Lithuania: Draft Bill for VAT Registration requirements for Related Entities
The Lithuanian Parliament issued Bill No. XIVP-1915, which amends Article 71 of the VAT Law regarding the VAT registration of connected legal entities that are managed by the same person alone or jointly with other related individuals.
An anti-abuse (splitting) clause in paragraph 7 of Article 71 states that all legal entities that are managed by the same person or persons, and whose total income exceeds the threshold for VAT registration, must register regardless of whether any one of them exceeds the threshold.
The European Commission issued Lithuania an infringement notice under the anti-abuse regulation in July 2021. The Commission determined that Lithuania failed to comply to the VAT Directive and did not properly implement VAT regulations meant for small businesses.
To address this issue, draft law XIVP-1915 revises the anti-abuse rule by adding a clause that says the rule doesn’t apply if the related entities can prove that:
- None of their legal entities and/or individual members of their legal entities are the same person;
- The engagement of their business activities is not of the same nature, no conflict of interest or act for one another’s advantage.
The Bill will go into effect on January 1, 2023.
source: vmi.lt
