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STI representative Irma Juškaitė says that the planned control actions are aimed at ensuring that managers and employees use the registered vehicles on behalf of the companies for their intended purpose.
“If a car is purchased on behalf of a company, it must be used in the business for its intended purpose, that is, to earn income and receive economic benefits.
Such a car can also be used for personal purposes, such as shopping for work or relaxing by the sea, but in this case, the profits are taxed accordingly. The benefits received by the employee are considered wages: the personal income tax (PIT), the Sodra contributions, the compulsory medical insurance (PSD) are calculated ”, says the specialist.
The vehicles will be fixed on the roads.
The STI announces that company-owned vehicles would be registered on the main roads by identifying their state number. Preparations are also being made to work with municipalities to help identify possible infractions.
Such a measure, according to the interlocutor, will make it possible to identify cases in which company cars are used for private purposes, such as when traveling to the beach or on vacation abroad.
“The tax administrator still plans to expand the arsenal of control measures with the help of the Multifunctional Infraction Control System, which records the movement of vehicles on the main and regional roads, as well as the Number Recognition System – video recording of Vehicles that cross automobile registration numbers and state lines.
It is also planned to cooperate with tourist municipalities regarding the receipt of additional information on the movement of cars belonging to companies, which may not be related to labor objectives, ”explains I. Juškaitė.
The STI provides examples of commercial representatives’ attempts to outsmart a value added tax (VAT) report on luxury vehicles.
After 16 control actions related to the purchase of luxury cars, more than 90 thousand. taxes in euros.
Some examples of companies trying to take advantage of a luxury car VAT deduction. In all these cases, the returns were adjusted by additional VAT returns.
• “Porsche” įsigyta už 92,396.70 euros, total PVM 19,403.3 euros;
• Mercedes was acquired for 74,800 euros, VAT amounting to 12,981.82 euros;
• The Mercedes was bought for 71,199 euros, the amount of VAT was 12,356.85 euros ”, says the specialist.
Won’t the idea work in reality?
Daiva Čibirienė, President of the Association of Accountants and Auditors of Lithuania, says that current aspirations can hardly be implemented with determination, since in different situations, from the point of view of trade representatives, their own interpretations may arise.
“The burden of proof is enormous and companies can shirk very simply because the legislation here does not say very specifically where the income in kind begins and where it ends. For example, an entrepreneur may simply say that he went to Palanga to meet with a partner business, because Vilnius residents are not prohibited by law from discussing business matters in Palanga or Mallorca. Understandably, the STI may interview more people, but that business partner can attest to the fact that they had met with the businessman and they really had business meetings not only during the working day but also late into the night.
I believe that in the future the Ministry of Finance will clarify the procedure for the recognition of income in kind, which will be defined more clearly. I really agree that the current procedure allows employers to abuse, ”said D. Čibirienė.
The interviewee pointed out that the estimated fees for noncompliance with the established procedure are not very high.
“If the STI has all the data and can prove that the business representatives traveled to Nida or Palanga for 3 months not on a business trip, then such trip can be recognized as income in kind and taxed.
Taxes are not very high, they can reach 0.7 percent. of the market price of the car. For example, if the market price of the vehicle is 10,000. this would be recognized as income in kind of € 70. The total cost of the tax would be around 30 euros for one month, 90 euros for three months.
In addition, it should be noted that company employees can receive income in kind from the company (employer) of up to 200 EUR per year, from which SSD, PSD, GPM taxes are not deducted. So, going back to the three-month example of recognizing € 210 in kind for three months, only € 10 of that would be taxed and so we are talking about a € 4 tax instead of € 90. I would think that the cost of the STI control law is higher than 4 euros, “said the interlocutor.
Furthermore, it is questionable whether such control is directed solely at businessmen and not at representatives of other state institutions.
“Why do government cars test commercial cars but don’t inspect them? Why do we apply different standards? In this case, the business is like discriminated, as if to say that if an entrepreneur takes a child to kindergarten, he is a scammer and a tax thief, and if a politician makes a car with a car financed by the budget, there is no violation here. If we apply a certain moral norm, it should apply equally to everyone ”, considers D. Čibirienė.
The big problem is the shadow
The interlocutor maintains that the biggest problem at the moment is the embezzlement of the VAT, not the income in kind.
“There is a big shadow in Lithuania. Most of it is not in income in kind, but in embezzlement of VAT, when tons of goods are transported tax-free, when sales documents are not issued at points of sale, the sources of acquisition of goods There are uncontrolled crypto settlements, a large number of people still do not declare their bank accounts abroad, not all global income is declared, free of charge in cryptocurrency sale transactions.
Until now, the STI has not been able to “link” the assets of the population with the income from work and the contents of the bank accounts of all residents. There are many areas where there are many more unpaid taxes, but they also require more intelligence to raise money. The path currently chosen is the easiest in all respects and probably the least profitable for the budget of all possible paths ”, D. Čibirienė is convinced.
In case of uncertainty, more data would be verified
However, STI representatives note that gathering information in the event of uncertainty would encompass many different data. It would check not only the distance traveled by the vehicle, but also the refueling time.
“During the tax inspection or control actions, the travel documents of the company’s vehicle, the refueling time, the vehicle’s mileage and other related information are verified. This information can also be requested by contacting commercial representatives for monitoring.
If there is a suspicion that the car can be used for personal purposes, it is also planned to verify the movement of the vehicle on the basis of the data collected by the systems mentioned above. It should be noted that the STI has the right to inspect the taxpayer for the current calendar year and the previous three. <...> Discussions are ongoing with other institutions about receiving data from other systems, ”explained I. Juškaitė.
These measures are not the only ones. The STI indicates what additional documents would be required if sales representatives were asked to justify the fact that the vehicle is used for the needs of the company:
• the purpose of buying the car, with what funds the car was purchased (owned or loaned);
• automobile accounting in company accounting (fixed assets or property);
• how the car is used (in operation or rented);
• What is the procedure for accounting for automobile usage, storage, operating costs, and fuel rates?
• who uses the car in the company (what functions do these employees perform);
• average mileage per month;
• If you rent the car, provide information about the customer’s location, price, and search.
• other relevant information: VAT deduction, expenses, income in kind.
Apply sanctions
Entrepreneurs who evade VAT or other taxes would also be stressed by the responsible authorities.
Companies may be subject to different penalties: the amount of taxes and accrued interest, administrative responsibility, the fine. If it is established that the company did not follow the established procedure and used the car for personal purposes, it will be necessary to calculate and pay GPM, Sodra contributions, PSD for the entire period that the car was used for personal needs.
Also, if the inspection reveals that the cars or SUVs are purchased for commercial purposes that are not for sale, they are used for rental or passenger transport services for consideration, but VAT on purchases is included in the VAT deduction. , there is an obligation to calculate and pay sales VAT to the interlocutor.
The STI, for its part, explains that companies tend to meet the various personal needs of managers, owners and employees, but mainly identify cases that involve the purchase of various means of transportation, including pleasure boats and aircraft, the purchase of real estate, travel on business trips.
During 2021. I fourth The STI identified 31 cases of satisfaction of personal needs with company funds and receipt of income in kind. During these control actions, the total amounts of taxes payable, reportable and related to the budget amounted to almost 254 thousand LTL. euros.
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