COVID-19: What Businesses Should Know About Tax Compliance?

In response to the national and global situation relating to COVID-19, the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania has issued a statement regarding the facilitation of the tax obligations to businesses.

The following measures are established in response to COVID-19:

Deferral/distribution of tax payment

In the situation of temporary financial difficulties, taxpayers may apply to the tax administrator for the deferral or distribution of the debt (tax underpayment):

• Submission of an application suspends recovery of the payable amounts;
• A tax credit agreement (the “TCA”) is signed with the taxpayer and taxes are paid under the deferred (distributed) individual schedule set by the agreement;
• As published by the STI, no interest will be calculated (usually, interest under the TCA used to be charged in accordance with the rates approved by the Ministry of Finance).

How can a tax credit agreement be signed? The application for signing the TSA and other documents required for the examination of the application (the documents must specify the debt amount, preferred payment schedule as well as the reasons as to why currently it is not possible to cover the tax amount in full) are accepted by electronic means via “My STI” service on the STI portal. By taking the decision on signing the TCA, the STI individually examines each taxpayer’s application and situation based on the submitted information and following the approved criteria. The decision is made within 30 days from the date when the application and other documents were submitted. In case a positive decision is made regarding the distribution or deferral of the payment, the respective entity must sign the TCA within 10 business days.

Currently, the proposal is in place to enable signing the TCA also regarding the instalments of the Personal Income Tax (the “PIT”) maturing on 16 March 2020. This is particularly relevant to the employers due to the PIT deductible from the salary. Until the respective legislation is adopted permitting the tax credit agreement on the PIT (maturing on 16 March 2020), the STI will not enforce recovery of the said tax. The relevant draft amendments to the legislative acts were registered on 16/03/2020.

Deferral of the term to submit advance corporate income tax returns until 30 March

Following the existing legislative acts, businesses must submit the advance corporate income tax returns by 16 March. As mentioned above, the tax administrator carries forward the term to submit advance corporate income tax returns for Q1 2020 to the date of 30 March 2020.

In this context it is also relevant that:

• Businesses are entitled to change the payment method of the advance corporate income taxonce in a year: to change the method of the calculation of the advance corporate income tax based on the previous year’s results into the method based on the expected results. To change the tax calculation method, a business entity should specify that by submitting the advance corporate income tax return. If a business entity changes the payment method of the advance corporate income tax based on the expected results, following the decreased corporate income, the payable advance corporate income tax amount decreases accordingly or may become zero;
• The Corporate Income Law provides for the procedure allowing all business entities who incur a tax loss for the tax period to carry forward the amount of such losses shall to the following tax periods and to reduce the taxable income calculated in such periods by the respective tax loss amounts.

Waiver of the obligation to file tax returns

In cases where taxpayers do not perform any activity on a temporary basis (do not make or perform any transactions; do not make any settlements with business entities; do not receive income, except for the interest on the balance of the taxpayers’ bank accounts), such taxpayers bay be temporarily be released from the obligation to file tax returns and/or other documents specified by the legislation.

Annual PIT return

The STI has extended the term to file the individual income returns and the PIT for the year 2019 until 1 July 2020.

On 16/03/2020, the Government approved the package of economic incentive and aid measures for businesses suffering COVID-19 outbreak

The package provides for the following tax measures related to COVID-19:

• to issue tax credits by deferring or distributing taxes under an agreed schedule, without charging any interest;
• to suspend actions related to the recovery of tax underpayment recovery following the reasonability rule;
• to exempt taxpayers from the payment of penalties and default interest;
• to provide the possibility to defer or distribute the payment of the deducted PIT debt;
• to recommend the municipalities to exempt taxpayers from the payment of commercial real estate tax and land tax.

Some of the provided tax measures (the TCA, a possibility to defer or distribute payment of the deducted PIT debt) are specified in the statement published by the STI. The STI has not published any information on the implementation of other tax measures so far.

In case your business entity needs any tax advice, please consult our experts.

Artūras Bakšys, Tax Partner, Head of Tax Practices

Edvard Gasperskij, Associate Partner, Tax Adviser

Agnė Pimpytė, Associate, Tax Law Expert

Jolita Čėsnė, Associate, Tax Law Expert

Akvilė Pauliūtė, Junior Associate