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Lithuania

Special VAT Scheme for Non-EU Taxable Persons Providing Services to EU Non-Taxable Persons

3 weeks ago
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Tax authorities issued guidance on ”Special schemes for taxation under Lithuanian law related to services provided by entities outside the European Union’s territory”.

  • Non-EU Special VAT Scheme: Taxable persons established outside the EU can opt for a special VAT scheme, allowing them to register in one EU Member State and fulfill VAT obligations across the EU for services provided to non-taxable persons.
  • Registration and Obligations: These taxable persons must register as VAT payers in a chosen EU Member State, submit quarterly VAT declarations, and pay VAT accordingly. The scheme applies to all relevant services provided within the EU, including telecommunications, broadcasting, and electronic services.
  • Accounting and Record Keeping: Participants must maintain detailed accounting records for ten years, which must be accessible electronically to competent authorities upon request. This ensures compliance and accurate VAT declaration.
  • Deregistration Conditions: Participants can be deregistered if they cease providing services within the EU, no longer meet the scheme’s requirements, or continuously violate the scheme’s provisions. Deregistration can be voluntary or initiated by the tax administrator.
  • Payment and Distribution: VAT payments made under this scheme are collected by the tax authority of the registration state and distributed to the respective Member States where the services were consumed, following specific regulatory guidelines.

Source vm.fi

Unofficial translation

CHAPTER XII
SPECIAL VAT SCHEMES

SECTION FIVE. Special scheme for the taxation of services provided by taxable persons established outside the territory of the European Union

Article 1151. Application of the provisions of this section

  1. The provisions of this section apply to services provided to persons who are not taxable persons by a taxable person established outside the territory of the European Union.

Commentary

The provisions of this section apply to services provided to persons who are not taxable persons by a taxable person established outside the EU territory when the place of supply of such services is within the EU territory.

  1. A taxable person established outside the territory of the European Union and providing services within the territory of the European Union to persons in different Member States who are not taxable persons has the right to choose to apply the special scheme for services provided by taxable persons established outside the territory of the European Union (hereinafter referred to as the “non-EU scheme”), to register as a VAT payer in one of the Member States, and to fulfill their tax obligations throughout the territory of the European Union through that Member State. The non-EU scheme applies to all relevant services provided by such a taxable person within the territory of the European Union. When applying the non-EU scheme:
  1. a taxable person established outside the territory of the European Union is considered a taxable person who does not have an establishment or branch within the territory of the European Union;

Commentary

  1. A taxable person established outside the EU territory and providing services within the EU territory to persons in different Member States who are not taxable persons has the right to choose to apply the non-EU scheme.
  2. One of the conditions for a taxable person wishing to use the non-EU scheme is that they must be established outside the EU territory and must not have an establishment or branch within the EU territory. In other words, such a taxable person cannot have a business (place of business) established within the EU territory and cannot have a branch there, or if they have a business established in a Member State’s territory to which Directive 2006/112/EC does not apply, e.g., Canary Islands, Åland Islands, etc. (see Article 6 of Directive 2006/112/EC).
  3. A branch is considered a place of business other than where central administration functions are carried out, which is sufficiently permanent and has an appropriate structure of human and technical resources to acquire and use services/goods or sell them. Holding a VAT number alone does not mean that a taxable person can be considered to have a permanent branch.
  1. The Member State of registration is considered to be the Member State where the taxable person established outside the territory of the European Union decides to register;

Commentary

  1. When applying the non-EU scheme, the Member State of registration is considered to be the Member State where the taxable person has registered to use this scheme and where they declare and pay VAT.
  2. A taxable person wishing to use the non-EU scheme can register in only one Member State, regardless of whether they provide services in several EU Member States. That Member State provides a separate VAT number for the taxable person, which can only be used for declaring services provided under this scheme. Thus, a taxable person cannot decide to use the non-EU scheme only for services provided in some Member States and not use it in others. Therefore, once decided to use this scheme, it will apply to services provided to non-taxable persons in all Member States.
  1. The Member State of consumption is considered to be the Member State where, according to Articles 121, 13, 132 of this Law or corresponding provisions of other Member States’ laws determining the place of supply of services, services are considered supplied.

Commentary

  1. The Member State of consumption is considered to be the Member State where a taxable person provides services to non-taxable persons, i.e., the Member State where, according to VAT law Articles 121, 13, 132 or corresponding provisions of other Member States’ laws, services provided by a taxable person to non-taxable persons are considered supplied and where VAT must be paid according to those Member States’ VAT rates.
  2. The criteria for determining the place of supply of services are specified in VAT law Articles 121, 13, 132. For example, for telecommunications services, radio and television broadcasting services, electronically supplied services, the place of supply for non-taxable persons is determined according to Article 13(15) and Article 132 of VAT law (see comments on these articles for more details).
  3. The non-EU scheme can be used for providing these services:
  • telecommunications services;
  • radio and television broadcasting services;
  • electronically supplied services;
  • services related to immovable property when such property is located within EU territory;
  • catering services provided within EU territory;
  • passenger transport services provided within EU territory;
  • goods transport services provided within EU territory;
  • short-term rental of means of transport when such means are physically handed over to clients within EU territory;
  • other services where, according to rules determining place of supply, such place is within EU territory.
  1. The provisions of this section apply when a taxable person established outside the territory of the European Union chooses to apply the non-EU scheme and register as a VAT payer in Lithuania, regardless of whether they were registered as a VAT payer under Articles 71, 711 or 72 of this Law.

Commentary

  1. The provisions of this section apply when a taxable person established outside EU territory chooses to apply the non-EU scheme in Lithuania, regardless of whether they were registered as a VAT payer (e.g., voluntarily registered as a VAT payer under Article 72 of VAT law) or whether they may have an obligation to register as a VAT payer due to application of Articles 71 or 711 (depending on circumstances) (see comments on Articles 71, 711 or 72 for more details).

Article 115(2). Registration

  1. Taxable persons established outside the territory of the European Union who choose to apply the non-EU scheme and register as VAT payers in Lithuania are registered, deregistered, and assigned a VAT number for applying this scheme according to procedures set by central tax administrator.

Commentary

  1. Taxable persons established outside EU territory who choose to apply the non-EU scheme and register as VAT payers in Lithuania are registered, deregistered, and assigned a VAT number for applying this scheme according to rules set by Order No. VA-64 “On Approval of Rules for Registration as Users of Special Schemes in OSS System, Assignment and Issuance of VAT Numbers, VOES Codes and Intermediary Numbers” issued by Head of State Tax Inspectorate under Ministry of Finance on October 4, 2021 (hereinafter – Registration Rules).
  2. A taxable person choosing to apply non-EU scheme and register as VAT payer in Lithuania must submit an application to become a participant in non-EU scheme. Application can be submitted through authenticated or unauthenticated OSS system area. Application can be submitted by taxable person themselves or their authorized representative. Authenticated OSS area is part of OSS system accessed through e.VMI portal’s authorized electronic services area “My VMI” after identifying user. Unauthenticated OSS area is part accessed through State Tax Inspectorate website (https://www.vmi.lt/oss/Page/Home/) without identifying user. More details on application submission can be found in Chapter III (Registration in Special Non-EU Scheme for Services Provided by Taxable Persons Established Outside EU Territory) of Registration Rules.
  3. Application submitted by taxable person established outside EU choosing non-EU scheme and registering as VAT payer in Lithuania is reviewed and decisions made by Head or authorized representative of Vilnius County State Tax Inspectorate. To ensure compliance with conditions for using non-EU scheme, information provided in registration application is verified (e.g., whether taxable person is not already registered using same scheme in another Member State). After verification, decision is made whether to register or not.
  4. Decision on registration or non-registration as participant in non-EU scheme is made within 5 working days from application confirmation date. Notification about decision is provided in OSS system and decision sent via email address specified in “Contact Details” section of registration application.
  5. If registration application is submitted before actual commencement of activities, non-EU scheme becomes effective from first day of next calendar quarter following quarter when application was submitted. For example, if application submitted on September 15, 2024, effective date will be October 1, 2024. If application submitted on July 15, 2024, effective date will be October 1, 2024.
  6. If registration application submitted after actual commencement of activities:
  • Effective date cannot be earlier than first day of month preceding current month if application submitted before 10th day of current month. For example, if activities started on August 6, 2024, and application submitted on September 4, 2024, effective date will be August 6, 2024.
  • Effective date cannot be earlier than first day of current month if application submitted after 10th day of current month. For example, if activities started on August 6, 2024, but application submitted on September 11, 2024, effective date will be September 1, 2024.
  1. Taxable person registering as participant in non-EU scheme is assigned separate VAT number used only for declaring services under this scheme. According to Registration Rules point 42, participant assigned VOES code consisting prefix “EU”, ISO code (3 digits) for registering Member State (Lithuania), assigned code (5 digits) and control digit. Total length is eleven alphanumeric characters.
  2. Taxable person can be deregistered from non-EU scheme either upon request or by tax administrator’s decision. For deregistration cases see Article 1155 commentary.
  3. Deregistration request submitted through authenticated OSS area selecting “Registration” menu item “Registration Data” then “Deregistration Request”. Reason for deregistration must be specified along with additional questions clarifying reason.
  4. Decision on deregistration must be made within 5 working days from receipt date. More details on deregistration process can be found in Chapter VII (Deregistration from Special Scheme Participants) of Registration Rules.
  5. Information required by tax administrator from taxable person mentioned in paragraph 1 must be provided electronically.

Commentary

  1. Taxable person established outside EU choosing non-EU scheme and registering as VAT payer in Lithuania must provide all information electronically through OSS system.
  2. Tax administrator uses email address specified in OSS registration application for communication (e.g., reminders about missing OSS VAT declaration).

Article 1153. Submission and payment of VAT declaration

  1. Taxable person choosing non-EU scheme in Lithuania must submit VAT declaration for each calendar quarter by last day of first month following quarter end. Data required for filling declaration and submission procedure set by central tax administrator. Declaration must be submitted regardless whether any services were provided during quarter or not. If necessary to correct data in submitted declaration, corrections included in subsequent declaration within three years from original submission date.

Commentary

  1. Taxable person choosing non-EU scheme in Lithuania must submit OSS VAT declaration electronically detailing information necessary for determining special scheme participant’s VAT liability. OSS VAT declaration filling and submission procedure set by Order No. VA-64 “On Approval of Rules for Registration as Users of Special Schemes in OSS System” issued by Head of State Tax Inspectorate under Ministry of Finance on October 4, 2021 (hereinafter – Declaration Rules). OSS VAT declaration includes services provided by non-EU scheme participants to non-taxable persons within EU (including Lithuania).

Example 1 A US company registers in Lithuania to use non-EU scheme providing electronic services to non-taxable persons in Finland, Sweden and Lithuania declares all these services including those provided in Lithuania through OSS system submitting OSS VAT declaration.

Example 2 A Norwegian company registers in Lithuania using non-EU scheme providing installation work related to immovable property in Lithuania and Latvia declares all these services through OSS system submitting OSS VAT declaration.

  1. Non-EU scheme VAT declaration period is calendar quarter with submission deadline being last day of month following quarter end. For example first quarter (January – March) declaration must be submitted by April 30th second quarter (April – June) by July 31st etc.
  2. OSS VAT declarations filled and submitted directly through OSS system selecting “New OSS VAT Declaration” under “VAT Declaration” menu item. Submitted OSS VAT declaration assigned identification number (declaration identifier). This identifier must be specified when making payment.
  3. Amounts declared in OSS VAT declaration must be specified in euros without rounding up or down. If transactions conducted in other currency it must be converted into euros using exchange rate published by European Central Bank on last day of tax period (if no rate published on that day then earliest rate published after period end).
  4. Submitted OSS VAT declaration cannot be corrected but necessary corrections included in subsequent declaration within three years from original submission date specifying corrections under “Previous Declarations Corrections” section. If corrected amounts result in refund it will be automatically refunded without separate request if declared amount exceeds current period’s declared amount. If current period’s declared amount exceeds corrected amounts no refund generated but amounts offset against payable amounts for specific Member State.

OSS VAT declaration must be submitted regardless whether any services were provided during period or not filling only “Identification” section if no services provided.

More details on filling submitting correcting OSS VAT declarations can be found in Chapter II (Filling Submitting Correcting VAT Declarations) of Declaration Rules.

  1. Taxable person choosing non-EU scheme in Lithuania must pay declared VAT amount calculated for all provided services covered by this section no later than submission deadline specified in paragraph 1.

Commentary

  1. Taxable person must pay calculated payable VAT amount based on submitted OSS VAT declaration no later than last day following month into special account held by State Tax Inspectorate under Ministry of Finance.
  2. When making payment participant must specify identification number assigned to OSS VAT declaration therefore payment can only be made after declaration submission. If payable amount not paid within deadline reminder sent after ten days from deadline. If reminder sent by consumption Member State payable amount must be paid directly into that state’s special account specifying identification number assigned to OSS VAT declaration. If multiple consumption states listed but reminder sent only by some payable amounts must be paid into State Tax Inspectorate account.

More details on payment process can be found in Chapter III (Payment) of Declaration Rules.

  1. Paid VAT amounts distributed among relevant Member States according to Regulation (EU) No. 904/2010 provisions detailed distribution procedure set by Minister of Finance.

Commentary

  1. Taxable person choosing non-EU scheme in Lithuania pays payable amounts for services provided to non-taxable persons within EU into Lithuanian tax authority account which then distributes amounts among consumption states according to Regulation (EU) No. 904/2010 provisions detailed distribution procedure set by Order No. 1K-065 “On Approval of Rules for Distribution among Member States” issued by Minister of Finance on March 2nd 2004.

Article 1154. Accounting requirements

Taxable person subject to this section’s provisions must maintain accounting records for services taxed under this section as specified in Article 63c Regulation (EU) No. 282/2011 keeping records for ten calendar years from year when service was provided allowing access electronically upon request from competent authorities during this period.

Commentary

  1. Taxable person established outside EU providing services within EU choosing non-EU scheme registering as user in Lithuania must maintain accounting records for taxed services under this section.
  2. To ensure sufficient detail accounting records must include information specified under Article 63c(1) Council Implementing Regulation (EU) No. 2019/2026 amending Implementing Regulation (EU) No. 282/2011 regarding supplies using electronic interfaces special schemes for taxable persons providing services distance sales certain domestic supplies. Such information also specified under Order No.VA-40 “On Approval Requirements for Maintaining Accounting Records Related Supplies Services Using Electronic Interfaces” issued by Head State Tax Inspectorate on June 29th2021. 3.Accounting records must be kept ten years from year transaction occurred regardless whether participant ceased using non-EU scheme or not. 4.Upon request from registration state or any consumption state tax authorities access must be granted immediately electronically during ten-year period allowing review use records for supervision purposes(e.g., verifying correctness declarations etc.). 5.Failure provide records considered continuous violation rules related non-EU scheme resulting deregistration from scheme participants.

Article1155.Cases when application provisions terminated

Provisions this section cease apply when:

1.Taxable person notifies termination provisioned service supply within EU;

Commentary

1.Taxable person choosing non-EU scheme Lithuania can deregister notifying termination service supply within EU. 2.Participant may voluntarily submit deregistration request if: 2.1.plans cease providing services within EU; 2.2.plans register participant another state; 2.3.plans register directly all states continue providing relevant services paying taxes there.

Deregistration procedure specified Registration Rules.

2.Tax administrator determines cessation economic activity specified this section;

Commentary

1.Participant may be deregistered tax administrator’s initiative if determined cessation economic activity under this section. Tax administrator deregisters participant if determined cessation service supply within EU i.e., cessation economic activity under this scheme. 2.Deregistration effective first day next calendar quarter after notification sent electronically.

3.Taxable person no longer meets requirements applying provisions this section;

Commentary

1.Participant may be deregistered if no longer meets requirements applying provisions e.g., relocates business establishes permanent branch another state registers using same scheme another state etc.

4.Taxable person continuously violates provisions this section as understood under Article58b Regulation(EU)No282/2011.

Commentary

1.If participant continuously violates provisions understood under Article58b Regulation(EU)No282/2011 they removed from participants list.This includes cases where: 1.1.tax administrator sent reminder submit OSS VAT declaration three preceding periods but declaration not submitted each period within ten days reminder; 1.2.tax administrator sent reminder unpaid amount three preceding periods but full amount not paid each period within ten days reminder except remaining unpaid amount each period less than100euros; 1.3.after request provide accounting documents(records)and one month later reminder documents not provided electronically.

2.If participant continuously violates rules related non-EU scheme deregistration effective first day next calendar quarter after notification sent electronically.Participant barred using any special schemes any state two years following period deregistration occurred.

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