VAT changes related to e-services

Lithuania: Starting 1 January 2015 new rules on the Law of VAT come into force in Lithuania, related to the place of electronic service supply.

These rules were transposed from Council Directive 2008/8/EC amending provisions of Directive 2006/112/EC related to the place of service supply. After the New Year, suppliers of telecommunications, broadcasting and other electronic services (Electronic services) e. g. website development, software supply, music, movies, and games must fill in tax returns and pay VAT in the Member State where final consumers, non-taxable persons, are established or reside.

A mini one-stop-shop (MOSS) system was created in order to relieve Electronic service providers’ administrative burden where Electronic services providers are able to fulfill their VAT obligations centrally. The main advantage of this system – registering with MOSS in one Member State enables the supplier of services to fill in tax returns and pay VAT in other Member States through the Member State of registration. Although registration with the MOSS system is not mandatory, in that case the taxpayer has to register as a VAT payer and fill in tax returns/pay VAT in all other Member States where Electronic services are provided separately.

The main risk might arise where a taxpayer determines the place of supply of services incorrectly. This can happen for various reasons, e. g.:

  • incorrect attribution of the supply of services to Electronic or non-Electronic services;

  • incorrect application of the rule on the place of supply of Electronic services;

  • incorrect identification of a non-taxable person’s establishment or residency.

Incorrect application of the place of supply will determine improper implementation of VAT obligations and will result in VAT debts (including fines and late payment interest) in different states. Improper non-taxation with VAT will undoubtedly cause problems when trying to collect VAT from non-taxable persons or trying to refund them with overpaid VAT in case of improper taxation.

Providing services and having doubts on whether these services are treated as Electronic services? Raising questions on the place of service supply? Willing to register with the MOSS system? We are always glad to support you.

Subscribe to the newsletter