Lithuania introduces new VAT registration rules for small businesses (effective May 1, 2025)

As of May 1, 2025, Lithuania has implemented significant changes to VAT rules, impacting small businesses that were previously exempt from VAT registration. These changes, aligned with the European Union's VAT directive, have introduced new registration requirements for services acquired from abroad and services provided within the EU.

What’s changed?
Small businesses that weren’t required to register for VAT due to local sales must now register if they acquire services from abroad (EU or non-EU) or provide services to other EU countries. This includes services that fall under the reverse charge mechanism, such as legal consultations, translation services, advertising, and more.

However, businesses that meet this new registration requirement can still benefit from the Small Business Scheme (SVS), as long as their annual revenue stays below €45, 000. This means they won’t need to charge VAT on goods or services provided within Lithuania.

Who’s affected?
The changes primarily affect businesses engaged in cross-border services. If your business acquires services from abroad or provides services to other EU countries, you now need to register as a VAT payer. However, you won’t face the full VAT obligations of regular VAT payers - you’ll still be able to operate under the SVS and enjoy exemptions, provided you stay under the €45, 000 threshold.
How does the small business scheme (SVS) work?

The SVS continues to allow businesses with annual income below €45, 000 to be exempt from VAT on goods and services within Lithuania. With the recent changes, businesses required to register as VAT payers because of foreign transactions can still benefit from this exemption, as long as they don’t exceed the €45, 000 threshold. The same rule applies to businesses from other EU countries that sell in Lithuania, as long as they stay within the €45, 000 cap in Lithuania and the €100, 000 cap across the EU.

What about VAT invoices?
Businesses registered under the SVS still need to issue VAT invoices for cross-border transactions. While VAT isn’t applied to goods or services sold within Lithuania (if the €45, 000 limit isn’t exceeded), simplified invoices must be issued for transactions with other EU countries. These invoices won’t require submission to the i.SAF system.

However, one downside: businesses under the SVS cannot reclaim VAT on services received from foreign taxable persons under the reverse charge mechanism.

New virtual event rules
Starting in May 2025, the place of supply for virtual events will now depend on the purchaser’s location. For non-taxable persons, the service will be deemed supplied where the purchaser’s business or permanent residence is located. For taxable persons, VAT will be transferred to the buyer’s country, and reverse charge will apply.

What’s next?
These changes have already taken effect. Businesses need to apply the new VAT registration rules as of May 1, 2025, and can still rely on the SVS provisions as long as they meet the relevant thresholds. If you’re trading in other EU countries, make sure your EX VAT number is processed, which can take up to 35 working days.

Opportunities and risks
The new VAT registration rules offer small businesses more flexibility, especially when trading within the EU. However, businesses must carefully track their revenue and comply with new reporting and VAT calculation requirements. Additionally, VAT on expenses can’t be reclaimed under this exemption.

In short, while these changes offer opportunities for small businesses, staying compliant is essential to avoid complications down the road.

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