LAW ON VALUE ADDED TAX, 5 March 2002 No IX-751 (official translation, excerpts)

CHAPTER ONE. GENERAL PROVISIONS

Article 1. Purpose of the Law

This Law establishes the imposition of the value added tax (hereinafter referred to as VAT) and the obligations of taxable persons, VAT payers and other persons incidental to the payment of the tax.

Article 2. Definitions

For the purposes of this Law:

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5. "Economic activities" shall mean activities (…) seeking to obtain any income (regardless of whether or not the activity is aimed at making a profit). The following activities, however, shall not be considered as economic activities:

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3) holding of shares (interests, member shares) and other securities, even though income (interest, dividends, etc) is obtained therefrom on a continuing basis. The said exception shall not cover sale or any other transfer of shares (interests, member shares) even though income accrued from the holding thereof is obtained due to such sale or transfer;

4) keeping of a bank deposit, bank account or bank card account, even though income is obtained therefrom on a continuing basis;

5) transactions carried out on an occasional basis, i.e. not inter-connected transactions giving no grounds to believe that they are or will be carried out on a continuing basis. Where the transactions which are carried out are not uniform, this fact by itself does not give ground to treat them as being carried out on an occasional basis, where other circumstances give grounds to believe otherwise.

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20. "Non-profit-making legal persons" shall mean legal persons established for other than profit-making purposes, whose generated profit under the legal acts regulating their activities shall not be distributable to their founders and/or members.

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27. "Standard rate of VAT" shall be 18 %.

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CHAPTER IV. SUPPLIES, EXEMPT FROM VAT

Article 20. Goods and Services Related to Health Care

1. Personal and public health care services provided by health care institutions within the meaning of relevant laws, as well as natural persons who have acquired, according to the procedure established by legal acts, the right to provide the above services shall be exempt from VAT.

2. Supplies of goods by the persons specified in paragraph 1 of this Article as well as supplies by the said persons of services other than those referred to in paragraph 1 of this Article shall be exempt from VAT provided all the following conditions are met:

1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article;

2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article.

3) The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article.

4) Therapeutic substances of human origin and human milk, also dental prostheses supplied by dentists and dental technicians shall be exempt from VAT.

5) The supply of transport services for sick or injured persons or other persons in need of medical aid in vehicles specially designed for the purpose shall be exempt.

Article 21. Social Services and Connected Goods

1. Exempt from VAT shall be the supply of social services by children and young people care institutions, by old people's homes and/or by the care/guardianship institutions for the disabled or by other non-profit making legal persons.

2. The supplies of goods and services other than those specified in paragraph 1 of this Article by the persons referred to in paragraph 1 of this Article shall be exempt from VAT provided the following conditions are met:

1) the goods and services are supplied for the users of services specified in paragraph 1 of this Article;

2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article.

3) The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article.

Article 22. Education and Training Services

1. Pre-school education, primary, general, secondary, tertiary and higher education, additional training of children and young people (in art, music, other spheres), studies at higher educational establishments, vocational training shall be exempt from VAT if provided by legal persons who are qualified under laws to provide the above services, also exempted shall be in-service training and retraining, where the services are supplied by non-profit making legal persons who have acquired the right to supply the services according to the procedure prescribed by legal acts.

1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article;

2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article.

3) The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article.

4) Scientific research carried out by the institutions of science and studies referred to the paragraph 1 of this Article, the type whereof is linked to the supplied services of higher education and/or studies shall be exempt from VAT.

5) Tuition given by natural persons shall be exempt from VAT provided their syllabi correspond to the general, secondary and higher education syllabi in the respective subject.

Article 23. Cultural and Sports Services

1. Cultural services supplied by non-profit making legal persons shall be exempt from VAT. For the purposes of this Article, the following shall be considered as cultural services:

1) activities of museums, zoological and botanical gardens, circus;

2) various cultural events (theatre performances, choreographic performances, cultural events for children and young people, art exhibitions and exhibitions of folk art, etc.), film production (including ancillary activities - dubbing, subtitling, etc.), film rent and demonstration;

3) services in the field of bibliography and information supplied by libraries.

1) the goods and services are supplied to the users of services referred to in paragraph 1 of this Article;

2) the supply of the above goods and services is linked to the supply of services referred to in paragraph 1 of this Article.

3. The Government of the Republic of Lithuania shall have the right to lay down the conditions of and impose restrictions on the application of provisions of paragraph 2 of this Article.

4. Supply of services linked to physical education and sport by non-profit making legal persons shall be exempt from VAT. For the purposes of this Law, the following services shall be considered linked to physical education and sport:

1) granting of the right to participate in a cultural or sport event. The provisions of the subparagraph shall not be applicable to the sale of tickets to physical education or sporting events;

2) supply of services to the participants in physical education or sporting events directly linked to their participation, i.e. the granting of the right to use special premises, territories and/or inventory for physical education and sport, the services of training of participants and other similar services. The services relating to provision of accommodation, catering and transport shall not be attributable to the above-mentioned services.

Article 24. Activities of Non-profit Making Legal Persons, Not Specified in Articles 20, 21, 22 and 23

1. Services supplied to their member by political parties, trade unions and other non-profit making legal persons set up and operating on the membership basis shall be exempt from VAT provided that the services conform to the aims of the legal person determined in the bylaws/regulations thereof and no consideration is obtained for the above services in addition to membership fees. The provisions of this paragraph shall be applied to the activities of non-profit making legal persons only where the payment of members' fee may be linked to the specific service supplied for the benefit of a specific member.

2. Supply of services by religious communities, societies and centres for the benefit of their members if the services conform to the aims provided in the cannons, statutes and other norms of the said persons and, save for donations, no additional consideration is received for the services, shall be exempt from VAT. The provisions of this paragraph shall be applied to the activities of the above-mentioned legal persons only where the donations may be linked to a specific service supplied for the benefit of a specific member.

3. Supply of services by a non-profit making legal person whose regulations (bylaws, statutes, cannons and other norms) provide for the activities indicated in Articles 20, 21 or 22 of this Law shall be exempt from VAT if the non-profit making legal person supplies another person with staff, required for the supply of certain services indicated in Articles 20, 21 or 22 of this Law.

4. Supplies of goods and/or services by non-profit making legal persons during charitable and sponsorship events organised by the said persons (including sale of tickets to the events) shall be exempt from VAT if the balance of the collected funds remaining after covering the expenses related to the organisation of the event are to be allotted only for charity and/or community service engaged in by the above persons. The provisions shall be applicable to not more than 12 charitable and sponsorship events organised by a specific legal person in the course of a calendar year. If more than 12 events are organised during a calendar year, each subsequent event and related supplies of goods and/or services shall be subject to VAT according to the procedure laid down in this Law. For the purposes of this Law, a cultural event (theatrical, musical, choreographic, etc.), a fair or a similar event shall be considered a charitable or sponsorship event provided it is indicated during the preparatory stage of the event (on the tickets, posters or otherwise) that after covering the organisational expenses, the total balance of the funds collected during the event will be allotted for charity and/or community service performed by the legal person organising the event. For the purposes of this Law, charity and community service shall be interpreted in accordance with the definition of the terms in the Law of the Republic of Lithuania on Charity and Sponsorship.

5. If it is established that due to the application of provisions of paragraph 4 of this Article the goods and/or services supplied by non-profit making legal persons have gained unjustified competitive advantage over the goods and/or services supplied by other taxable persons which are or may be competitive, the Government of the Republic of Lithuania or an institution authorised by it shall have the right to establish limitations of the value and types of goods and services supplied at charitable and sponsorship events, to which the provisions of paragraph 4 of this Article are applicable.

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Article 26. Radio and Television

1. Supply to the public of public information services by non-profit making legal persons - radio and/or television broadcasters shall be exempt from VAT.

2. The provisions of paragraph 1 of this Article shall not be applicable to the sale of broadcasts, advertising services and other commercial activities.

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CHAPTER V. IMPORTS, EXEMPT FROM VAT

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Article 40. Special Cases of Exemptions on Importation

1. The following shall be exempt from import VAT:

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10) goods for charitable institutions;

2. Concrete conditions, procedure and limitations of application of provisions of paragraph 1 of this Article shall be established by the Government of the Republic of Lithuania or an institution authorised by it.

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CHAPTER VI. CASES OF APPLICATION OF ZERO-RATE OF VAT TO SUPPLIES OF GOODS AND SERVICES

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Article 49. Goods and Services Purchased with Certain Funds

1. Zero-rate of VAT shall be charged on purchases of goods and/or services that are paid for with the technical assistance funds, also funds received under the international agreement of the Republic of Lithuania where the funds received under the agreement may not be used for the payment of VAT.

2. The procedure for implementing the provisions of paragraph 1 of this Article shall be established by the Government of the Republic of Lithuania or an institution authorised by it.

Article 50. Goods Supplied to Recipients of Sponsorship

1. Zero-rate of VAT shall be applicable to the supply of goods to the recipients of sponsorship registered in the Republic of Lithuania, who are specified in the Law of the Republic of Lithuania on Charity and Sponsorship, if the goods are exported as sponsorship by the above-mentioned recipients of sponsorship to organisations functioning abroad which themselves are entitled to receive sponsorship donations under the Law of the Republic of Lithuania on Charity and Sponsorship.

2. The provisions referred to in paragraph 1 of this Article shall be implemented by refunding to the recipients of sponsorship registered in the Republic of Lithuania the amount of the VAT which they paid for the goods purchased and exported abroad. The procedure of application of the above provision shall be established by the Government of the Republic of Lithuania or an institution authorised by it.

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