The Ministry of Finance filed a draft change to the VAT Law, which the Lithuanian government adopted. The amendment recommends to the Seimas that products and associated services acquired by assistance groups for victims of war and catastrophe in Ukraine be subject to a 0% VAT rate. Previously beneficiaries had to pay VAT on funds raised, while purchasing goods or services.
Beneficiaries, support groups, and other people dealing with the consequences of catastrophes will be able to buy food, clothes, medications, bedding, and other commodities from providers (businesses, other legal entities) with a 0% VAT rate.
Once a Commission decision, permitting Lithuania to exclude such products from VAT, is issued this VAT relief might be applied to commodities meant for catastrophe victims. Furthermore, assistance organizations will be excluded from VAT when purchasing certain commodities from other European Union Member States, as well as any associated services (such as freight transport) that are supplied free of charge to victims of war in Ukraine.
According to the Deputy Minister, the contributed funds would allow assistance organizations to purchase more goods or services.
Because the use of VAT exemptions to goods and services is only permitted in exceptional circumstances, there are no statistical or other data that can be used to forecast the need for assistance and potential budget losses. Furthermore, the adjustments are intended to take effect on the date mentioned in the European Commission’s decision.
The administration suggests to implement changes to the statute with special urgency.
We would like to remind you that during the indefinite armed war in Ukraine, tax benefits are also applied when a business offers assistance to anyone with the status of a beneficiary of Lithuanian assistance who utilize such assistance to aid the people of Ukraine.
When it comes to value-added tax (VAT), where businesses give non-profit organizations support in exchange for the goods they sell (food, clothing, etc.) and this support is given in the event of a national emergency, VAT does not have to be calculated, and these businesses do not lose their right to deduct VAT on goods. Furthermore, in the event of an emergency, housing and other services offered to non-profit organizations under a grant agreement are not classified as private consumption and are thus not subject to VAT in principle.