REPUBLIC OF LITHUANIA                                     
                                                                                
                               LAW                                              
                               ON                                               
                         VALUE-ADDED TAX                                        
                                                                                
                      I. The Object of Tax                                      
                                                                                
     Article  1.  The  object  of  value-added  tax  (hereinafter               
referred to  as VAT)  shall be the value added to the product and               
services at  each stage of production, distribution and sales, as               
well as imported goods.                                                         
                                                                                
     Article 2.  A good,  as the  object of  tax,  shall  include               
things, coins  meant for  numismatics, real  property  (with  the               
exception of land), and energy of all types.                                    
                                                                                
     Article 3. Services, as the object of the tax, shall include               
services of   all   types  and  other  activities  provided for a               
consideration of money, excluding those provided by the employees               
to their employers under employment contract.                                   
                                                                                
      Article 4. The following goods and services shall be exempt               
from VAT:                                                                       
     1) medical and dental services, medicines, medical goods and               
medical equipment;                                                              
     2) social  services rendered  by day  care centers and homes               
for invalids and the elderly;                                                   
     3) educational, scientific and cultural services rendered by               
institutions of  education, science  and studies, as well as non-               
profit cultural institutions;                                                   
     4) services of route passenger transport;                                  
     5) postal  services (with  the exception  of transmission of               
parcels and  telecommunication services, as well as postal stamps               
and envelopes meant for collecting);                                            
      6) insurance   and  banking   services  (excluding  storage               
facility services) and turnover of securities;                                  
       7)  coffins, wreaths,  temporary tombstones,  and  funeral               
services;                                                                       
     8) publishing,   printing  and  circulation  of  newspapers,               
magazines and books;                                                            
     9) services  and works  for which  taxes are  paid into  the               
budget;                                                                         
     10) goods  and services  rendered to  foreign diplomatic and               
consular missions and international organisations;                              
     11) state-owned property subject to privatization;                         
     12) works and services paid for with donated funds;                        
     13) rent  for houses  and apartments  being leased  for more               
than 2 months;                                                                  
     14) land rent; and                                                         
     15) articles of traditional art.                                           
                                                                                
                        II. Payers of VAT                                       
                                                                                
     Article 5.  VAT shall be calculated and paid into the budget               
by: legal  persons, enterprises  without the  rights of  a  legal               
person, sub-units  of foreign  economic entities operating in the               
Republic of Lithuania, and natural persons.                                     
                                                                                
     Article 6.  Persons whose receipt from the sale of goods and               
services (not  including the  sale of long-term assets which were               
used for more than one year) are, excluding VAT, not in excess of               
5,000 litas, shall not calculate and pay VAT into the budget. VAT               
paid by  these persons  for acquired   goods or obtained services               
shall not be repaid.                                                            
                                                                                
      Persons whose income is specified in part 1 of this Article               
shall, if  said income  is between  5,000 and  15,000  litas  per               
year, be entitled, if they wish, to be payers of this tax.                      
     If the  annual receipts  of these  persons from  the sale of               
goods and  services are  in excess of 15,000 litas, they shall be               
required to  calculate and  pay VAT  into the budget according to               
the general  procedure, starting from the month when the receipts               
exceeded the designated amount.                                                 
                                                                                
     Article 7. Persons who under the provisions of Article 6 are               
payers of  VAT must  register with  the State Tax Inspectorate as               
payers of VAT.                                                                  
     Newly established  companies, institutions and organisations               
which expect  that their  sales proceeds  shall  exceed  the  sum               
specified  in  Article  6,  must  register  with  the  State  Tax               
Inspectorate at  least 10  days prior  to the commencement of the               
activities.                                                                     
                                                                                
     Article 8.  Persons who are not payers of VAT shall not have               
the right  to charge this tax to their customers. If said persons               
do charge this tax, they must transfer it into the budget.                      
                                                                                
           III. Taxable Value and Time for Computation                          
                                                                                
     Article 9.  The taxable  value of  goods and  services shall               
consist of:                                                                     
     1) the  production cost  of goods and the rendering price of               
services;                                                                       
     2) expenses for packaging, transportation, insurance and the               
like;                                                                           
     3) payments for the installation of equipment;                             
     4) payments for mediation, commission and auction charges;                 
     5) various  discounts and  additional charges not entered in               
the invoice;                                                                    
     6) expenses for the purchase or sale of goods on credit;                   
     7) various  taxes related  with the  sale of  goods (customs               
duties, excise duties), excluding VAT; and                                      
     8) service  expenses or  other  sums  not  included  in  the               
production cost  of goods  or rendering  of services,  which  the               
customer pays to the seller of goods or services.                               
                                                                                
     Article 10.  The taxable  price of  goods imported  into the               
Republic of  Lithuania shall  be determined according to the same               
procedure as  for assessing customs duty (customs duty shall also               
be included therein).                                                           
                                                                                
     Article 11. While exchanging goods (or services) the taxable               
price shall be the price of exchanged goods or services.                        
                                                                                
     Article 12. VAT on goods and services shall be computed:                   
     when the  seller (supplier of services) issues an invoice or               
other document   to the  customer for  the  goods  sold (services               
rendered);                                                                      
     upon paying  the money  at the  cash desk,  when  goods  (or               
services) are paid for in cash and an invoice is not issued;                    
     upon presenting  the goods  declaration when  said goods are               
imported.                                                                       
                                                                                
                          IV. Tax Rates                                         
                                                                                
     Article 13.  VAT shall be charged at a rate of:                            
     1) 0% -  for exported goods and services; or                               
     2) 18%  - for  all goods  and services with the exception of               
those referred  to in Articles 4 and 38 of this Law and in item 1               
hereof.                                                                         
                                                                                
     Article 14.  VAT shall  be computed  by applying  an 18% tax               
rate when  charging it  on the  taxable value  of goods  sold  or               
imported (or  services rendered),  or  a  15.25%  tax  rate  when               
charging it on the value of goods and services including VAT.                   
                                                                                
                    V. Computation of the Tax                                   
                                                                                
     Article 15. Upon expiration of the tax period, the payers of               
VAT must  transfer into  the budget  the difference  between  the               
computed sum  of VAT for goods sold and services rendered and the               
deductible sum of VAT.                                                          
                                                                                
     Article 16. The deductible  sum of VAT shall include   the                 
sum of VAT recorded in in the accounts for goods delivered by the               
suppliers and  services   rendered and  the sum  of VAT  paid for               
imported goods,  with the exception of cases specified in Article               
19 of this Law.                                                                 
                                                                                
     Article 17.  If during  the tax period the deductible sum of               
VAT was in excess  of the  computed sum of  VAT for goods sold or               
services rendered,  the difference  shall be  deducted  from  the               
computed sum of VAT for goods sold and services rendered in later               
tax periods.  The sum  of Vat  recorded in  in the  accounts  for               
acquired long-term  assets meant for production shall be deducted               
from the  sum of  VAT assessed  by the  owner for  goods sold and               
services rendered  in that  tax period in which these assets were               
used for  the production  of goods  subject to  VAT or exportable               
goods or  for rendering  services subject  to  VAT,  taking  into               
account the  provisions of Article 20, irrespective of the sum of               
VAT levied  on the  goods  sold.  If  the  purpose  of  long-term               
property for  production is later changed and therefore the right               
to deduct  VAT is  terminated, the deductible sum of VAT shall be               
adjusted according to the procedure established by the Government               
of the Republic of Lithuania, although no more than 10 years must               
elapse from  the deduction of VAT from real property, and 5 years               
from other long-term property.                                                  
     The sum  of VAT  recorded in  in the  accounts for  exported               
goods shall  be deducted  while computing VAT for that tax period               
during which  these goods  were exported, irrespective of the sum               
that was computed for the goods sold or services rendered.                      
                                                                                
     Article 18.  It shall  be permitted  to deduct  sums of  VAT               
which must  be paid  by other  taxpayers only  if such  sums  are               
indicated separately   in  the   invoice. Sums   of VAT  paid for               
imported goods may be deducted only if there is a special mark of               
the customs  office in  the import  documentation evidencing  the               
payment of tax.                                                                 
     The payer  of VAT may calculate and deduct the tax according               
to the procedure established by the Government of the Republic of               
Lithuania for goods acquired in retail trade enterprises, but not               
in excess of 2,000 litas per year.                                              
     Upon selling purchased second-hand items, special shops may,               
according to  the procedure  established by the Government of the               
Republic of  Lithuania, calculate and deduct VAT according to the               
price of the purchased items.                                                   
                                                                                
     Article 19.   VAT  recorded in  the accounts  for goods  and               
services shall  not be  deducted from  the sum of VAT due for the               
goods sold  and services rendered, if such goods or services have               
been used:                                                                      
     1) for  production of  goods or  rendering of services which               
are not  subject to  VAT (specified  in Articles 4 and 38 of this               
Law);                                                                           
     2) for catering of the employees of the taxpayer;                          
     3) for payment in kind for work done by the employees of the               
taxpayer;                                                                       
     4) for  the maintenance  of day care centers, rehabilitation               
centres, accommodations,  holiday homes, or summer camps used for               
the needs of the employees of the taxpayer;                                     
     5) for gifts, representation, and various entertainment;                   
     6) for the exploitation of passenger vehicles with a seating               
capacity  not  exceeding  10  passengers  excluding  the  driver,               
provided that  said exploitation is not related with the carriage               
of passengers for a fee and is not chargeable with VAT.                         
                                                                                
     Article 20.  If the  taxpayer produces both taxable and non-               
taxable (VAT)  goods (renders services), recorded in the accounts               
sum of  VAT payable  to suppliers during the tax period for goods               
and services  (except those  specified in  Article 19)  shall  be               
deducted in  proportion to  the value  of taxable and non-taxable               
goods (the  value of  the supplied  services)  delivered  to  the               
purchasers within that period.                                                  
     The Government  of the Republic of Lithuania may establish a               
different procedure  for deducting  VAT in  cases provided for in               
this Article.                                                                   
                                                                                
     Article 21. Paid VAT shall be repaid to:                                   
     1) foreign nationals who have acquired more goods at special               
shops than  are permitted  by the  Government of  the Republic of               
Lithuania to  bring into  the Republic of Lithuania duty free and               
who took them out of the Republic of Lithuania;                                 
     2) officers  of foreign diplomatic and consular missions and               
members of their families (on a parity basis) as well as officers               
of international  organisations and members of their families for               
goods  acquired   for  personal   consumption,  or  for  services               
obtained.                                                                       
                                                                                
               VI. Taxation of Imports and Exports                              
                                                                                
     Article 22.  VAT shall  be levied  on imports  at  the  rate               
established in item 2 of Article 13, which shall be paid into the               
budget according  to the procedure established for the payment of               
customs duty.                                                                   
                                                                                
     Article 23.  The following  imported goods  shall be  exempt               
from VAT:                                                                       
     1) goods imported as charity or humanitarian relief;                       
     2)  goods  paid  for  with  the  funds  of  foreign  states,               
international organisations and foundations;                                    
     3) goods brought in by natural persons, if their number does               
not exceed  the designated  number  of  goods  permitted  by  the               
Government of  the Republic  of Lithuania  to be imported free of               
duty.                                                                           
                                                                                
     Article 24. The value of imported goods shall be assessed by               
taking into  consideration the  provisions of  Article 10 of this               
Law and the Law on Customs Tariffs of the Republic of Lithuania.                
     The Government of the Republic of Lithuania may postpone the               
payment of VAT for imported long-term production assets, with the               
exception of means of transportation.                                           
                                                                                
     Article 25.  Zero-rating provided  for in Article 13 of this               
Law shall apply to the following goods:                                         
     1) exported goods;                                                         
     2) goods,  works and  services  relative  to  the  carriage,               
loading, unloading  of exported goods, and the transit of foreign               
cargo through the Republic of Lithuania;                                        
     3) provision,  completion, repair,  exploitation and rent of               
aircraft  and   ships  which   carry  goods   and  passengers  on               
international routes;                                                           
                                                                                
                                                                                
     4) goods brought into customs warehouses and shops which are               
located  outside   the  customs  territory  of  the  Republic  of               
Lithuania;                                                                      
     5) services  performed  by  the  taxpayers  --  enterprises,               
institutions and  organisations --  beyond the  boundaries of the               
Republic of Lithuania.                                                          
                                                                                
                VII.  Value- Added Tax Accounting                               
                                                                                
     Article 26.  Customers must  be  issued  invoices  of  goods               
dispatched and  services  rendered  to  them.  The  invoice  must               
contain mandatory  requisites provided  for in  Article 10 of the               
Law on the Principles of Accounting and the code of the payer.                  
                                                                                
     Article 27.  If after  the issue of an invoice the prices of               
goods or  their amount  have been  changed, a new invoice must be               
issued.                                                                         
                                                                                
     Article 28.  If the  issued invoices  do not comply with the               
requirements of  Article 26  and 27  of this  Law,  sums  of  VAT               
payable to  suppliers according  to these  invoices shall  not be               
deducted when calculating the sum of VAT payable into the budget.               
                                                                                
     Article 29. If the payer has calculated and included VAT for               
goods and  services in the invoice which pursuant to this Law are               
outside the  scope of  VAT, said payer must pay this VAT into the               
budget according to the established procedure.                                  
                                                                                
     Article 30. The payers of VAT must keep a separate record of               
purchase and  sale of  taxable goods  and services,  according to               
which VAT shall be assessed.                                                    
                                                                                
       VIII. Procedure for Payment of VAT into the Budget                       
                                                                                
     Article 31. The tax period of VAT shall be a calendar month.               
The Government  of the  Republic of  Lithuania may  establish the               
period of and procedure for advance payment of VAT.                             
                                                                                
     Article 32.  Upon the expiration of the due date of payment,               
each taxpayer  must, before  the 15th day of the next month, file               
with the State Tax Inspectorate a declaration of the computed and               
deductible sum of VAT.                                                          
                                                                                
     Article 33.  If a  taxpayer fails to file a declaration when               
due, the State Tax Inspectorate shall increase the sum of VAT due               
during that  tax period  by 1%, which shall be recovered into the               
budget.                                                                         
                                                                                
     Article 34. If a taxpayer fails to file a declaration within               
5 days  after the  expiration of  the due  date,  the  State  Tax               
Inspectorate shall, without suit, recover into the budget the sum               
of  tax  showed  on  the  declaration  for  the  previous  month,               
increased temporarily by 10% until the declaration is filed.                    
                                                                                
     Article 35.  The computed  sum of  VAT must be paid into the               
budget within  10 days from the date prescribed by  Article 32 of               
this Law  for filing  the declaration. Upon failure to pay VAT in               
due time,  the unpaid tax shall  bear interest  at  the  rate  of               
0.5%   for  each  day thereafter, including  the day on which the               
tax was  paid into  the budget. The unpaid VAT shall be recovered               
for the current year and 5 preceding years.                                     
                                                                                
            IX. Control of Tax and Economic Sanctions                           
                                                                                
     Article 36.  If during the examination it is determined that               
the taxpayer showed in the declaration an amount of tax less than               
the correct  sum of VAT or has deducted too much of and therefore               
paid too  little into  the budget,  said taxpayer  must  pay  the               
assessed deficiency  and the  penalty in  an amount  equal to the               
deficiency into  the budget  within 5  days after the date of the               
determination of default.                                                       
     The State  Tax Inspectorates shall recover sums of taxes and               
penalties  from   enterprises,  institutions   and  organisations               
without suit and from natural persons in court.                                 
                                                                                
                       X. Final Provisions                                      
                                                                                
     Article 37. This Law shall come into effect on 1 May, 1994.                
                                                                                
     Article 38. Upon the consent of the taxpayers, the following               
goods and  services shall,  until January 1, 1995, not be charged               
with VAT::                                                                      
     1) gas,  water, electricity, thermal power, sewage and other               
public utilities supplied to residential houses;                                
     2) home-produced food stuffs sold to the consumers and trade               
companies  which  were  not  subject  to  excise  tax  until  the               
introduction of VAT.                                                            
     The Government  of the  Republic of  Lithuania has therefore               
established a  provisional procedure  for trade companies for the               
calculation and payment of VAT which shall be valid until January               
1, 1995.                                                                        
     Upon the  consent of  VAT  payers,  organizations  supplying               
services, and  construction and  design  of  residential  houses,               
including  the   construction   of   engineering   networks   and               
territorial management, shall be exempt from VAT until January 1,               
1996.                                                                           
                                                                                
     Article 39.  The Government  of the  Republic  of  Lithuania               
shall, by 1 March 1994, establish:                                              
     1) lists  of goods  and services  for which VAT shall not be               
calculated;                                                                     
     2) the procedure for the registration of the payers of VAT;                
     3) the  procedure for  adjustment  of  sums  deductible  for               
acquired long-term  production assets  if they are used for other               
purposes;                                                                       
     4) the  procedure for  deducting VAT for goods acquired from               
retail trade and second-hand goods purchased by special shops;                  
     5) the  procedure for repayment of VAT -                                   
     for foreign   nationals,  for  goods bought at special shops               
and exported from the Republic of Lithuania;                                    
     for officers of foreign diplomatic and consular missions and               
their family members, for goods acquired for personal consumption               
and for services obtained;                                                      
     6) the  procedure for  the transition  from turnover  tax to               
VAT.                                                                            
                                                                                
     Article 40.  The Government of the Republic of Lithuania, on               
the basis of this Law, shall, by 1 March 1994, issue instructions               
for the calculation and payment of VAT.                                         
                                                                                
     I promulgate  this Law  passed by the Seimas of the Republic               
of Lithuania.                                                                   
                                                                                
                                        ALGIRDAS BRAZAUSKAS                     
                                             President                          
                                             of the Republic                    
                                                                                
Vilnius                                                                         
22 December 1993                                                                
No.I-345                                                                        
(As amended 7 April 1994)                                                       
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