EU VAT guide – Lithuania

VAT rates in Lithuania 

How much is VAT in Lithuania? 

The Standard VAT Rate (PVM tarifas (PVM)) in Lithuania is 21%. 

Some supplies are exempt from VAT. This applies to business activities like health care, insurance, and educational services.

The exact list of taxable transactions and allocated Lithuania VAT rate can be found in VAT Lithuania regulations. 

VAT thresholds in Lithuania 

Valuable information about the VAT threshold in Lithuania and applicable provisions can be found in the VAT legislation. Also, a helpful source of information is an interpretation of the appropriate information shared by Tax Authority officials. 

VAT registration threshold for resident businesses: The resident businesses can benefit from a threshold of EUR 45,000 for the supply of goods and/or provision of services where the place of supply is within the country. The turnover calculation period is based on the payments received in the last 12 months.

VAT registration threshold for non-resident businesses: In most cases, there is no registration threshold for foreign businesses without a permanent establishment in the country. 

VAT registration threshold for intra-EU distance sales of goods and B2C supplies of services: EU-wide harmonized threshold of EUR 10,000

VAT registration threshold for non-EU established suppliers of Electronically Supplied Services: No registration threshold

VAT Taxable Activities in Lithuania

A taxable person by Lithuania VAT Law is a legal person or individual who carries out economic activity independently, whatever the purpose or results. 

Types of taxable activities that trigger the imposition of Lithuania VAT: 

• The supply of goods and rendering of services in Lithuania for consideration;
• Receipt of reverse-charge services by a taxable person in Lithuania;
• Export of goods;
• Import of goods.

Other case scenarios exist where domestic or foreign businesses should impose Lithuania VAT on their transactions. 

Tax Representative in Lithuania 

For non-EU-established businesses, having a tax representative for all VAT compliance-related activities is often mandatory. Tax persons with tax residence in third countries or territories with mutual assistance agreements signed with Lithuania can fulfill their tax obligations without contracting a tax representative. 

Having a tax intermediary isn’t compulsory for EU-established companies. Still, the economic operator could acquire the professionals to ease and streamline compliance challenges for its operations in the country. 

VAT on Electronically Supplied Services in Lithuania 

Electronically Supplied Services 

Electronically Supplied Services (ESS), as outlined by the EU VAT Directive 2006/112/EC, refer to a category of services provided via the Internet or other digital networks. An essential characteristic of these services is their delivery based on automatization. 

From a practical standpoint, this means there is often no human intervention. Services performed without using digital channels are excluded from this group. 

Lithuania has incorporated Electronically Supplied Services into its national legislation, aligning domestic rules with the EU VAT Directive and its accompanying regulations. Harmonizing the domestic regulatory framework with the E-commerce VAT package strengthened the reliability and transparency of the country’s tax treatment of digital services. 

This alignment streamlines tax rules for ESS, benefiting economic operators and tax authorities alike. 

Despite this clarification, the terms “digital services,” “digital products,” and “electronic services” are often used interchangeably. This practice may need clarification about what digital products and services mean and the related allocation of the tax rate.

Taxability Rules for ESS

The adoption of the E-Commerce VAT package on July 1, 2021, introduced many relevant changes to the EU VAT framework. The scope of changes is extensive, from introducing the new reporting scheme to new taxability rules. The uniform approach by regulators can be summarized as strengthening the single market with more tax and legal certainty. 

These reforms improve the business environment for VAT registration, tax reporting, and compliance challenges.

Relevant highlights of the 2021 E-commerce Reform:

• B2B Electronically Supplied Services: For B2B transactions, existing general rules are used to determine the place of supply;
• B2C Electronically Supplied Services: The destination principle applies to businesses outside the EU. This principle states that the customer’s location determines the place of supply for tax purposes. This principle clarifies tax responsibilities for companies selling to EU consumers;
• Distance Sales of Goods and ESS: The established intra-EU-based threshold of EUR 10,000 for EU-based suppliers applies. The scope of the threshold covers intra-community distance sales of goods and B2C supplies of services.  Taxable persons whose annual turnover is below this threshold may follow their home country’s VAT rules or report transactions through the One-Stop Shop (OSS) schemes;
• Distance Sales Exceeding the EUR 10,000 Threshold: EU-based merchants with annual turnover exceeding this threshold must apply VAT rates based on the destination principle.

This alignment of VAT rules, established by the EU VAT Directive, simplifies compliance for companies operating across the EU. 

How much is VAT in Lithuania for Electronically Supplied Services?

VAT rate Lithuania: A standard VAT rate of 21% is applied in most cases on sales of Electronically Supplied Services in Lithuania.

E-Commerce VAT Rules in Lithuania 

On July 1, 2021, EU regulators adopted a significant change to the part of the EU VAT Directive covering the E-commerce section. These changes aim to tackle the expanding influence of the digital economy and design a simplified reporting system for businesses operating cross-border.

Some of the Changes to the EU VAT Directive on E-commerce VAT Rules:

Cross-Border Sales of Low-Value Goods: The reforms have established a unified EU threshold for importing low-value goods from third countries or territories. Thanks to the adoption of the uniform EU-wide rules, businesses that supply the LVG to EU customers will have fewer administrative barriers in their operations.

Intra-Community Distance Sales: The previous national thresholds for intra-community distance sales became obsolete, simplifying VAT obligations for non-resident sellers and reducing compliance complexity.

Domestic Sales by Deemed Suppliers: In specific scenarios, digital platform operators are responsible for charging, collecting, and reporting VAT to tax authorities. From a practical standpoint, the VAT compliance duties of the original vendor should be shifted to the digital platform operator.

Provision of B2C Electronically Supplied Services (ESS): The range of services eligible for reporting under the One-Stop Shop (OSS) schemes has been significantly expanded, making VAT reporting more manageable for businesses engaged in cross-border activities. 

Improvements for uniform reporting systems:

Alongside revising the taxability rules for different types of B2C transactions, the latest EU VAT reform from 2021 introduced the abovementioned changes concerning simplified reporting systems.

These include the presentation of the new One-Stop Shop (OSS) scheme and the Import-One-Stop Shop (IOSS) scheme and the expansion of the scope of the two previously established schemes. These initiatives aim to streamline VAT reporting and compliance across the EU, making the related tax and legal challenges less costly and confusing for the impacted parties.

The E-Commerce VAT package made the following special schemes available:

• Union One-Stop-Shop Scheme;

• Non-Union One-Stop-Scheme;

• Import One-Stop-Shop Scheme.

Overview of EU VAT Special Schemes

Conditions for Using the Non-Union OSS:

This scheme can be leveraged only by non-EU-established suppliers. It permits non-resident suppliers to report B2C cross-border provision of services. The scope of services that can be aggregately reported under this simplified scheme has been significantly expanded after the E-commerce reform.

Adhering to the special VAT scheme reduces the expenses for cross-border tax compliance for the vendors in scope. 

Conditions for Using the Union OSS:

Taxable persons established in Member States can use the Union OSS scheme to report their intra-community distance sales of goods and cross-border B2C services. 

Economic operators without permanent establishments in one or more Member States can benefit from this simplified scheme to report all their intra-community distance sales of goods to customers within the EU.

Conditions for Using the Import One-Stop-Shop (IOSS) Scheme:

The Import One-Stop-Shop (IOSS) is open to EU and non-EU businesses. This scheme reports import VAT for the low-value goods imported from third countries or territories. Digital platforms that facilitate the sale of low-value goods take on the tax responsibility instead of online vendors.

Positive Impact of the OSS:

The enlargement of the simplified reporting system for transactions where the purchaser is an EU resident has significantly reduced the compliance costs that cross-border operating businesses will experience. 

OSS Return and Payment 

Lithuania hasn’t developed a simplified reporting system for non-resident providers of digital services. However, it has harmonized its national VAT regulation regarding the simplified reporting systems established by the EU VAT Directive, i.e., OSS schemes. 

Taxable operators from outside the EU and those from the EU can significantly benefit from accessing one or more of the OSS schemes. These schemes help them bypass local VAT registration requirements using a consolidated reporting framework.

The adoption of the OSS schemes under the EU VAT Directive and, later, its implementation into the national framework have drastically reduced the number of mandatory VAT registrations and related compliance challenges for foreign providers of digital services and intra-community distance sales of goods. 

However, the scope of these schemes does not guarantee a complete exemption to non-resident suppliers when dealing with taxable supplies to customers in Lithuania. There are many cases when foreign taxable persons should pursue the local tax registration procedure. 

Electronic Platform and Deemed Supplier Rules 

Lithuania has transposed into its national framework amendments to the EU VAT Directive, which have been implemented as part of the e-commerce reform. These updates have significantly reduced compliance and administrative costs for non-resident taxable persons supplying taxable goods and services to Lithuanian customers.

The new rules introduced the concept of a deemed supplier for digital platform operators. Practically speaking, this shifts VAT responsibilities from the original vendor to the platform operator in the following scenarios:

1. Import of Low-Value Goods: When EU and non-EU established suppliers sell imported low-value goods to EU customers using the facilitation services of digital marketplaces.
2. Sales of Goods Within the EU: When vendors with a tax residency outside the EU sell goods that are in free circulation in the EU to end customers based in a Member State, no matter what is the value of the good. 

When certain conditions are met, the institute of deemed suppliers is triggered. Practically, it means that the tax liability of the original vendor, the one that makes the supply in question, is transferred to the digital platform operator. In this case, the marketplace becomes responsible for fulfilling the VAT duties typically managed by the original merchant.

This multi-sided transaction has two parts:

• Business-to-Business (B2B): The initial transaction from the original vendor to the digital marketplace is an exempted or zero-rated B2B transaction;
• Business-to-Consumer (B2C): The subsequent transaction from the marketplace to the end consumer is categorized as a B2C transaction.

This rule simplifies the reporting processes for both online vendors and digital platforms. For tax authorities, this transfer of tax liability also reduces the challenges when the reports are received, analyzed, or audited if the case shows the necessity. 

Invoice Requirements in Lithuania 

General invoice information:

• Date of invoice issuance;
• Date of the supply of goods or provision of services if different from the date of the invoice issuance;
• Unique invoice numbers issued in sequence.

Seller information:

• Company name;
• Full address (head office);
• Billing address if different from company address;
•  VAT number.

Customer information:

• Name;
• Full address;
• VAT number;
• Delivery address;
• The billing address is different from the delivery address.

Fiscal Information:

• Description and breakdown of the goods or services – quantity, discounts, unit price, excl. VAT;
• Total without VAT;
• VAT amount;
• The VAT rate(s) applied and the breakdown of VAT per rate;
• Invoice Total.

Additional information required in particular cases:

• Exemption reference – guaranteed by precise norm;
• Reverse charge – term if applicable;
• Self-billing – term if applicable;
• Tax Representative information for non-resident business.

Foreign Currency Invoice in Lithuania  

In Lithuania, it’s permissible to issue tax invoices in foreign currencies, but the VAT amount on the invoice must be shown in EUR.

VAT Return in Lithuania 

Domestic returns

Domestic taxpayers and non-established foreign businesses who conduct business under the national VAT Lithuania rules in general submit declarations:

1. Monthly;
2. Quarterly;
3. Annually.

Penalties for late reporting and omitted declarations 

Taxpayers should charge Lithuania VAT on their transactions when the responsibility rises and submit the VAT return. If they do the return fillings after the deadline, they can expect to allocate more funds than they would if they had filled the return within the permitted time frame. 

In the case a legal person makes a late payment, late registration, or erroneous declaration, the following range of penalties could be expected:

• Erroneous declaration (a consequence of the wrongful calculation of the tax payable) – missing tax amount + fine of the value between 20% – 100% of owed tax amount.

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