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Applying for VAT in Lithuania and for a financial institution or virtual currency exchange

Most financial institutions in Lithuania do not have a VAT number. So what should you do? Follow their example or take your own approach?

Why do companies apply for VAT, especially in the EU? Historically, it has been a tool to return the value-added tax within the same country if you have purchased any goods or services for the need to conduct your own business activity. Ever since the EU took its economic agenda to ease up and generate a great deal of trade between the members in the union and thus avoid double taxation, that also included an agreement clause for the VAT. When a VAT registered EU member sells or buys any goods or services from another VAT Registered EU member, then the active VAT is 0% (with certain provisions and exclusions). Hence, considering that the financial institution, with a target market in the EU, will also have significant costs in the same region, especially for marketing, maintenance, various supporting activities, etc. thus to save on such costs of 21% is a great deal and thus an argument why to apply for VAT.

However, most financial institutions do not. And it is for the following reason. VAT is intended for the local market, and why the VMI (Lithuanian tax authority) put their attention to the requirements to fulfill:

  1. Local list of customers and business partners that the company regularly transacts with;

  2. Local employees that are paid the social tax;

  3. Local office in the address that is not used by other companies (as a virtual office);

  4. The company exceeds EUR 45k revenue per 12 months basis;

And then, should you have the VAT, that would mean that the European private and corporate customer(s) who don't have a VAT registered in the EU, for any legal services provided (e.g. account opening) by the financial institution would be charged their fees + 21% (standard VAT rate).

Therefore, the decision is always on the company and it all depends on the individual cases, but mostly it is better to remain without the VAT registration. For more information, be sure to connect with ALT Accounting team.

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