VAT in Lithuania: Rates, Registration, & Reporting Guide

VAT in Lithuania - Three Types of Rates

There are three types of VAT rates in Lithuania:

1. Standard VAT rate,

2. Reduced VAT rates, and

3. Zero VAT rate.

How Much is VAT in Lithuania’s Regions?

Lithuania VAT Law does not stipulate any special VAT rates for specific regions. This means that the standard, reduced, and zero VAT rates apply to all related transactions.

VAT Registration Threshold

In addition to the VAT Lithuania Law, official opinions and guidelines published by the State Tax Inspectorate provide necessary information on the VAT threshold in Lithuania.

The VAT registration threshold for domestic taxable persons, including both individuals and businesses, has been set at EUR 45,000 within the last 12 months. In addition, if the value of goods purchased from another EU country exceeds EUR 14,000 in the previous calendar year, domestic taxable persons must register for VAT in Lithuania. On the other hand, there is no VAT threshold in Lithuania for foreign taxable persons engaging in taxable activities there.

As an EU Member State, Lithuania implemented EU-wide rules on the VAT threshold for intra-EU distance sales of goods and B2C supplies of services, set at EUR 10,000. Following the same EU rules, there is no registration threshold for non-EU suppliers of electronically supplied services.

Additionally, Lithuania transposed the EU VAT SME rules into national legislation. Under the EU VAT SME scheme, SMEs from other EU countries are not required to register for VAT in Lithuania if their local turnover does not exceed Lithuania’s VAT threshold of EUR 45,000, and their total EU turnover remains below EUR 100,000. Similarly, Lithuanian SMEs can avoid VAT registration in other EU countries as long as they remain below the respective local VAT thresholds and the EU-wide EUR 100,000 turnover limit.

Types of Taxable Activities in Lithuania

Under the VAT Lithuania rules and regulations, any legal or natural person independently involved in economic activity is considered a taxable person. The purpose and outcome of such economic activity are not crucial for a person to be considered taxable. Suppose any of those activities include the supply of goods or services in Lithuania for a fee, the reception of reverse-charge services by a taxable person in Lithuania, or exporting or importing goods. In that case, they are considered taxable activities for VAT purposes.

VAT Registration Process

The VAT registration process in Lithuania for domestic and foreign taxable persons is similar. However, there are differences in the documents required when applying for VAT, especially for applicants who are non-EU taxable persons.

Lithuania VAT Registration for Domestic Businesses

Domestic businesses must submit their VAT registration application electronically through the government portal Mano VMI as taxable persons. In addition to fulfilling and submitting the online VAT registration form, applicants must submit certain documents and provide certain information. If the application is complete, the State Tax Inspectorate will, on the form FR0618, decide to register the applicant for VAT purposes. The decision is usually made within three working days.

Lithuania VAT Registration for Foreign Businesses 

Foreign taxable persons, such as businesses, must submit VAT registration applications to Lithuania’s State Tax Inspectorate via the Mano VMI online portal. However, to complete VAT registration, foreign businesses must first register in the Register of Taxpayers by submitting Form FR0227.

In addition to completing the application, documents such as a certificate of registration in a foreign country and an original copy of the authorization issued by the foreign person must be submitted with the application, together with their translation into Lithuanian.

Non-EU businesses must appoint a tax representative to complete the VAT registration process. Therefore, the power of attorney of the foreign companies certified by a public notary is an additional document that must be submitted to the State Tax Inspectorate. The registration process is usually completed within three working days if the application and all submitted documents are in order.

VAT Returns in Lithuania

Under the VAT Lithuania Law, there are four types of VAT returns: monthly, quarterly, semi-annual, and annual. For businesses, the general rule is to file a monthly VAT return by the 25th of the month following the reporting period. In some cases, a quarterly return may be allowed. For individuals registered for VAT, a semi-annual VAT return is necessary. Annual VAT returns are required if the deductible input VAT must be adjusted at the end of the calendar year.

Penalties for Failure to File Tax Return

Taxable persons who do not comply with the VAT registration and VAT filing rules and regulations may face penalties. For example, suppose a State Tax Inspectorate discovers that a taxable person has unjustifiably reduced the calculated amount of VAT due. In that case, in addition to paying the additional VAT due, a penalty of 20 to 100% of the additional VAT due will be imposed.

VAT Rules for Electronically Supplied Services 

A few requirements must be met for a service to qualify as electronically supplied services (ESS) under the EU VAT Directive 2006/112/EC. Services must be provided over the Internet or similar digital networks and must be provided automatically. This means that services that are heavily reliant on human effort and delivered by channels other than digital cannot qualify as ESS.

However, other terms are often used for ESS, leading to confusion among taxable persons. These terms are digital services, digital products, and electronic services, and they have the same meaning as ESS. Lithuania implemented EU ESS-related rules and regulations in its national laws and regulations to align with EU-wide rules under the EU VAT Directive and implementing regulations.

Taxability Rules for ESS:

The 2021 reform, which implemented the E-Commerce package, significantly impacted the taxability rules for ESS. The newly established rules changed the landscape for service providers and contributed to further unification and development of the EU single market.

Under the 2021 E-commerce reform, general rules are used to determine the place of supply for B2B ESS. Regarding the B2C supply of ESS, the destination principle is critical, as it states that the customer’s location determines the place of supply.

Also, the reformatory package set the EUR 10,000 threshold as the key to determining taxability rules for distance sales of goods and ESS. Suppliers whose annual turnover is below this threshold may apply VAT rates in their home country. In contrast, those whose turnover exceeds the set threshold must apply VAT rates based on the destination principle, e.g., the VAT rate in Lithuania.

How much is VAT in Lithuania on ESS?

The Lithuania VAT rate for ESS is 21%.

E-Commerce Rules

The purpose of the 2021 E-commerce reform package was to tackle the challenges brought by the expenditure and development of the digital economy. The EU VAT Directive simplified the VAT reporting system for businesses engaged in cross-border transactions.

One of the most significant changes was the removal of the EUR 22 threshold and introduction of the EUR 150 threshold for low-value goods imported in single consignments from third countries or territories, also known as non-EU countries.

Deemed supplier rules that make digital platform operators liable for collecting and remitting VAT when specific criteria are met, shifting VAT responsibility from the underlying suppliers or actual vendors to them.

In addition, one of the most noticeable changes was the enlargement of the 2015 Mini One Stop Shop (MOSS) system. Updating rules and regulations for existing Union and non-Union schemes made VAT reporting much more manageable for businesses engaged in cross-border transactions, and adding additional schemes transformed MOSS into a One Stop Shop (OSS) system.

The 2021 E-commerce reform introduced the Import One Stop Shop (IOSS), therefore establishing OSS, which consists of three schemes:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

VAT EU Reporting

VAT-registered taxable persons must submit a Recapitulative Statement, also known as EC Sales List, and an Intrastat report.

EC Sales List

EC Sales List (ESL) is a tax declaration that includes information on intra-Community transactions between EU VAT-registered businesses. The ESLs are submitted monthly by the 25th of the following month.

Intrastat

An Intrastat report is a statistical report that includes information on goods supplied by EU VAT-registered taxable persons in different EU countries. For Intrastat reporting to become mandatory for taxable persons in Lithuania, their dispatches to another EU country must exceed EUR 400,000, or their arrivals from other EU countries must exceed EUR 600,000. 

However, if dispatches to another EU Member State exceed EUR 10 million, or the value of arrivals exceeds EUR 7 million. In that case, a more detailed Intrastat report is required.

Digital Reporting

In Lithuania, e-invoicing rules and additional digital reporting requirements apply to VAT-registered businesses.

Local Businesses

Since 2017, mandatory B2G e-invoicing rules have applied to all domestic businesses engaged in any transaction with the government. The B2G e-invoices are submitted and processed through the government portal SABIS.

In addition to mandatory B2G e-invoicing, the i.SAF system for electronic filing of monthly reports, including all transactions, such as B2B, B2G, and B2C, as well as domestic, intra-EU, and extra-EU transactions, was implemented in 2016.

This system was later merged into the Smart Tax Administration System, commonly referred to as i.MAS, which aims to reduce administrative burdens and improve efficiency in tax-related matters. The I.MAS includes the SAF system for monthly reporting of information on issued and received invoices and the SAF-T system for electronic tax audit files that must be made available to the State Tax Inspectorate in the audit process.

Non-Resident Businesses

The same digital reporting rules that apply to domestic businesses apply to non-resident businesses. The only exemption applies to non-resident VAT businesses registered for VAT in Lithuania for intra-EU acquisitions and to those that did not carry out any other economic activity.