Tax

Managing tax risks continues to be one of the most difficult challenges for investors around the world. Our team helps clients to minimize these risks as well as to optimize their tax positions.  We have the necessary expertise to address the nuances of legal issues that often arise in complex transactions and can have significant tax impact. In addition to advising on both direct and indirect tax matters, our tax experts are ready to represent our clients at all levels of sophisticated tax disputes.
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Gintaras Balčius

Consultant

Head of Tax practice
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Antanas Butrimas

Senior Associate

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Ingrida Kemežienė

Expert

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Rūta Švedarauskienė

Associate Consultant

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Edita Masiulė

Associate

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Dr. Robertas Čiočys

Partner

Head of M&A, Private Equity and Corporate Establishment Team
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Ramūnas Petravičius

Partner

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Laura Razulevičiūtė

Junior Associate

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What's new in the field
OECD published updated guidance on tax treaties and the impact of the COVID-19 pandemic
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Key projects in the field

OECD published updated guidance on tax treaties and the impact of the COVID-19 pandemic
2021-02-01
 
On 21 January 2021, the Organisation for Economic Cooperation and Development (OECD) issued Updated guidance on tax treaties and the impact of the COVID-19 pandemic (Guidance) (available here)

The Guidance addresses the interpretation and application of the provisions of tax treaties during the COVID-19 pandemic when public health measures (including restrictions of mobility) are in effect. The Guidance focuses on:
 
  • tax residence of companies and individuals;
  • creation of permanent establishments;
  • taxation of income from employment.
Although the Guidance is not binding, the OECD notes that the certainty to taxpayers is necessary and encourages tax authorities to issue national consistent guidance that would be applicable during this exceptional period. Seeking to share the best practice, the OECD presents examples of guidance already issued by individual tax authorities.
 
According to the updated Guidance:
 
  • The exceptional and temporary change of the location where employees exercise their employment as a result of public health measures imposed or recommended by the government, (i. e. working from home) should not create new permanent establishment (PE) for the employer.
  • An employee’s or agent’s activity in a jurisdiction should not be regarded as “habitual” if they have exceptionally begun working at home in that jurisdiction as a public health measure imposed or recommended by at least one of the governments of the jurisdictions involved. As a result, such activity would not constitute a dependent agent PE.
  • Periods where operations of construction site are prevented as a public health measure imposed or recommended by the government constitute a type of interruption that should be excluded from the calculation of time thresholds for construction site PE.
  • A temporary change in location of board members or other senior executives is an extraordinary and temporary situation due to the COVID-19 pandemic and such change of location should not trigger a change in tax residence status.
  • An exercise of employment in other jurisdiction due to a public health measure of one of the governments involved should not by itself affect the individual’s residence status for tax treaty purposes. If an employee is prevented from traveling because of COVID-19 public health measures and remains in other jurisdiction, COVID-related days of presence may be ignored in considering the 183-day limit. As a result, such employment related income should not be taxed in the jurisdiction where the work was actually performed (taxation shall occur only in the state of tax residency).
The State Tax Inspectorate under the Ministry of Finance (STI) has not yet provided an official opinion regarding the interpretation and application of the provisions of tax treaties during the COVID-19 pandemic. Considering, that personal income tax return and corporate income tax return should be submitted until the middle of the year, an official opinion of the STI would be helpful.
If the STI does not publish guidance regarding COVID-19 impact on tax treaties, no exceptions regarding (i) tax residence of companies and individuals, (ii) creation of permanent establishments and (iii) taxation of income from employment could be applicable.
Taxation of immovable property in 2021. Overview
2021-01-28
 
Immovable property and its taxation always trigger various discussions. What tax novelties will be introduced in 2021 in Lithuania?

The State Tax Inspectorate under the Ministry of Finance, STI (Valstybinė mokesčių inspekcija), in its information notice of 14 January 2021 "On the establishment of taxable values of immovable property subject to mass evaluation" (here) noted that the tax on immovable property (IP) for 2021 will have to be calculated based on the new taxable values. It was established by the state enterprise Centre of Registers. The STI has also commented on the tax-exempt amount of IP applied to natural persons. The STI stated that married natural persons who acquired, built, or are acquiring IP during their marriage would be able to use a larger tax-exempt amount of IP jointly only if the ownership right to such IP has been registered as common joint ownership with the Register of Immovable Property. If the common joint ownership is not registered with the Register of Immovable Property, the STI will presume that the IP is owned only by one of the spouses and will calculate the tax only to that one natural person. I.e., the value of the IP will not be divided for the spouses into equal shares.

Meanwhile, the provisions of the Civil Code (the CC) stipulate otherwise. Paragraph 1 of Article 3.87 of the CC establishes that under the legal regime, the property acquired by the spouses after the commencement of their marriage shall be their common joint ownership. Furthermore, paragraph 2 of Article 3.88 of the CC presumes that property is the common joint ownership of the spouses unless it is established that it is the individual property of one of them.

Consequently, we have the STI's presumption on recognizing the ownership right only to one of the spouses, which does not comply with the legal regime of the spouses' property under the CC.

A possibility to register a legal fact of the common joint ownership of the spouses exists, undoubtedly. It can be done electronically, however, it is a paid service and this possibility can be used by persons who have e-signature. Persons who do not have the opportunity to sign electronically would need to go directly to the state enterprise Centre of Registers.

Registration of the legal fact on the spouses' common joint ownership would certainly facilitate administration of the IP tax for the STI because it would become easier to identify the tax-exempt amount of IP applicable to the particular person. Nevertheless, failure to register the indicated legal fact may not be a sufficient basis for not applying the division of the value of IP immediately for the taxpayers (spouses) in equal shares as provided under the Law on Immovable Property Tax.
 
We helped global healthcare company Fresenius Kabi Group to transfer its pharmaceutical distribution business to Lithuania.
We advised Fresenius Kabi Polska and its Baltic subsidiary on transfer of its distribution operations from Poland to Lithuania. Fresenius Kabi Baltics went on to become the developer of distribution businesses in Lithuania, Latvia and Estonia. Our team assisted the client in structuring the transaction, including advice on tax issues.