Official translation                    
                                                                                
                      Republic of Lithuania                                     
                                                                                
                     Law on Value-Added Tax                                     
                                                                                
                    22 December 1993 No.I-345                                   
                                                                                
                    (As amended 20 July 1994)                                   
                                                                                
                             Vilnius                                            
                                                                                
                                                                                
                      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 the disabled 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) state-owned property subject to privatization;                         
     11) works and services paid for with donated funds;                        
     12) rent  for houses  and apartments  being leased  for more               
than 2 months;                                                                  
     13) land rent; and                                                         
     14) articles of traditional art.                                           
     15) veterinary  services, veterinary  medicines and  medical               
goods.                                                                          
     16) services  provided by travel agencies to tourists coming               
into the Republic of Lithuania (Amended 20 July 1994).                          
                                                                                
                        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  proceeds from the sale of goods               
and services   not  including the sale of capital goods  used for               
more than  one year   are,  excluding VAT, not in excess of 5,000               
litas per  year 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 specified  in paragraph 1 hereof,   is               
between 5,000  and 15,000  litas per  year, shall be entitled, if               
they wish,  to be  the payers of this tax. Said persons shall pay               
VAT into  the budget  ( VAT  shall be  repaid   to them  from the               
budget)    beginning     from    the    month    following    the               
registration.(Amended 7 April 1994)                                             
                                                                                
     If the  annual proceeds  of these  persons from  the sale of               
goods and  services are  in excess of 50,000 litas, they shall be               
required to  calculate and pay  VAT into  the budget according to               
the general  procedure, starting from the month when the proceeds               
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, 23 and 38 and item 7 of Article               
39 of this Law (Amended 20 July 1994).                                          
                                                                                
     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.                   
     When computing VAT, 15.25% rate shall be applied:                          
     1) when  goods are sold (services rendered) for cash without               
issuing an invoice;                                                             
     2) when  the amount  of prices  of  goods  (services)    are               
established by state government institutions;                                   
     3) when  in the invoice VAT is included in the price (is not               
provided separately)  of taxable goods (services);                              
     4) in  other cases  established by  the  Government  of  the               
Republic of Lithuania (Amended 20 July 1994).                                   
                                                                                
                                                                                
                    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 be the sum of               
VAT recorded    in  the  accounts  for  goods  delivered  by  the               
suppliers and  services rendered  and the  sum of  VAT  paid  for               
imported goods  which shall be used for  the production and  sale               
of goods subject to VAT and for the rendering of services subject               
to VAT.  This sum  shall be  determined taking  into account  the               
provisions of Articles 18, 19 and 20.                                           
                                                                                
     Article 17.  If during  the tax period the deductible sum of               
VAT is  in excess  of the   sum of VAT for goods sold or services               
rendered, the  difference, at  the request of the taxpayer, shall               
be refunded  by the  State Tax Inspectorate not later than within               
the period established in Article 35.                                           
     If such  difference occurs  during the  three tax periods in               
succession, the  State  Tax  inspectorate  may  not  refund  said               
difference.                                                                     
     If the   sum  of VAT deducted during the calendar year is in               
excess of the sum of VAT for goods sold or services rendered, the               
State Tax  Inspectorate  shall,  upon  examination,  recover  the               
groundlessly refunded  sum and may cancel the registration of the               
taxpayer.                                                                       
     The provisions  of paragraphs 2 and 3 hereof shall not apply               
if the difference occurred due to :                                             
     1) export of goods and service;                                            
     2) acquisition of capital goods;                                           
                                                                                
     3)  formation   of  inventory  of  seasonal  goods  and  raw               
materials and  other materials  for  the  production  of  taxable               
goods.                                                                          
     4) utilization   of  services and   material  values for the               
production of taxable goods if the production is seasonal or long               
lasting. (Amended 20 July 1994)                                                 
     If the  purpose of   capital  goods  is  later  changed  and               
therefore the  right to  deduct   VAT is terminated, the deducted               
sum  of   VAT  shall  be  adjusted  according  to  the  procedure               
established by  the Government of the Republic of Lithuania. This               
provision shall  apply only  in the  case when   no more than  10               
years have   elapsed    from  the  deduction  of  VAT  from  real               
property, and 5 years from other capital goods.                                 
                                                                                
     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 computed 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               
                                                                                
free of  charge    and  who took  them out  of  the  Republic  of               
Lithuania;                                                                      
     2)  foreign diplomatic and consular missions on parity basis               
for goods  acquired and  services obtained,   as well as officers               
thereof and  members of  their families  for   goods acquired for               
personal consumption;                                                           
     3)  international   organisations  for  goods  acquired  and               
services obtained,  as well  as officers thereof and their family               
members for  goods acquired  for personal consumption, if in  the               
agreements concluded  by said organisations with  the Republic of               
Lithuania there  is a  stipulation that   VAT or other comparable               
tax  shall not be charged or that such taxes shall be refunded;                 
     4) according  to the procedure established by the Government               
of the Republic of Lithuania  for goods and services paid for  by               
foreign states,  international organisations  and foundations  as               
well as  with the  funds of   loans  granted to the state. If the               
term for  the payment  of VAT  on imports has not expired and the               
tax has not been paid, it may be revoked (Amended 20 July 1994).                
                                                                                
               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 and on the terms established by               
the Government of the Republic of Lithuania.                                    
                                                                                
     Article 23.  The following  imported goods  shall be  exempt               
from VAT:                                                                       
     1) electrical energy;                                                      
     2) goods received  as charity or humanitarian relief;                      
     3) temporarily  imported goods  that are  under the Customs'               
control;                                                                        
     4) goods  controlled by the Customs imported temporarily for               
processing  according   to  the   checklist  established  by  the               
Government of  the Republic  of Lithuania.  If said  goods  or  a               
portion thereof  or products made from them are not exported from               
the Republic  of Lithuania   by  the   date  established  by  the               
Government of  the Republic  of Lithuania, VAT shall be levied on               
them  according to the general procedure;                                       
     5) temporarily  exported goods controlled by the Customs, as               
well as goods exported for processing or products made from them,               
provided they  are reimported  within the time period established               
by the Government of the Republic of Lithuania;                                 
     6) 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;                                                                           
     7) goods  returned for  warranty repair  or  exported  goods               
which have been rejected;                                                       
     8) goods  enumerated in  Article 4,   part  2 of  item 1  of               
Article 38  and in  parts 5  and 6  , and  item 7  of Article  39               
(Amended 20 July 1994).                                                         
                                                                                
     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.                
                                                                                
     Article 25.  Zero-rating provided  for in Article 13 of this               
Law shall apply to the  following goods:                                        
     1) exported  goods including   goods that had been  imported               
temporarily for  processing and   products  made from them, which               
have been re-exported; (Amended 20 July 1994)                                   
     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.                                                          
     6)  goods   and  services  paid  for  by  foreign  entities,               
associated with  the production  of goods meant for export or re-               
export (Amended 20 July 1994).                                                  
                                                                                
                                                                                
                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  by               
the expiration  of the  due date  of the  payment of VAT into the               
Budget (Amended  20 July 1994), 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 (refunded  from the  budget) within  10 days from the date               
                                                                                
prescribed by  Article 32 of this Law for filing the declaration.               
Upon failure to pay VAT when due, the unpaid                                    
(or not  refunded) tax    shall bear interest at the rate of 0.3%               
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  as of      1               
August, 1994.  VAT shall  be refunded  to foreign  diplomatic and               
consular  missions,   as  well   as  international  organisations               
according to  the procedure provided for in Article 21 hereof for               
goods and  services acquired  after 1  May 1994.(Amended  20 July               
1994)                                                                           
                                                                                
     VAT paid  pursuant to item 1 of part 2 and part 5 of Article               
38 for  the period  between 1 May 1994 and 1 August 1994 shall be               
refunded to the taxpayers from the Budget (Amended 20 July 1994).               
     Article 38.  Until 1 January 1996 a temporary 9% rate of VAT               
( and  in cases  specified in part 2 of Article 14 -- 8.26% rate)               
shall  be   charged  on   mixed  fodder  produced  by  Lithuanian               
producers, agricultural  produce and  fish, with the exception of               
canivorous soft  fur animals,  nutrias and their fur, food stuffs               
made from  these products,  which   were not  subject to  general               
excise tax until the introduction of VAT. The list of these goods               
shall be  established  by  the  Government  of  the  Republic  of               
Lithuania.                                                                      
                                                                                
The following  goods and  services shall, until 1 January,  1996,               
not be charged with VAT::                                                       
     1) nuclear  fuel, coal,  liquefied  and  natural  gas,  oil,               
furnace fuel, and mazut;                                                        
     2)   water, electricity,  thermal power,  sewage  and  other               
public utilities supplied to residential houses;                                
     Upon the  consent of  VAT  payers,  organisations  supplying               
services,   housing and  design works, including the construction               
of engineering  networks  and  territorial  management  shall  be               
exempt from VAT until 1 January  1996.                                          
     Until 1  January   1996 VAT shall not be charged on services               
rendered by  agricultural companies  and agricultural cooperative               
to their members.                                                               
     Until 1  January   1996 VAT shall not be charged on imported               
tractors, engines,  other agricultural  machinery and spare parts               
thereof, which  are sold on local market.                                       
     Until 1  January ,  2000 VAT  shall not  be charged  on  raw               
materials used  for the  production of  medicines, as well as raw               
materials, materials and completing parts used for the production               
of basic  medical goods and medical equipment. Lists of these raw               
materials, materials and completing parts, as well as enterprises               
that  are   entitled  to  receive  them  without  VAT,  shall  be               
established by  the  Government  of  the  Republic  of  Lithuania               
(Amended 20 July 1994).                                                         
                                                                                
                                                                                
                                                                                
     Article 38-1.  Manufacturing  enterprises  hiring  employees               
with the  limited capacity  for work shall reduce  the difference               
between computed  in 1994  and payable into the budget sum of VAT               
for goods  sold and services rendered,  and the deductible sum of               
VAT  in the following manner:                                                   
                                                                                
The ratio of  persons with                                                      
limited capacity for work           The sum of VAT shall be                     
to  the general number of employees          reduced by:                        
                                                                                
more than 50 %                               100%                               
40-50%                                       90%                                
30-40%                                       80%                                
20-30%                                       70%                                
                                                                                
     The computed difference payable into the budget by a private               
enterprise of  public organizations of the invalid persons  shall               
be reduced by 100%.                                                             
                                                                                
     For the  purpose of  this relief the following persons shall               
be considered as of limited capacity for work:                                  
     invalid persons of Group 1,2 and 3;                                        
     persons with  II and  III degree  of deafness  (according to               
Neumann scale)                                                                  
     convicted persons working at correctional institutions;                    
     patients working  in the labour therapy workshops of medical               
institutions.                                                                   
                                                                                
     The procedure  for  attributing enterprises to manufacturing               
enterprises shall   be  established  by  the  Government  of  the               
Republic of Lithuania.                                                          
                                                                                
     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 capital goods 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  and the beginning of the 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 excise tax to VAT.                
     7) the  amount of  imported sugar  and the   raw material of               
sugar for which VAT shall not be computed  in 1994.                             
                                                                                
     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.                                                                         
                                                                                
     Article 41.  For the payment of the computed sum of VAT into               
the budget  (repayment from  the budget)  the Government  of  the               
Republic of  Lithuania may  establish for  1994 other  terms than               
those  provided   for  in  Article  35,  and    for  agricultural               
enterprises and  farmers it  may establish   for the period up to               
January, 1997  other terms  for  the  payment  of  VAT  for  sold               
agricultural produce.                                                           
(Amended 20 July 1994)                                                          
     I promulgate  this Law  passed by the Seimas of the Republic               
of Lithuania.                                                                   
                                                                                
                                                                                
                                                                                
President of the                                                                
Republic of Lithuania              Algirdas Brazauskas