Reverse VAT charge is also applicable for construction in Lithuania
Following the amendments of the Law on VAT, reverse VAT charge shall also apply for construction works, even if customer and contractor are both established in Lithuania. The amendments came into force July 1, 2015.
In other words, the construction works will be subject to the VAT reverse charge mechanism, under which VAT for construction works shall be calculated and paid to the state budget by the customer, not the contractor. This rule applies for all customers which are considered taxable persons as well as VAT payers.
Obligations of the contractor
The contractor shall issue an invoice for construction services and include output VAT (21%), however the contractor shall not include the output VAT in declaration. The customer shall pay the sum of the services to the contractor excluding the sum of VAT.
If the construction services are purchased by a taxable person which is not VAT payer, or VAT payer which non-taxable person, VAT shall be declared and paid by the contractor.
If construction services are purchased by natural person which is registered as VAT payer but has purchased construction services for personal interests, VAT shall be declared and paid by the contractor.
Reverse VAT charge scheme is also not applied when the customer is a foreign taxable person which is not registered as VAT payer in Lithuania.
Obligations of the customer
The customer shall include output VAT, indicated by the contractor, in his declaration. VAT included in the declaration is deductible. Deduction shall be made following general regulations which apply to VAT deduction in Lithuania. If construction services purchased by the customer are 100% intended for activity which is taxed with VAT, no VAT will be actually paid to the state budget.
Definition of construction works
Reverse VAT charge scheme is only applied to construction works as they are defined in the Law on Construction. Meaning that construction works are considered all of the works which are performed when constructing a building or demolishing a building: construction of new building, reconstruction of building, major repairs, general repairs, as well as demolition works.
Reverse VAT charge will not be applied to: preparation of building project, supervision of project, expertise of the building, technical maintenance of the building, building research, geodetic and cadastral measurements and other similar works.
Jovita Valatkaitė
English speaking lawyer the Gencs Valters Law Firm in Vilnius, practising in field of Tax law in Lithuania, Latvia and Estonia.
T: +370 67 24 0090
F: +372 67 24 0091