Customs Duties and Taxes on Goods Originating in Lithuania
In this practical leaflet you will find a list of customs duties and other taxes on goods exported from Lithuania to the country of the recipient when the country of origin of the goods is Lithuania. Find out what taxes the customer will have to pay after the customer buys your product and it reaches the customer’s country.
This information would benefit sellers who wish to avoid the situation where goods are returned because the buyer is unwilling to pay duties related to customs clearance. By notifying the buyer in advance thereof, you will reduce the risk of return. This information is also useful for people who for one reason or another pay these costs.
WHEN MUST ONE PAY CUSTOMS DUTY?
Customs duties are usually calculated on the basis of the value of the goods, the country of origin and the type of goods.
Duty-free value of goods
The cost of the product is based on the value of a group of products which you send in shipping documents. Many countries have set a price limit for goods entering the country (tax-free value) that exempts the recipient from customs duties and other taxes.
As you may have already understood, it is the responsibility of the sender to provide the correct information about the value of the goods. We remind you that each country has the right to stop cargoes for physical inspection in order to verify the correctness of the provided information and the declared value.
Origin of the goods
The origin of the goods means the country where the product was manufactured (even if the raw materials came from third countries). The origin of the goods is extremely important because it determines whether the product is subject to customs duty and in which amount.
The European Union has concluded free trade agreements or preferential tariffs with many countries of the world. This means that goods produced in Lithuania are subject to preferential customs duties when the shipping documents indicate that the goods are of preferential origin.
In order for your product to be recognized as a product of preferential origin, you usually do not need an official certificate, but you are asked to write, print, and submit a declaration of origin when sending the product.
In most cases, when calculating taxes, it does not matter whether the product was produced in Lithuania or, say, in Germany. Most often, when exporting outside the European Union, the amount of taxes is set for all countries of the European Union. Therefore, in many declarations of origin, it is sufficient to indicate the European Union as the country of origin.
Nomenclature of goods
The goods are divided into groups which have been assigned different tax rates. The World Customs Organization has published the Harmonized International Cargo Classification System (HS or HTS), which is followed by many countries around the world.
In the HS system, each element has been assigned a corresponding HS code, which best describes the element. You can find out the codes of your goods on the website of the Lithuanian Customs Authority.
The goods are also separated from each other in accordance with the description of the goods in the shipping documents. Therefore, it is very important to describe the shipped goods accurately and in detail.
OTHER IMPORT-RELATED TAXES
In addition to customs duties, other consumption-related taxes may be applied to goods – value added tax or its equivalent, excise taxes, etc. Consumption taxes in each country are paid by residents of this country when purchasing goods (or services). Therefore, taxes are levied on both domestic and imported goods or services.
There may be free trade or cooperation agreements concluded between customs-exempt states, but consumption-related taxes still have to be paid.
For Lithuania (and for the whole of Europe), the usual tax on the consumption of goods and services is the value added tax (VAT). It is true that VAT is only one form of consumption taxation – outside the European Union there are also other forms of consumption-related taxes, such as the Goods and Services Tax (GST) in Australia, the GST (Sales Tax) in the United States, etc.
Payment of VAT (import)
Import VAT payments are processed in the same way as customs duties.
Taxable persons must complete and submit to the customs authorities a single administrative document that must indicate the value, place of origin, consignee, destination, price, weight of the goods, etc.
The taxable amount is the total amount actually paid or payable by the buyer, customer or third party. As a rule, the taxable amount is the price indicated in the invoice, including:
- Taxes, duties, fees and expenses, except VAT itself
- Contingencies such as commissions, packaging, transportation and insurance to be borne by the supplier or buyer.
In case of import of goods, the taxable amount also includes contingencies incurred up to the place of destination:
“Taxable amount = customs value + customs duties and all other import duties + additional costs to destination”.
The main activities subject to VAT are:
- Commercial supply of goods by a taxable person in the territory of an EU country.
- Provision of services: VAT is charged in the EU country where the recipient of the service is established.
- Transactions within the EU: purchases by traders residing in different EU countries are not considered as imports and exports, but as transactions within the EU. Acquisitions within the EU and deliveries of goods between VAT-registered traders will be taxed in the EU country to which the goods are sent.
- Imports: VAT is levied on imported goods and is usually collected in accordance with customs clearance procedures for the release of goods into circulation. However, when goods are imported into one EU country but are intended for use or consumption in another, a conditional VAT exemption may apply. Under this regime, VAT will be levied on the sender of the EU country and not on the recipient of the EU country.
Minimum VAT rates
Taxable transactions are subject to rates and rules adopted by the EU country to which the goods or services are supplied.
- standard rate cannot be less than 15%. EU countries can also apply one or two reduced rates, which should be at least 5% and apply only to very specific supplies of goods.
- the directive allows a reduced rate of at least 12% (the so-called parking tariff) for certain goods or services.
- in addition, some EU countries are allowed to continue to apply reduced rates of less than 5% (very preferential rates).
Suspension measures and free zones
Imported goods may be placed under one of the following customs procedures:
- goods in temporary storage warehouse
- goods placed under internal processing (suspension system)
- goods imported into customs warehouses or free zones
- temporary entry
- transit procedures
- Free zones where goods are exempt from VAT, as well as import duties and taxes.
However, VAT is paid only when the goods are placed on the market for public sale.
VALUE ADDED TAX in Lithuania
Standard rate (21%)
Applies to all products that are not subject to reduced rates or exclusions.
Reduced rate (9%)
Applicable to certain products, such as:
- Books and other non-periodicals.
- Wood and wood products intended for heating and purchased by household energy consumers.
Extra low rate (5%)
Applicable to certain products, such as:
- Pharmaceutical products
- Medical supplies and technical equipment used to assist persons with disabilities.
- Newspapers, magazines and other periodicals, printed or electronic.
Zero rate (0%)
Applicable to the following items:
- Sea-going vessels used for the carriage of passengers or goods on international routes, sea-going fishing vessels as well as sea-going vessels used for rescue or assistance at sea.
- Supply of aircraft to taxable persons receiving more than half of their annual income from international passenger and cargo traffic.
- Supply of gold to the system of European central banks and the European Central Bank.
TERRITORIES OF EU COUNTRIES EXEMPT FROM VAT
Germany: Helgoland Island and Büshingen Territory:
- Italy: Italian waters of Livigno, Campione d’Italia and Lake Lugano
- France: Guadeloupe, Guyana, Martinique, Reunion, Mayotte
- Spain: Ceuta, Melilla and Canary Islands
- Greece: Athos
- Austria: Jungholz and Mittelberg
- Denmark: Greenland and the Faroe Islands
- Finland: Åland Islands
Areas subject to special tariffs:
- Portugal: Azores and Madeira
- Greece: several islands of the Aegean Sea
- France: Corsica
Third territories considered to be EU countries
- Transactions concluded or intended for the Principality of Monaco are considered as transactions concluded in France or intended for France.
When the consignee receives goods for which additional import taxes are to be paid, he is informed of the procedures to be followed.
Customs clearance of goods and other customs procedures are usually carried out by customs brokers, who charge a separate fee for their work. The exact rates of intermediaries are not specified, since they vary depending on the selected broker.
Sometimes the buyer may not agree to pay taxes related to the import of the goods. In case of refusal, the sender shall bear the additional costs. For this reason, we advise you to always communicate very clearly to your customers what obligations they will have to assume after purchasing the goods. And if you decide to cover some of the fees associated with the recipient, it is worth making a preliminary calculation in advance of how much it will cost you.
If customs procedures take time (for example, customs skips the necessary information in shipping documents, notices inconsistencies), the goods are stored in warehouses until the problems are solved in one way or another. The customs warehouse fee begins to apply.
Suspensive agreements and VAT-free zones
Goods imported under one of the following customs procedures will be temporarily exempt from VAT as long as they remain in this situation:
- Goods intended for placement in a free zone.
- Goods intended for temporary storage.
- Goods placed under customs warehousing or internal processing.
- Goods under temporary importation.
- Goods subject to transit procedures.
Free zones in Lithuania:
For detailed advice on the taxation of Lithuanian legal entities, we recommend you to contact an accountant or tax consultant of Company in Lithuania UAB and get answers to your questions.