Clarification on VAT Rules in Cross-Border Trade, Lithuania

The Lithuanian Supreme Administrative Court (LVAT) recently clarified an important VAT rule under Article 12(2)(2) of the Lithuanian VAT Law. The case focused on proof of VAT payment when goods are transported to another EU country.

Background
A taxpayer bought fuel in Germany between 2014 and 2016. The fuel was sent to Poland and later sold to companies in other EU nations. The taxpayer argued that Polish companies had already paid VAT in Poland. Therefore, the exception in Article 12(2)(2) of the VAT Law should apply.

The Issue
The Lithuanian State Tax Inspectorate (STI) disagreed. It claimed the taxpayer failed to prove VAT had been paid in Poland. Without evidence, the STI held the taxpayer responsible for VAT payment in Lithuania.

Court’s Findings
The court ruled that under Article 12(2)(2), it’s the taxpayer’s duty to prove VAT was paid in the country where the goods were delivered—in this case, Poland.

The taxpayer suggested that Lithuanian authorities should check with Polish authorities. However, the court rejected this argument.

The court emphasized that proof of VAT compliance is the taxpayer’s responsibility. Simply saying VAT was paid by someone else down the line isn’t enough.

The Decision
The exception under Article 12(2)(2) can only apply if the taxpayer provides clear proof that VAT was paid in the destination country. In this case, the taxpayer couldn’t show that VAT was declared in Poland. Without this proof, the STI’s decision to impose VAT in Lithuania was upheld.

Key Takeaway
When goods move across borders, businesses must prove they’ve met VAT rules in the destination country. If you can’t provide evidence, you may still owe VAT in your home country—even if later buyers in the supply chain paid VAT.

Case Reference: Administrative Case No. eA-123-602/2024.

Accounting, Tax advisory