Lithuanian Tax Newsflash - November 2011
Jei norite Lietuvos mokesčių naujienlaiškį skaityti lietuvių kalba, spauskite : Eesti keeles
Lietuvos mokesčių naujienlaiškis apžvelgia naujai priimtas taisykles dėl įpareigojančių sprendimų bei įpareigojančių kainodaros susitarimų.

  Tomas Kontautas
   
 
Tomas Kontautas
Partner
tomas.kontautas@sorainen.com
   
  Saulė Dagilytė
   
 
Saulė Dagilytė
Senior Associate
saule.dagilyte@sorainen.com
   
  Rokas Daugėla
   
 
Rokas Daugėla
Associate
rokas.daugela@sorainen.com
   
Dear client and cooperation partner,

We would like to inform you that on 19 October 2011 the State Tax Inspectorate adopted rules concerning binding rulings on application of Lithuanian taxation legislation provisions to future transactions (Binding rulings).

A binding ruling is an obligation of the tax administration under factual circumstances described in the application for a ruling to apply Lithuanian taxation provisions established in the ruling for the entire period of validity of the ruling.

On 21 October 2011 the State Tax Inspectorate also adopted rules concerning binding rulings on application of transfer pricing principles to future transactions (Advance pricing agreements).

An advance pricing agreement is an agreement between the taxpayer and the tax administration regarding transfer pricing principles related to a particular future associated transaction: transfer pricing method, principles of comparability with non-associated transactions, critical assumptions for applying transfer pricing policy and other questions related to compatibility with the arm’s length principle of a future associated transaction.

Rules on binding rulings and advance pricing agreements establish the following instructions for submitting and reviewing applications and adopting a decision:

  • An application for a binding ruling or advance pricing agreement may be submitted only by a Lithuanian taxable person or its representative. Application is free of charge.
  • An application for a binding ruling or advance pricing agreement may be submitted only in respect of a future transaction or an operation to be carried out after the application is submitted (if the contract concerning the operation is concluded before submitting the application).
  • An application for a binding ruling must contain a description of all factual circumstances related to the contract or transaction and an explanation of Lithuanian taxation rules that should, according to the taxpayer, apply to the particular future transaction.
  • An application for an advance pricing agreement must include information about the parties involved in the future associated transaction, their relations and activities carried out by each of the parties, their business strategy as well as information about the object of the transaction, functions performed, risks assumed and assets used by the parties. Based on this information the taxpayer in its application must describe the transfer pricing method, provide comparability analysis, critical assumptions and other information demonstrating compliance with the arm’s length principle.
  • The tax administration must adopt a decision on a binding ruling or an advance pricing agreement in 60 calendar days (for applications submitted before 1 July 2013 – 90 calendar days). The deadline for adopting a decision on an advance pricing agreement may be prolonged for 60 calendar days. The tax administration may adopt a decision to approve or deny applicability of Lithuanian taxation legislation provisions or transfer pricing principles to the future transaction in question.
  • The decision is mandatory for the tax authorities of all levels throughout the entire period of the transaction but not longer than five calendar years after the year in which the decision was adopted. The decision is not mandatory for the taxpayer.
  • The tax administration is not obliged to follow the ruling if the taxpayer did not provide all necessary factual information or details in the application or if the information provided by the taxpayer is not correct.

Until now taxpayers had a possibility to submit written inquiries to the tax administration but the reply to such inquiry was not binding and obligatory to the tax administration. Binding rulings and advance pricing agreements are expected to provide taxpayers an opportunity to manage tax risks related to their activities in Lithuania more effectively and to improve the attractiveness of the Lithuanian tax system and investment climate for foreign investors.

As of 1 January 2012 when rules on binding rulings and advance pricing agreements come into force we would recommend considering your future transactions and possibility to obtain advance consent of the tax administration for your assessment of tax implications of the future transaction.

 
ESTONIA
Kaido Loor
send e-mail
Pärnu mnt 15
10141 Tallinn
phone +372 6 400 900
fax +372 6 400 901
estonia@sorainen.com
 
LATVIA
Jānis Taukačs
send e-mail
Kr. Valdemāra iela 21
LV-1010 Riga
phone +371 67 365 000
fax +371 67 365 001
latvia@sorainen.com
 
LITHUANIA
Tomas Kontautas
send e-mail
Jogailos g 4
LT-01116 Vilnius
phone +370 52 685 040
fax +370 52 685 041
lithuania@sorainen.com
 
BELARUS
Kiryl Apanasevich
send e-mail
ul Nemiga 40
220004 Minsk
phone +375 17 306 2102
fax +375 17 306 2079
belarus@sorainen.com

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