Foreign Account Tax Compliance Act (FATCA) agreement with the United States (US)
Lithuania signed an intergovernmental agreement (IGA) with the United States under the framework of FATCA. Lithuania and the United States will exchange information about the accounts of foreign (US or Lithuania, respectively) residents held in local financial institutions or local branches of foreign financial institutions.
Implementation of base erosion and profit shifting (BEPS) provisions
The OECD has announced a package of BEPS recommendations aiming to increase transparency of international taxation and prevent tax evasion and aggressive tax planning. Many OECD countries, including Lithuania, have already started shifting certain provisions related to implementation of the BEPS recommendation package into their tax legislation.
Common Reporting Standard (CRS)
Information disclosure requirements related to international transparency movements (i.e. Common Reporting Standard) have been adopted into national law. Based on them, financial market participants are required to provide the tax authorities with information on their clients’ accounts (both individual and legal entities), such as account turnover and year-end balances, interest due and debt obligations, trade in securities, insurance premiums, pension insurance premiums, and other details when certain conditions are met. Moreover, legal entities in Lithuania are required to submit information on services acquired from foreign companies (which partially or entirely are provided in Lithuania), where the value of the transaction or several transactions made with the same foreign entity within a year is EUR 15,000 or higher.
The EU Directive on the mandatory disclosure and exchange of reportable cross-border tax arrangements (referred to as DAC6 or the Directive) has been introduced into Lithuanian law. Under DAC6, starting from 1 January 2021, taxpayers and intermediaries are required to report cross-border reportable arrangements that include at least one of the distinguishing hallmarks defined in the law. Additionally, some of the hallmarks are also subject to the main benefit test. The test determines if obtaining a tax advantage is the main purpose or one of the main purposes of the arrangement.
The reporting duty covers all arrangements since the Directive came into force. Thus, a reporting requirement also applies in respect of reportable arrangements where the first stage was implemented between 25 June 2018 to 31 December 2020, which had to be reported by 28 February 2021 at the latest. From 1 January 2021 onwards, reports must have been submitted within 30 days of an arrangement meeting the reporting criteria.
Failing to comply with DAC6 reporting obligations is subject to a penalty of up to EUR 6,000 and recognition of a taxpayer as unreliable (with all negative implications of this status).