Lithuania: an intelligent tax system

Lithuania: an intelligent tax system

Building a modern tax administration

The Value Added Tax was introduced in Lithuania in 1994 and, as a Member State of the EU, its VAT registrations, returns and compliance are aligned with the EU VAT Directives. Its tax system is administered by the State Tax Inspectorate (STI), under the authority of the Ministry of Finance.

Ever since electronic tax processes became a trend, countries in the European Union have been changing the way they submit their invoices. In Lithuania, since October 2016 invoices have been submitted via the i.MAS system, an IT-based tax administration system.

How i.MAS works

i.MAS is a Web Service channel that incorporates eight subsystems, but only three have been implemented. These are associated with three different areas: invoicing and VAT returns (i.SAF), transport documents (i.VAZ), and tax audit files (i.SAF-T).

i.SAF is used to report invoice data, where all taxable people report sales and purchase invoices on a monthly basis. Currently, it is able to: upload data files in XML format and submit VAT invoices; record the electronic invoices issued and received in a certain tax period; view, fill and export the data to your computer. This way, the data is standardised and submitted electronically to a tax administrator.

The other subsystem is the i.VAZ, which is a tool for transport data reporting. It is where the dispatch of goods within Lithuania’s territory must be reported, prior to the dispatch. These XML documents are used to declare shipping operations in real-time, all related to the domestic movement of goods.

Finally, i.SAF-T is used for accounting transactions by resident businesses. It prepares Standard Audit Files for Tax (SAF-T), but they are not mandatory, companies only prepare them upon request to give to the Tax Authority, Customs or other public authority. SAF-T was developed in 2005 by the OECD to support global tax authorities and companies, creating a consistent exchange of tax transactions data from country to country. It has already been adopted by Portugal, France, Austria, Luxembourg and Poland. In Lithuania, the period of implementation for this system is the following:

  • January 2017 for businesses with revenue over EUR 8 million per year
  • January 2018 for businesses with revenue over EUR 750 thousand per year
  • January 2019 for businesses with revenue over EUR 45 thousand per year
  • January 2020 for all businesses

This is applicable for all VAT taxpayers registered in the country, even if they are from foreign countries. These submissions happen once a month and should be done before the 20th of the following month. As mentioned before, all the electronic invoices are in XML format and under the European standards for tax files (SAF-T).

Main benefits of this system

In the i.MAS system there is no limit regarding the amount of invoices that can be submitted. The Lithuanian government can use this information to compare the data, better control VAT returns, and make advanced predictions. Also, it can contribute to improvements in the quality and reliability of invoices, as well as decrease the scale of grey economy and tax gaps.

Having all tax data automated and declared electronically made the process of collecting and analysing data more efficient. It also saves time for other tax administration functions and supports tax audits.

a new way to process saf-t files

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