Lithuania: Government gives green light to VAT changes

On 20 December 2011, the Lithuanian Parliament adopted several VAT changes. Please find more information on the most relevant changes introduced below.

Threshold for VAT registration increased.
As from 1 January 2012, the threshold for an obligatory registration as VAT payer was increased from LTL 100,000 (approx EUR 29,000) to LTL 155,000 (approx EUR 45,000). The remuneration received for goods/services supplied in the territory of Lithuania will be included in calculating the threshold. VAT will be calculated from the total amount of the transaction, due to which the threshold was exceeded (and not only from that part of the amount, which exceeds the threshold, as under previous regulations).

VAT adjustment due to bad debts.
The new regulations introduce the possibility to adjust VAT due to bad debts incurred. The VAT adjustment can only be made if (i) not less than 12 months since the supply of goods or services have passed, (ii) the output VAT was calculated and declared, and (iii) the company is capable to prove the non-recoverability of debts and the efforts to recover them. The aforementioned provisions are not applicable if the supplier and the purchaser of goods (and services) are related parties or became such in the calendar year, following the calendar year, in which the debt was declared as irrecoverable and VAT was adjusted accordingly. It should be noted that the VAT adjustment will be possible only with respect to output VAT, which was calculated and declared after 1 January 2012.

VAT rates.
The application of the reduced 9 % VAT rate for thermal energy and hot water supplied to residential premises as well as cold water and thermal energy consumed to prepare hot water used in residential premises was extended up to 31 December 2012. Furthermore, the application of the 5 % VAT rate for medicines and medical aid devices, for which the acquisition costs are partially or fully reimbursed, was extended up to 31 December 2012.

VAT option for immovable items.
As from 29 December 2011, VAT payers can opt to calculate VAT on the lease, sale or other transfer of immovable items if such items are leased, sold or otherwise transferred not only to VATable persons, but also to diplomatic missions, consular posts, EU institutions and their established offices as well as international organizations and their representations.

Input VAT deduction for persons that were obliged to register as VAT payers.
Taxable persons that did not register as Lithuanian VAT payers, although they were obliged to do so, and which supplied VATable goods and services in the territory of Lithuania  (with some exceptions), were granted the right to input VAT deduction. These persons will have the right to deduct input and (or) import VAT, calculated from the purchased and (or) imported goods and services actually used by for (i) the VATable supply of goods and (or) services, (ii) the supply of goods and (or) services outside the territory of Lithuania when the supply of such goods and services would not be VAT exempt if it occurred within the territory of Lithuania. These amendments will enter into force as from 1 January 2013. Currently, only registered VAT payers shall have the right to input VAT deduction.


Tatjana Vaičiulienė

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