Declaring income in Lithuania. New requirements for investors.
Lithuanian law on tax administration introduced a new requirement which is significant to investors doing Business in Lithuania. Article 421 of law on tax administration provides that permanent residents of Lithuania (description of resident is given below), are obliged to submit information to Lithuanian Tax Authority once a year regarding the transactions which satisfy all of the below mentioned criteria:
- Resident receives income (including loan) under the contract from natural persons or foreign legal persons, and
- Resident receives income in cash and the sum paid under one or several contracts entered with the same payer exceeds 14481 EUR (50 000 LTL) during one calendar year, and
- Contracts are not notary sealed, and
- Resident doesn‘t have to declare such income under requirements of other tax laws (i.e. mandatory declaration of gifts, property etc.)
Information regarding the income should be submitted to Lithuanian Tax Authority only if it wasn‘t declared in resident‘s annual income declaration. Resident who fails to submit information to Lithuanian Tax Authority by May 1st of the successive year regarding the income received under the abovementioned contracts, such contracts can’t be used to justify the source of one‘s income or means of property acquisition. On late submission of declaration, information is not evaluated if Tax Authority has already commenced resident‘s tax investigation
For the purpose of application of Article 421, permanent resident of Lithuania is held to be:
- Natural person, who has his permanent residence in Lithuania during the tax period, or
- Natural person, who‘s place of personal, social or economical interests during the tax period is Lithuania rather than other country, or
- Natural person, who spends 183 or more days in Lithuania (throughout or with breaks) during the tax period (some exceptions apply), or
- Natural person, who spends 280 or more days in Lithuania during successive tax periods whereas 90 days (throughout or with breaks) are spend during one of the tax periods (some exceptions apply).
The rule enshrined in Article 421 of Lithuanian law on tax administration is applicable since 1st January 2013. Requirement to submit information on income received under contracts is applicable for income received in 2012 and the following years.