Contributed by AFS Accounting & Financial Services, Lithuania
Recently a law amendment, that was pending for a long time, has been finally adopted. The law amendment removed restrictions on the amount of VAT refundable over time. This provision of law will take effect from 1 January 2021.
Under the current provisions of the VAT law, overpayments of VAT in certain cases can only be reimbursed from the budget for half of the calendar year (i.e. purchase VAT paid in January can only be reimbursed in July). Refunds of VAT input at the end of the tax period currently have certain restrictions and can be refunded only if certain criteria are met (e.g. in case of export transactions subject to 0% VAT may be subject to a refund up to a notional amount of 21% calculated on the value of such exports). The remaining VAT amount can only be refunded after the end of calendar half-year.
From 2021 these restrictions are changed since it will be possible to apply for the refund of any overpayment of VAT incurred during a tax period after the end of that tax period and taxpayers will not have to wait until the end of the calendar half-year. This VAT law amendment will enable reliable taxpayers to recover VAT overpayments more quickly and will enable them to optimize their cash flows.
Unfortunately, if a taxpayer does not meet the minimum reliability requirements (which will be set accordingly), rules will stay the same - VAT overpayment can be refunded no earlier than after the end of calendar half-year.