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Lithuania

Corporate Tax

While there was much discussion on changes to the Lithuanian taxation system after the recent elections, the New Year has not brought any drastic changes. Nevertheless, some amendments have been made to the Profit Tax Law - with regard to not-for-profit organizations and long-term tangible assets - and the Income Tax Law, with regard to farmers’ income.

An amendment to the Value Added Tax (VAT) Law permits enterprises that deliver long-term services to retain VAT invoices in electronic format and enterprises that provide goods and services which are exempt from VAT to omit certain data normally required on VAT invoices. In addition, some small changes have been introduced into the Profit Tax Law and the Law on Income Tax of Individuals.

On June 15 2004 the Income Tax Law was amended to allow tax relief for persons purchasing computers and internet access for home use, in order to help Lithuania reach EU targets. Amendments have also been made to encourage the founding and development of social enterprises, which have been made exempt from corporate income tax.

As of May 1 2004 companies will not be required to use government-approved invoices and other blank forms in their transactions and accountancy procedures. The cabinet of ministers has also authorized the Ministry of Finance to create rules for the use of Value Added Tax (VAT) invoice forms, which VAT-paying companies must now acquire from their local tax authorities.

A new law aims to improve the tax administration system in Lithuania by adopting some of the best practices of foreign states. The law emphasizes cooperation between taxpayers and the tax administration, and concentrates on the voluntary payment of taxes rather than the function of collecting taxes.

Lithuania's Law on Value Added Tax (VAT) has been amended to harmonize it with EU legislation. The new law will enter into force on May 1 2004, the date of Lithuania's accession to the European Union. Among other things, the law provides new definitions for terms such as ‘goods’, ‘VAT payers’ and ‘VAT commercial invoices’.

Litigation

A recent Supreme Court clarifies that the purpose of restitution in the context of a wrongful agreement is to limit the ability of a party acting with wrongful intent and in bad faith from benefitting from such conduct. Consequently, such a party must fully reimburse its contractual counterparty under an annulled contract, whereas a party that has acted in bad faith should not be reimbursed.

In considering an appeal arising from a dismissed claim for non-pecuniary damages, the Supreme Court has warned against an overly formalistic approach to statutory limitation periods. It referred to the practice of the European Court of Human Rights in stating that limitation rules cannot be applied without considering the circumstances of the legal relationship in question.

A dispute between a construction company and the developer of a residential tourism complex regarding liability for fire damage to the complex has led to two decisions by the Supreme Court. Among other things, the court has clarified the circumstances in which a fire may be said to constitute force majeure.

A recent case centred on the effect of an arbitration clause in a financial lease contract in respect of an earlier purchase and sale contract, which was attached to the financial lease contract as an annex. The Supreme Court held that the dispute should be adjudicated by an arbitration tribunal and that a reference to EU Regulation 44/2001 was unfounded.

A regional court in Lithuania denied its competence to consider a claim related to a bankrupt German company, finding that claims against a company based in another EU member state arising out of bankruptcy must be decided by the courts of the state in which bankruptcy proceedings were initiated. The Supreme Court has now referred three related questions to the European Court of Justice.

The Supreme Court has ruled that contracts for the carriage of passengers are consumer contracts. The court also ruled that a jurisdictional clause in such a contract is invalid if it states that a dispute arising out of the contract shall be adjudicated by the courts of the state in which the carrier is located.

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