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 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.  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 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 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 the 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.                                                                          
     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 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 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) 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.                
                                                                                
     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 (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 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 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           reduced by:                             
     employees                                                                  
                                                                                
     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.                                               
                                                                                
     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                                                                        
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