European Commission Closes Infringement Proceedings Regarding Lithuania’s VAT Threshold Avoidance Rule

The European Commission has closed its infringement proceedings against Lithuania in relation to VAT avoidance and the threshold for small enterprises. The proceedings were initiated due to Lithuania’s anti-abuse rule, which required legal entities controlled by the same person(s) to register for VAT if their combined revenue exceeded the threshold, regardless of whether or not an individual entity exceeded the threshold. The Commission found this rule to be disproportionate and contrary to the principle of fiscal neutrality. Lithuania amended the rule by adding provisions that exempt financially linked but independent entities from registration if they can prove that their management bodies and economic activities are not the same. The amendment came into effect on 1 January 2023, and as a result, the infringement proceedings have been closed.

Source Orbitax

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