Restrictions are being put in place for entrepreneurs buying cars through companies – there are three possible directions

“After all, consumption is really for an individual, not a company. Now the pockets are confused,” he said at a meeting of the Tax Incentive Review Task Force on Wednesday.

The Minister emphasized the equity aspect of the tax system.

“It seems to me that a fairer tax system would help raise more budget revenue from those who can help build our state. Naturally, those higher revenues are needed both to pay for higher quality public sector services and to improve public sector services. salaries of public sector employees and increase pensions.

Horizontal justice and uniform regulation are also very important. Still, there are individual areas where earnings are calculated differently. It seems to me that the calculation and payment of income tax should be identical, regardless of the sector in which we work ”, said G. Skaistė.

Three directions for cars

The meeting also addressed the issue of cars purchased by entrepreneurs through companies. Rūta Bilkštytė, Vice Minister of Finance and Chairman of the Task Force, said international practice should be taken into account when deducting the purchase costs of all cars purchased by the company for corporate tax purposes.

“In Lithuania, all the company’s car expenses, depreciation, rent and operation are deducted from income. A total of 208.6 thousand people are registered in Lithuania. passenger cars registered in the name of companies.

In 2020, around 670 companies bought 770 luxury cars, if we read that there are more than 50 thousand luxury cars. euro, ”he said.

R. Bilkštytė pointed out that at least nine countries in the European Union restrict the deduction of car expenses.

“There are several restrictions, but deductions for the cost of the car often apply. There may be absolute or relative size limits related to carbon dioxide emissions. There may be restrictions on both the purchase price and the deduction of operating and other costs, ”he said.

The deputy minister suggested considering three possible directions.

In order to discount the part of the purchase price of the car that does not exceed a certain amount of euros. Another amount could be for an electric car and the difference would be representative costs.

Another option is to discount a percentage of the purchase price of the car. The third option is to deduct only the purchase price of the luxury cars, ”he said.

R. Bilkštytė added that additional restrictions for CO2 could be taken into account, and similar restrictions would apply to operating and rental costs.

Other rates could go down

Economist Raimondas Kuodis spoke at the meeting about the fact that tax breaks cost much more than what is shown.

“It is not only a direct loss of the budget, they are also higher rates than we could have: VAT, GPM, etc. With all the relevant consequences for competitiveness with Poland and so on.

We often have a poorly paid public sector, which leads to poor quality education, poor health care, etc. “, He said.

R. Kuodis said that the Lithuanian tax system had already faced the challenges of the Constitutional Court.

“Many in the same public sector cannot consume through companies because they are prohibited from having them. They also pay high rates under standard employment contracts, while others work in ridiculously taxed ways, ”he said.

R. Kuodis proposed to revise the number of commercial forms, to reduce them to three: joint-stock companies, limited companies and “mini-companies”.

Advised to concentrate

Tax expert Kęstutis Lisauskas supported the idea of ​​reducing the number of business forms.

“Either through the number of forms or through the harmonization of taxes for different forms, both options are good, but the path should be the same,” he said.

K. Lisauskas also recommended focusing on those areas where there really is an effect on the budget.

“We spend a lot of time on those cases of allowed deductions or the calculation of taxable income, where there is basically only one time difference. We should probably not emphasize here.

The second is the problem of abuse. Whether for private consumption, we know cars and all other toys. Would these things be done by the people involved in terms of CIU? If there are such things, let’s examine, discuss, make additions, “he said.

A set of benefits

According to the Ministry, it is convenient to review other sectoral benefits:

Treatment of life insurance premiums received by life insurance companies for corporate tax purposes;

The effectiveness of the income tax relief for film production in order to promote the export of services;

Treatment of the income of health institutions for services financed with the funds of the Compulsory Health Insurance Fund for income tax purposes;

Deduction of special provisions made by credit institutions and insurance companies for corporate tax purposes;

The effectiveness of the tax relief on corporate income for collective investment institutions (IIC) and the income received by their participants from the IIC;

The conditions for the transfer of tax losses between group companies;

The conditions for the application of the income tax relief applicable to the income derived from the transfer of shares;

Direct payments and other compensatory payments to maintain income levels, treatment of scrapping fishing vessels for the purposes of corporate tax and personal income tax.

With regard to the taxation of small companies, the Ministry proposes to review:

Conditions of income tax benefits for small businesses;

The concept of taxation and administration of income from individual activity;

30 percent effectiveness of the application of alleged costs;

Conditions for the payment of a lump sum personal income tax payable on the acquisition of business licenses;

Possibilities for automating the collection of taxes for small companies, when the measures of the tax administration simplify the payment of taxes;

VAT registration threshold (Lithuania may increase the threshold to EUR 55,000 until December 31, 2024).

The final meeting of the working group, which would present the solutions to be presented to the government, is scheduled for October.