributable profit (including dividends) (prior to amendment an income tax rate of 20 percent was applied) Art. 6 ITIL.

Income tax relief on interest received by residents on loans granted to entities and other residents (ITIL Item 19 Pt 1 Art. 17) was lifted. Interest on loans, actually received since 1 January 2014, will be taxed by applying ITI of 15 percent.

Amount of interest on not asset-backed securities and deposits not exceeding LTL 10,000 is non-taxable within the tax period by applying an income tax, if not asset-backed securities have been acquired or contracts for deposits have been concluded since 1 January 2014 (Item 20 Pt. 1 Art. 17). The exceeding amount will be taxed by applying ITI of 15 percent.

Item 30 Pt 1 Art. 17 ITIL is changed indicating that income from the sale of securities (difference between the transfer and acquisition price) exceeding LTL 10,000 within the tax period will be taxed.

Law on Value Added Tax (VATL)

The application of the reduced rate of VAT of 9 percent (VATL Pt 3 Art. 19):

• is prolonged to 31 December 2014 for heat energy, supplied for housing heating (including heat energy, transferred through the hot water supply system), for hot water, supplied to the residential premises, or cold water for preparation of hot water and heat energy, used for heating that water.
  
• is established for accommodation services supplied according to the procedure laid down in the legal acts regulating the tourist activities (since 1 January 2015).

The reduced rate of VAT of 5 percent for the period of unlimited duration is applied to medicines and medicinal aid products when acquisition costs of these goods are fully or partly compensated in the procedure prescribed by the Law on Health Insurance of the Republic of Lithuania (VATL Pt 4 Art 19).