Lithuania: Changes to corporate income tax return increase control by tax authorities.
In 2014 not only has the Law on Corporate Income Tax (CIT) changed but also enactment of the Order of the Head of the State Tax Inspectorate No VA-76 of 12 September 2014 has set in place new rules for CIT reporting (applicable to CIT returns for taxable periods beginning in 2014).
So, what are the main changes awaiting taxpayers?
First of all, the structure of tax returns has fundamentally changed by applying the concept of personal income tax returns, i.e. most of the information has been moved from the main form to separate annexes. Another change – extension of reportable data – certain former data fields have been split into separate fields, new data fields have been created for certain non-tax-deductible expenses or non-taxable income that had previously been reported as “other” income/expenses without the possibility to identify the amount(s).
However, in our opinion, the most important change to the new CIT return is provision of information to the Tax authorities on persons from whom taxpayers transfer their operating losses or losses from the transfer of securities or financial derivatives. Up to now, taxpayers had to provide information on losses transferred to them but without identifying the persons from whom tax losses were transferred.
The question arises: how will these changes affect taxpayers?
The tax authorities believe that changing CIT returns will improve filing procedures and the functionality of returns. We are of the opinion that the changes will enable the tax authorities to evaluate in greater detail the types of income and expenses affecting CIT calculations, to easily track changes and respond swiftly in case of suspicious discrepancies.
The new reporting rules will increase the tax authorities’ control, allowing them with no additional effort to identify taxpayers that have transferred and taken over tax losses, to check the amounts of losses reported and to roughly evaluate whether those tax losses could have been transferred. In that light, taxpayers should closely evaluate the possibilities to transfer or accept tax losses and to ensure that information on losses reported matches in both taxpayers’ CIT returns.
Not entirely sure whether the new CIT return is filled in correctly? Uncertain whether you can transfer or accept tax losses? Feel free to contact us and we will be happy to help in resolving any questions you may have.