We are pleased to introduce this tax newsletter offering a brief overview of the most relevant regulatory developments and exciting award news.
We hope you find this overview useful. Please do not hesitate to get in touch if you would like to follow up with us on anything.
EU Mandatory Disclosure Regime for cross-border transactions
In line with the EU directive aimed at preventing aggressive cross-border tax planning agreements, Estonia, Latvia and Lithuania, like the other EU Member States, will have to adopt the necessary legislation by the end of 2019. In Lithuania amendments to the Law on Tax Administration have already been drafted, while in Estonia and Latvia draft amendments to legislation are still under way.
In Lithuania both natural persons and corporate entities will have to notify the tax authority about their tax planning agreements and about transactions where the main or one of the main benefits is tax-related. This obligation applies to persons or entities participating, organising, proposing, consulting or otherwise involved in such transactions. The specific criteria defining a transaction that has to be reported to the tax authorities are still to be specified by the State Tax Inspectorate.
Although national legislation comes into force on 1 July 2020 onwards, the Lithuanian State Tax Inspectorate will require information about all notifiable cross-border agreements in which the first steps were taken from 25 June 2018 to 30 June 2020. Although the content and procedure of the report are yet to be clarified and defined, it is clear that businesses will inevitably face a heavier administrative burden.
New VAT rules in Lithuania
In 2020 new VAT rules, so called “quick fixes”, for companies engaged in trade in the EU will enter into force in Lithuania. As a result, the VAT rules on chain goods supply and on-call off-stock supply will change. Additionally, new ways to prove the validity of 0% VAT application will be introduced. However, they will be very limited due to lack of clarity and practicality. Therefore it is important for businesses to assess the real possibilities of making use of these new rules.
Business-friendly tax outlook in Estonia
Estonia has good news for foreign investors: despite initial fears of tax upsets, the new government in Estonia has agreed on tax peace, only looking to reduce excise duties if possible. There are no plans to raise or create any new taxes or change the Estonian tax system.
Borderless tax solutions bring one more major tax award to Sorainen
In 2018 our clients entrusted us with resolving their most complex tax issues. This did not go unnoticed by the International Tax Review (ITR), the leading publication for tax professionals. On 16 May 2019 ITR presented Sorainen with the Baltic States Tax Firm of the Year award for the eighth time.
Notable projects on which we worked in 2018 include:
- Advising the Estonian, Latvian and Lithuanian governments in a pan-Baltic project aimed at introducing covered bonds and securitisation legislation. The purpose of the legislation is to ensure greater opportunities for financial institutions to attract funds and finance business, thus contributing to long-term economic growth in the region.
- Constitutional Court victory in Latvia over Solidarity tax. We prepared more than 30 constitutional claims challenging the constitutionality of the solidarity tax, which was introduced in Latvia in 2016.
- Assisting leading provider of liquified natural gas as marine fuel in the Baltics. We advised the client on VAT, customs and excise-related questions in Estonia and Lithuania and helped to identify optimal solutions to enable smooth operations.