| Abstract [eng] |
Taxation of Construction Works with Value Added Tax in Lithuania Visvaldas Račkauskas The construction sector, as one of the largest business sectors in Lithuania, faces significant risks related to tax evasion, miscalculation, tax delays, intentional bankruptcies and other ways to avoid tax obligations. In order to eliminate the possibilities of VAT evasion in the taxation of construction works, from 2015 July 1 VAT reverse charge of construction works was established in Lithuania. VAT is taxed by applying two different methods of payment of this tax: 1) when VAT is deducted and paid by the service provider; 2) when VAT is deducted and paid to the state budget by the purchaser of the service, if the person is considered VAT taxable person (VAT reverse charge is applied). This paper analyzes the reasons for VAT reverse charge on construction works, examines the concept of construction works and other conditions under which this mechanism is applied, as well as legal disputes arising from the application of this mechanism and raises the question of whether the current legal regulation of VAT reverse charge complies with constitutional principles that tax can be established only by law and that taxation has to be clear. The first part of the work reviews the experience of the European Union member states in the taxation of construction works with reverse VAT and the development of the legal regulation of VAT on construction works in Lithuania. The second part of the work analyzes the conditions under which construction works are subject to VAT reverse charge. This section analyzes the concept of construction works, the issue of VAT reverse charge for construction-related goods and services, and other conditions for the application of this mechanism. The third part of the work examines the compliance of the legal regulation establishing VAT reverse charge and the practice of its application with the Constitution of the Republic of Lithuania and the jurisprudence of the Constitutional Court of Lithuania on the aspects of establishing taxes only by law and principles of tax clarity. The fourth part of the work analyzes the practice of legal disputes arising from the application of the reverse charge VAT mechanism in the Tax Disputes Commission and courts. |
