Lithuania - Amendments to the VAT Law

The Ministry of Finance has prepared a draft Bill, an amendment to the VAT Act. The proposed Bill, registered by the Lithuanian Parliament just last week, consists of more than a few important provisions that look to Europeanize domestic VAT provisions regarding subjects such as VAT registration thresholds, small Business Schemes, and place of supply rules for cultural events.

Applicability
If the Parliament adopts the draft bill in its presented form, the amendments will become effective on January 1, 2025.

Scope of Changes

VAT Registration Threshold
The Government's proposal to increase the VAT registration threshold shows its willingness to make the business environment for small businesses less administrative and with lower expenditures for mandatory compliance. The VAT registration threshold for small business owners in the country is currently set at EUR 45, 000.

The draft bill proposes to change this and raise the registration threshold to EUR 55, 000. This significant increase will undoubtedly reduce the number of mandatorily registered taxpayers. With the proposed increase in the registration threshold, Lithuania, like many other EU countries, is looking to make a business environment for small business owners less challenging by lifting the mandatory registration ceiling.

Small Bussiness Scheme
The proposal contains important provisions to implement a new regulatory framework for domestic and non-resident economic operators looking to leverage a Small Business Scheme(SBS) and remain VAT-neutral. The drafted bill contains:
Foreign SMEs whose place of business is in another Member State can adhere to the Lithuanian SBS if the conditions are met. This is possible even if this economic operator has an establishment in Lithuania besides the one where its place of business is.

The level thresholds for SBS for businesses within the country and the community will be introduced.

Place of Supply Rules

The amendment to the VAT Act contains awaited definitions that will, elaborated in this manner, achieve the following:
❖ Clarify the concept and scope of cultural services and the provision of services related to accession, auxiliary services attached to the principal one, and services of event organizers.
❖ Introduce new rules concerning the place of supply rules:
1. The place of supply will be in the country if the event is held in the country
2. Remote streaming of such events will also be seen as being performed in the country from a tax perspective if the principal event takes place in the country and the purchaser of the service is a domestic resident.

Conclusion
The Government has presented an important draft Law to the VAT Act before the Parliament. The force behind the proposal mainly can be divided into two separate reasons: one is to make a small business owner business operations smoother, and compliance costs less burdensome, and the other is to accommodate the novelties approved at the EU level concerning place of supply rules for cultural events, Small Business Schemes, and few different points.

Corporate Tax, Tax advisory, VAT