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Lithuania: New transfer pricing documentation rules in draft order

Lithuania: New transfer pricing documentation rules

The Ministry of Finance of Lithuania earlier in 2018 issued a draft order that to amend the existing rules that apply to controlled transactions—i.e., the transfer pricing rules. When finalized, the draft order would amend Order No. 1K-123 (9 April 2004).

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Among the measures in the draft order are the following:

  • Previously, the tax authorities on examining whether a controlled transaction price was consistent with the arm‘s length principle were able to use a database that was not accessible to taxpayers. The draft order would require the tax authorities to use the information provided by or made available to taxpayers. 
  • The transfer pricing documentation would consist of Master and Local files for certain companies.
  • The Master file would be prepared by Lithuanian entities and by foreign entities that operate in Lithuania through a permanent establishment and that have income of more than €15 million during the tax period.
  • Previously, companies had to prepare a Local file if the company's income exceeded approximately €2.9 million. This threshold would be increased to €3 million under the draft order.
  • A taxpayer would be required to renew its Master file under the transfer pricing documentation rules every three years if all conditions of the controlled transaction remained unchanged.
  • A taxpayer would have to renew its benchmarking study with respect to a period complying with the requirements of the arm‘s length principle every three years, if the economic circumstances did not change significantly.
  • Data submitted in the documents relating to the controlled transaction would need to be updated each tax period.

 

Read a 2018 report prepared by the KPMG member firm in Lithuania

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