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Updated transfer pricing documentation requirements in Lithuania

Updated transfer pricing documentation in Lithuania

The new requirements for Lithuanian transfer pricing (TP) documentation have been accepted on 19 October 2020. These new requirements are prepared according to the OECD BEPS Actions 8-10 and will be effective 1 January 2021.

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Giedrius Biconas

Manager, Tax, Transfer Pricing services

KPMG in Lithuania

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Transfer pricing

Major changes in the new TP requirements:

  • A simplified approach for Low value-adding intra-group services have been set by allowing tax payers to  apply a mark-up of 5 percent of the allocated costs without need to be justified by a benchmarking study.
  • Simplified tax administration processes for control of transactions related to Hard-to-value intangibles have been set. Requirements were supplemented by provisions allowing tax administrator retrospectively adjust the price of the controlled transaction on the basis of information received after the transaction.
  • The procedure for documenting controlled transactions have been simplified by eliminating the requirement to prepare transfer pricing documentation for transactions carried out between Lithuanian taxpayers.
  • The procedure for applying the Transactional Profit Split Method has been clarified.

Updated requirements related to documentation of Low value-adding intra-group services and transactions carried-out between Lithuanian taxpayers will be applied for the calculation of corporate income tax for 2020 and subsequent tax periods. Meanwhile, updated requirements for transactions related to Hard-to-value intangibles will be applicable for controlled transactions carried out from 23 October 2020.

In parallel to these changes tax authorities have announced their increased focus on controlled international transaction with special attention to financing and services transactions.

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