Lietuviškai
Case No. 53/01
THE CONSTITUTIONAL COURT OF THE REPUBLIC OF
LITHUANIA
RULING
ON THE COMPLIANCE OF ITEM 11 OF THE PROCEDURE OF
REGISTRATION OF VALUE ADDED TAX PAYERS WHICH WAS
CONFIRMED BY ITEM 2.4 OF GOVERNMENT OF THE
REPUBLIC OF LITHUANIA RESOLUTION NO. 546 "ON VALUE
ADDED TAX" OF 9 MAY 1996 WITH THE CONSTITUTION OF
THE REPUBLIC OF LITHUANIA AND PARAGRAPH 3
(WORDINGS OF 7 APRIL 1994 AND 14 OCTOBER 1997) OF
ARTICLE 6 AND ARTICLE 15 (WORDING OF 22 DECEMBER
1993) OF THE REPUBLIC OF LITHUANIA LAW ON VALUE
ADDED TAX
2 September 2004
Vilnius
The Constitutional Court of the Republic of Lithuania,
composed of the Justices of the Constitutional Court Armanas
Abramavičius, Egidijus Jarašiūnas, Egidijus Kūris, Kęstutis
Lapinskas, Zenonas Namavičius, Augustinas Normantas, Jonas
Prapiestis, Vytautas Sinkevičius, and Stasys Stačiokas,
with the secretary of the hearing-Daiva Pitrėnaitė,
in the presence of:
the representative of the Government of the Republic of
Lithuania, the petitioner, who was Paulius Majauskas, the Head
of the Tax Administration Department of the Tax Department at
the Ministry of Finance of the Republic of Lithuania,
pursuant to Articles 102 and 105 of the Constitution of
the Republic of Lithuania, and Article 1 of the Law on the
Constitutional Court of the Republic of Lithuania, in its
public hearing on 19 August 2004 heard case No. 53/01 which
originated in the petition of the petitioner, the Supreme
Administrative Court of Lithuania, requesting to investigate as
to whether Item 11 of the Procedure of Registration of Value
Added Tax Payers, confirmed by Government of the Republic of
Lithuania Resolution No. 546 "On Value Added Tax" of 9 May
1996, was not in conflict with Item 15 of Article 67 and
Paragraph 3 of Article 127 of the Constitution of the Republic
of Lithuania and Paragraph 3 of Article 6 of the Republic of
Lithuania Law on Value Added Tax (the wording which was
effective till the adoption of Law No. VIII-764 of 2 June
1998).
The Constitutional Court
has established:
I
The Supreme Administrative Court of Lithuania, the
petitioner, was investigating an administrative case. The court
suspended the investigation of the case by its ruling and
applied to the Constitutional Court with a petition requesting
to investigate as to whether Item 11 of the Procedure of
Registration of Value Added Tax Payers (hereinafter also
referred to as the Procedure) confirmed by Government
Resolution No. 546 "On Value Added Tax" of 9 May 1996 (Official
Gazette Valstybės žinios, 1996, No. 44-1081, hereinafter also
referred to as the Government Resolution of 9 May 1996) was not
in conflict with Item 15 of Article 67 and Paragraph 3 of
Article 127 of the Constitution and Paragraph 3 of Article 6 of
the Law on Valued Added Tax (hereinafter also referred to as
the Law; the wording which was effective till the adoption of
Law No. VIII-764 of 2 June 1998).
II
The petition of the petitioner is based on the following
arguments.
1. According to Item 15 of Article 67 of the Constitution
the Seimas establishes state taxes and other obligatory
payments, and according to Paragraph 3 of Article 127 of the
Constitution the Seimas performs this function by adopting
laws. The basic elements of a tax, such as a taxable object,
entities of tax relations, their rights and obligations, sizes
(tariffs) of a tax, payment periods, exceptions and preferences
should be established by the law.
The Law on Value Added Tax defines the object which is
subject to value added tax (hereinafter also referred to as
VAT), the persons who pay the tax, the tariffs of the tax, the
procedure of calculation of the tax, etc. In Paragraph 3 (the
wording which was effective till the adoption of Law No.
VIII-764 of 2 June 1998) of Article 6 of the Law a rule was
established, pursuant to which the persons who had not
registered themselves as VAT payers, and whose income for the
sold goods or provided services exceeded LTL 50 thousand, had
to calculate VAT starting at the month when such exceeding
occurred and pay it to the budget under common procedure. In
the opinion of the petitioner, this means that an entity, which
has not registered itself as VAT payer, should have been
applied common rules established by the Law, which set down VAT
tariffs and the procedure of tax calculation.
2. In Item 11 (the wording which was effective till 1
January 1999) of the Procedure of Registration of Value Added
Tax Payers confirmed by Government Resolution No. 546 "On Value
Added Tax" of 9 May 1996 it was established that the persons
who have not registered themselves as VAT payers and whose
income from sales exceeds LTL 50 thousand per year must
calculate VAT according to the tariff equal to 15.25 (8.26)
percent of the value of the sold goods (provided services),
starting at the month when the income from sales exceeded LTL
50 thousand, and have no right to indicate VAT in the invoices,
as well the right to deduct VAT for the purchased goods
(received services) from the sum of VAT calculated for the sold
goods (provided services).
3. In the opinion of the petitioner, Item 11 of the
Procedure established a special procedure of VAT calculation
and payment in regard to an entity, which has not registered
itself as VAT payer; according to it such a tax payer was
applied exceptions to the general rules of VAT calculation and
payment established by the Law. Therefore, the petitioner had
doubts whether Item 11 of the Procedure was not in conflict
with Paragraph 3 of Article 6 of the Law on Value Added Tax
(the wording which was effective till the adoption of Law No.
VIII-764 of 2 June 1998), as well as Item 15 of Article 67 and
Paragraph 3 of Article 127 of the Constitution.
III
In the course of the preparation of the case for the
Constitutional Court hearing written explanations were received
from the representatives of the Government, the party
concerned, who were Paulius Majauskas, the Head of the Tax
Administration Department of the Tax Department at the Ministry
of Finance, and Leonora Žukienė, the Head of the Legal Division
of the State Tax Inspectorate under the Ministry of Finance, in
which it is stated that Item 11 of the Procedure was not in
conflict with Item 15 of Article 67 and Paragraph 3 of Article
127 of the Constitution and Paragraph 3 of Article 6 of the
Law.
1. P. Majauskas, the representative of the party
concerned, submitted the following explanations.
1.1. According to Paragraph 3 of Article 127 of the
Constitution, a new tax may be introduced only upon adoption of
a respective law, and according to Item 15 of Article 67 of the
Constitution, a new tax may only be established when the Seimas
adopts a respective legal act. In Item 11 of the Procedure no
new tax is established, but the procedure of calculation of the
tax already established by the Seimas is confirmed.
Introduction of new taxes and regulation of the procedure of
calculation of already introduced taxes are two different
issues, therefore, Item 11 of the Procedure was not in conflict
with Item 15 of Article 67 and Paragraph 3 of Article 127 of
the Constitution.
1.2. The Government enjoyed the powers to adopt the
resolution of 9 May 1996 and to establish the procedure of VAT
calculation, as in Article 40 of the Law, which was effective
at that time, the following was set down: "Pursuant to this Law
the Government of the Republic of Lithuania until 20 April 1994
issues an instruction on calculation and payment of value added
tax." It is specified in the Preamble to the Government
resolution of 9 May 1996 that this resolution has been adopted
pursuant to the Law on Value Added Tax. Thus the Government,
when passing the aforementioned resolution, only performed the
obligation imposed on it by the legislator to set down the
procedure of payment of the tax already established by the Law.
Therefore, in the opinion of the party concerned, the
Government did not exceed its competence and did not violate
Item 15 of Article 67 of the Constitution.
1.3. In the opinion of P. Majauskas, Item 11 of the
Procedure as to its form was not in conflict with Paragraph 3
of Article 6 of the Law, since the disputed item of the
Procedure was aimed not at the regulation of the VAT
calculation process in general, but at the specific aspect of
VAT calculation-the regulation of the procedure of registration
of payers of this tax. The title of the legal act, "The
Procedure of Registration of Value Added Tax Payers", Item 11
whereof is disputed, confirms that disputed Item 11 of the
Procedure is contained in the chapter "Unregistered Persons" of
the Procedure, too.
1.4. In the opinion of the representative of the party
concerned, Item 11 of the Procedure as to its content was also
not in conflict with Paragraph 3 of Article 6 of the Law, as
the "regulatory aspects were basically identical" in both legal
acts. The common procedure of VAT calculation and payment
thereof was laid down in the entire Law; the provisions aimed
at the procedure of VAT calculation and payment thereof applied
to the persons who have not registered themselves as VAT
payers, were set down in the following articles of the Law:
1) in Paragraph 1 of Article 7 it was established that the
persons who are considered to be VAT payers in accordance with
the provisions of Article 6 must register themselves as VAT
payers at a state tax inspectorate; in Article 8 it was
established that the persons who are not VAT payers have no
right to require this tax to be paid by the buyers of their
goods (receivers of their services). Therefore, in the opinion
of P. Majauskas, the provision of Item 11 of the Procedure that
the persons who have not registered themselves as VAT payers
have no right to indicate VAT in the invoices was in compliance
with the provisions of the Law;
2) in Article 26 it was established that the invoices for
dispatched goods or provided services, which are of the form
approved by the Government and are registered at territorial
state tax inspectorates, should be issued to the buyers who
have registered themselves as VAT payers and VAT in case of a
purchase may be deducted only according to such invoices; in
Article 28 it was established that in case the issued VAT
invoices do not meet the requirements of Article 26, the sums
of VAT which are to be paid to suppliers, when calculating the
sum of VAT due to be paid to the budget, are not deducted. As a
VAT invoice according to which VAT could have been deducted
might not be issued to a company, which had not registered
itself as a VAT payer, then, in the opinion of the
representative of the party concerned, the provision of Item 11
of the Procedure that the persons who have not registered
themselves as VAT payers have no right to deduct VAT for
purchased goods (received services) from the sum of VAT for the
sold goods (provided services), was in compliance with
provisions of the Law;
3) in Article 14 it was established that the 15.25 percent
tariff is applicable when calculating VAT, if VAT for taxable
goods (services) was not specified in the invoice; according to
Article 26 of the Law, invoices for dispatched goods or
provided services, which are of the form approved by the
Government and are registered at territorial state tax
inspectorates, should be issued to the buyers who have
registered themselves under the established procedure as VAT
payers. Since the company which did not register itself as a
VAT payer could not receive and issue invoices, and indicate
VAT therein, therefore, in the opinion of the representative of
the party concerned, the provision of Item 11 of the Procedure
that the persons who have not registered themselves as VAT
payers and whose income from sales per year (during the last 12
months) exceeds LTL 50 thousand must calculate VAT according to
the tariff equal to 15.25 (8.26) percent of the value of the
sold goods (provided services), was in compliance with the
provisions of the Law.
1.5. According to P. Majauskas, the Law differentiates the
persons who have registered themselves as VAT payers from the
other persons who have not registered themselves as VAT payers,
but still are obliged to calculate VAT. The persons who have
registered themselves as VAT payers gain certain other
obligations established by the Law (obligation to calculate
VAT, to submit VAT declarations, to separately account goods
and services subject to VAT), however, they also acquire the
right to include in deductible VAT the sums of VAT paid when
purchasing goods supplied (services provided) by the sellers,
if they are aimed for an activity subject to VAT, and the
import VAT as well. Meanwhile, a person, who enjoys the right
to calculate VAT, but has not registered himself as a VAT
payer, gains no such right. The fact that the Law considers the
ones who have registered themselves as VAT payers to be VAT
payers is also reflected in Article 36 of the Law, which reads
that if the inspection finds out that the persons listed in
Paragraph 3 of Article 6 and Article 8 of the Law failed to pay
VAT, and that the payers in their declarations reduced the
calculated VAT or deducted too much of this tax and for this
reason paid too little sum thereof to the budget, the
calculated additional sum of the tax, a penalty and default
interest should be paid to the budget under procedure
established by the Republic of Lithuania Law on Tax
Administration.
1.6. According to the representative of the party
concerned, in Item 11 of the Procedure neither the procedure of
payment of the tax by the persons who have not registered
themselves as VAT payers, nor any other procedure of VAT
calculation, save the exception established by the Law, was set
down. It only provided more details on VAT calculation. In the
opinion of P. Majauskas, in both legal acts the "basic
provisions linked with VAT payment" were treated in the same
manner, therefore Item 11 of the Procedure was not in conflict
with Paragraph 3 of Article 6 of the Law.
2. L. Žukienė, the representative of the party concerned,
submitted the following explanations.
2.1. Under Article 7 of the Law, a person, who was a VAT
payer according to the provisions of Article 6 of the Law, had
to register himself at a state tax inspectorate as a VAT payer.
Only the person who has registered himself as a VAT payer was
given a VAT payer code, only such a person would become under
an obligation, upon expiry of each taxation period until the
15th day of the next month, to submit VAT declaration; only to
such a person sanctions for failure to submit the declaration
in due time, which were established in Article 33 of the Law,
were applied.
In Paragraph 1 of Article 36 of the Law it was established
that if the inspection finds out that the persons named in
Paragraph 3 of Article 6 and Article 8 of the Law failed to pay
VAT, and that the payers in the declaration reduced the
calculated VAT sum and therefore paid too little amount thereof
to the budget (too big amount was repaid from the budget), an
additional sum of the tax, a penalty and default interest are
calculated. In the opinion of L. Žukienė, this provision of the
Law means that in regard to the persons who have not registered
themselves as VAT payers, and who are not specified as VAT
payers (named in Paragraph 3 of Article 6 of the Law), the
sanctions were established only for failure to pay VAT, while
in regard to the persons who have registered themselves as VAT
payers-for a misleading (too big) VAT report also.
According to the representative of the party concerned,
the Law provided for different obligations linked with
calculation of VAT size in regard to the persons who have
registered themselves as VAT payers, and the persons who have
to pay VAT, but have not registered themselves as VAT payers.
Therefore, in the opinion of L. Žukienė, the same rules of VAT
calculation could not be applied both to the persons who have
not registered themselves as VAT payers and who have not
fulfilled the specified in Article 7 of the Law requirement to
become registered at a state tax inspectorate as VAT payers,
and the persons who have fulfilled this requirement. Upon the
expiry of each taxation period the persons who have not
registered themselves as VAT payers and who were obliged only
to pay VAT did not submit VAT declarations, the sum of VAT due
to be paid to the budget was not increased for them for
non-submission of the declarations. There was even no sanction
established for an erroneous calculation of deduction for these
persons, since they had no right to include VAT from purchase
in the deductible sum.
In the opinion of L. Žukienė, if a person's income from
sales exceeded the established limit (LTL 50 thousand), and he
was under an obligation to pay VAT, while he had not registered
himself at a state tax inspectorate as a VAT payer, under the
Law and Item 11 of the Procedure he:
1) paid VAT which was calculated according to the tariff
amounting to 15.25 per cent of value of goods and services in
which VAT was included;
2) calculated VAT for all the goods sold and services
provided during the month, during which the limit had been
exceeded;
3) had no right to indicate VAT in the invoices, nor to
require it to be paid by the buyers;
4) had no right to deduct VAT from sales or import
(similar to the persons who registered themselves as VAT
payers).
In the opinion of the representative of the party
concerned, these provisions of Item 11 of the Procedure were in
line with the effective at that time Law on Value Added Tax and
particularised it rather than established different conditions
of VAT taxation.
2.2. By Article 40 of the Law the Seimas assigned the
Government with adoption of an instruction on calculation and
payment of the value added tax. According to Item 2 of Article
94 of the Constitution, the Government executes laws and
resolutions of the Seimas concerning the implementation of
laws, as well as the decrees of the President of the Republic.
When following the Constitution and implementing Article 40 of
the Law, the Government on 9 May 1996 adopted Resolution No.
546 "On Value Added Tax" whereby confirmed the Procedure of
Registration of Value Added Tax Payers. In the opinion of L.
Žukienė, when implementing the rights delegated by the Seimas,
the Government performed the duties established to it by the
Constitution.
IV
At the Constitutional Court hearing P. Majauskas, the
representative of the party concerned, virtually reiterated the
arguments set down in his written explanation.
The Constitutional Court
holds that:
I
1. The petitioner requests to investigate the compliance
of Item 11 of the Procedure of Registration of Value Added Tax
Payers confirmed by Government of the Republic of Lithuania
Resolution No. 546 "On Value Added Tax" of 9 May 1996 with Item
15 of Article 67 and Paragraph 3 of Article 127 of the
Constitution and Paragraph 3 (the wording which was effective
till the adoption of Law No. VIII-764 of 2 June 1998) of
Article 6 of the Law on Value Added Tax.
2. On 22 December 1993, the Seimas adopted the Republic of
Lithuania Law on Additional Value Tax, in Article 37 whereof it
is established that this law becomes effective as of 1 April
1994.
The Law on Additional Value Tax was amended and
supplemented more than once; it was amended by inter alia the
Republic of Lithuania Law "On Amending the Republic of
Lithuania Law on Additional Value Tax" adopted by the Seimas on
24 March 1994, which established a different day when the Law
on Additional Value Tax was to become effective, i.e. 1 May
1994.
On 20 July 1994, the Seimas adopted the Republic of
Lithuania Law "On Adopting and Supplementing the Republic of
Lithuania Law on Additional Value Tax", in Article 1 whereof
the notion "additional value" (Lith. pridėtoji vertė) was
replaced with "value added" (Lith. pridėtinė vertė) both in the
title and the text of the Law on Additional Value Tax, which
became effective on 1 August 1994 (Article 12 of the Law "On
Adopting and Supplementing the Republic of Lithuania Law on
Additional Value Tax"). Thus, since 1 August 1994 the Law on
Additional Value Tax is named the Republic of Lithuania Law on
Value Added Tax.
The Law on Value Added Tax was amended and supplemented
more than once.
On 5 March 2002, the Seimas adopted the new Republic of
Lithuania Law on Value Added Tax, in Item 1 of Article 131
whereof it was established that upon coming into effect of this
law, the Law on Value Added Tax, which was adopted by the
Seimas on 22 December 1993, shall become no longer effective.
Paragraph 1 of Article 126 of the Law on Value Added Tax, which
was adopted by the Seimas on 5 March 2002, provided that this
law shall become effective as of 1 July 2002. Therefore, the
Law on Value Added Tax, which was adopted by the Seimas on 22
December 1993, became no longer effective as of 1 July 2002.
3. On 9 May 1996, the Government adopted Resolution No.
546 "On Value Added Tax", by Item 2.4 of which it confirmed the
Procedure of Registration of Value Added Tax Payers. On 15 May
1996, this Government resolution was published in the Official
Gazette Valstybės žinios (No. 44-1081) and it became effective
on 16 May 1996.
The Government Resolution of 9 May 1996 was amended and
supplemented more than once.
On 12 June 2002, the Government adopted Resolution No. 861
"On the Implementation of the Republic of Lithuania Law on
Value Added Tax", in Item 4.2 whereof it recognised Government
Resolution No. 546 "On Value Added Tax" of 9 May 1996 as no
longer effective. Since, under Item 5 of Government Resolution
No. 861 "On the Implementation of the Republic of Lithuania Law
on Value Added Tax" of 12 June 2002, this Government Resolution
(save one exception specified therein) became effective as of 1
July 2002, thus Government Resolution No. 546 "On Value Added
Tax" of 9 May 1996 became no longer effective as from 1 July
2002.
4. According to Paragraph 4 of Article 69 of the Law on
the Constitutional Court, the annulment of the disputed legal
act is the grounds to adopt a decision to dismiss the initiated
legal proceedings. In its rulings the Constitutional Court has
held more than once that the formula "is the grounds to <...>
dismiss the initiated legal proceedings" of Paragraph 4 of
Article 69 of the Law on the Constitutional Court is to be
construed as the formula providing for the right of the
Constitutional Court, having considered the circumstances of
the case at issue, to dismiss the initiated legal proceedings
in case the Constitutional Court is applied not by the courts,
but by the entities specified in Article 106 of the
Constitution, but not as one stipulating that the initiated
legal proceedings must be dismissed in each case, when the
disputed legal act is annulled; under the Constitution, in
cases when the Constitutional Court is addressed by the court
which investigates the case and to which doubts arise in regard
to the compliance of a law applicable in the case with the
Constitution, as well as in regard to the compliance of other
legal act adopted by the Seimas, the President of the Republic
or the Government with the Constitution or laws, the
Constitutional Court is under the duty to examine the request
of the court irrespective of the fact whether the disputed law
or other legal act is effective or not.
5. It was already mentioned that the petitioner requests
to investigate the compliance of Item 11 of the Procedure of
Registration of Value Added Tax Payers confirmed by Government
Resolution No. 546 "On Value Added Tax" of 9 May 1996 with
Paragraph 3 of Article 6 of the Law of Value Added Tax (the
wording which was effective till the adoption of Law No.
VIII-764 of 2 June 1998).
5.1. The petitioner does not specify the title of
indicated by him Law No. VIII-764 of 2 June 1998. This law is
the Republic of Lithuania Law on Amending and Supplementing
Articles 5, 6, and 8 of the Law on Value Added Tax adopted on 2
June 1998 by the Seimas which (by Article 2 of this law) inter
alia amended and supplemented Article 6 (wording of 7 April
1994) of the Law on Value Added Tax. It was established in
Article 4 of the Law on Amending and Supplementing Articles 5,
6, and 8 of the Law on Value Added Tax that it shall become
effective as of 1 July 1998.
Taking account of the fact that the Government resolution
of 9 May 1996 became effective on 16 May 1996, it is to be held
that the petitioner doubts whether Item 11 of the Procedure is
in compliance with Paragraph 3 of Article 6 of wording
(wordings) of the Law on Value Added Tax to the extent that
this paragraph was set forth in the wording (wordings) of 16
May 1996 to 30 June 1998.
5.2. During the period of 16 May 1996 to 30 June 1998
Paragraph 3 of Article 6 of the Law on Value Added Tax was set
down in wordings: the one of 7 April 1994 and the other of 14
October 1997.
5.2.1. When Paragraph 3 (wording of 22 December 1993) of
Article 6 of the Law, the title of which at that time was the
Law on Additional Value Tax, was amended by Article 1 of the
Republic of Lithuania Law "On Amending and Supplementing the
Republic of Lithuania Law on Additional Value Tax", which was
adopted by the Seimas on 7 April 1994, in Paragraph 3 (wording
of 7 April 1994) of Article 6 it was established: "If the
income of these persons for the sold goods and provided
services exceeds LTL 50 thousand per year, VAT is to be
calculated and paid to the budget under the common procedure
starting at the month when the exceeding occurred."
5.2.2. When Paragraph 3 (wording of 7 April 1994) of
Article 6 of the Law on Value Added Tax was amended by Article
3 of the Republic of Lithuania Law on Amending Articles 4, 5,
6, 16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on Value
Added Tax, which was adopted by the Seimas on 14 October 1997,
in Paragraph 3 (wording of 14 October 1997) of Article 6 it was
established: "If the income (earnings) per year (during the
last 12 months) of these persons from the sold goods and
provided services exceed LTL 50 thousand, VAT is to be
calculated and paid to the budget under the common procedure
starting at the month when the exceeding occurred".
5.2.3. Upon comparing the legal regulation established in
Paragraph 3 (wording of 7 April 1994) of Article 6 of the Law
with the one established in Paragraph 3 (wording of 14 October
1997) of Article 6 of the Law, it becomes obvious that in
Paragraph 3 (wording of 14 October 1997) of Article 6 of the
Law the notions "per year" and "income" were specified in more
detail: instead of the word "per year" the word and numbers
"per year (during the last 12 months)" were entered, and
instead of the word "income" the words "income (earnings)" were
entered. Thus, identical legal regulation was established in
Paragraph 3 of Article 6 of both wordings of the Law.
5.3. Thus, the petitioner has doubts as to the compliance
of Item 11 of the Procedure with Paragraph 3 (wordings of 7
April 1994 and 14 October 1997) of Article 6 of the Law on
Value Added Tax.
6. It was established in Item 11 of the Procedure:
"The persons who have not registered themselves as VAT
payers and whose income from sales exceeds LTL 50 thousand per
year (during the last 12 months) must calculate VAT according
to this tariff-15.25 (8.26) percent of the value of the sold
goods (provided services)-starting at the month, when the
income from sales exceeded LTL 50 thousand, and have no right
to indicate VAT in the invoices, as well as the right to deduct
VAT for the purchased goods (received services) from the sum of
VAT calculated for the sold goods (provided services)."
It is clear from the legal regulation established in Item
11 of the Procedure that in this item of the Procedure a rule
was established according to which the sum of VAT to be paid to
the budget was calculated in regard to the persons who have not
registered themselves as VAT payers. It needs to be noted that
the procedure of payment of this calculated sum of VAT to the
budget was not established in Item 11 of the Procedure.
7. Disputed by the petitioner Item 11 of the Procedure was
not amended or supplemented within the period of 16 May 1996 to
30 June 1998.
8. It was mentioned that the petitioner has doubts
concerning the compliance of Item 11 of the Procedure with
Paragraph 3 (wordings of 7 April 1994 and 14 October 1997) of
Article 6 of the Law.
It is stated in the petition of the petitioner that in
Paragraph 3 of Article 6 of the Law a rule was established,
according to which the persons who did not register themselves
as VAT payers and whose income for the sold goods or provided
services exceeded LTL 50 thousand, starting at the month when
the exceeding occurred, had to calculate VAT and pay it to the
budget under common procedure, and that this means that the
general rules of the Law establishing VAT tariffs and procedure
of calculation should have been applied to the entity which did
not register itself as a VAT payer. In the petition of the
petitioner it is also stated that in Item 11 of the Procedure a
special procedure of VAT calculation and payment thereof in
regard to the entity which did not register itself as a VAT
payer was established; according to it, the exceptions to the
general rules of VAT calculation and payment thereof were
applied in regard to such a tax payer.
Taking account of the fact that, as it was mentioned, the
procedure of payment of calculated VAT to the budget was not
established in Item 11 of the Procedure, from the formulas of
the petition of the petitioner "the general rules on the Law on
Value Added Tax establishing the procedure of VAT <...>
calculation and payment thereof should have been applied to the
entity which did not register itself as a VAT payer", and
"exceptions to the general rules of VAT calculation and payment
thereof, which are established in the Law on Value Added tax",
a conclusion is to be made that the petitioner had doubts not
as regards the compliance of all the provisions of Item 11 of
the Procedure with entire Paragraph 3 (wordings of 7 April 1994
and 14 October 1997) of Article 6 of the Law, but as regards
the compliance of the provision "The persons who have not
registered themselves as VAT payers and whose income from sales
exceeds LTL 50 thousand per year (during the last 12 months)
<...> have no right to deduct VAT for the purchased goods
(received services) from the sum of VAT calculated for the sold
goods (provided services)" of Item 11 of the Procedure with the
provision of Paragraph 3 (wording of 7 April 1994 and 14
October 1997) of Article 6 of the Law that the persons whose
income for the sold goods and provided services exceeds LTL 50
thousand "must calculate VAT <...> under the common procedure".
9. Subsequent to the petition of the petitioner, the
Constitutional Court will investigate the compliance of the
provision "The persons who have not registered themselves as
VAT payers and whose income from sales exceeds LTL 50 thousand
per year (during the last 12 months) <...> have no right to
deduct VAT for the purchased goods (received services) from the
sum of VAT calculated for the sold goods (provided services)"
of Item 11 of the Procedure of Registration of Value Added Tax
Payers confirmed by Government Resolution No. 546 "On Value
Added Tax" of 9 May 1996 with Item 15 of Article 67 and
Paragraph 3 of Article 127 of the Constitution, as well as the
provision of Paragraph 3 (wordings of 7 April 1994 and 14
October 1997) of Article 6 of the Law on Value Added Tax that
the persons whose income for the sold goods and provided
services exceeds LTL 50 thousand "must calculate VAT <...>
under the common procedure".
It needs to be noted that the provisions of the Law on
Value Added Tax in this case will be considered only in the
aspect and to the extent that subsequent to the petition of the
petitioner one will investigate the compliance of the provision
"The persons who have not registered themselves as VAT payers
and whose income from sales exceeds LTL 50 thousand per year
(during the last 12 months) <...> have no right to deduct VAT
for the purchased goods (received services) from the sum of VAT
calculated for the sold goods (provided services)" of Item 11
of the Procedure with Item 15 of Article 67 and Paragraph 3 of
Article 127 of the Constitution, as well as the provision of
Paragraph 3 (wordings of 7 April 1994 and 14 October 1997) of
Article 6 of the Law on Value Added Tax that the persons whose
income for the sold goods and provided services exceeds LTL 50
thousand "must calculate VAT <...> under the common procedure".
II
1. Paragraph 3 of Article 127 of the Constitution provides
that taxes, other contributions to the budgets, and levies
shall be established by the laws of the Republic of Lithuania.
Under Item 15 of Article 67 of the Constitution the Seimas
establishes state taxes and other obligatory payments.
2. When construing Paragraph 3 of Article 127 of the
Constitution, the Constitutional Court in its rulings has held
more than once that it is consolidated therein in what form
(type) of legal act taxes are established: taxes may be
established only by the law.
When construing Item 15 of Article 67 of the Constitution
the Constitutional Court in its rulings held that state taxes
are established only by the Seimas.
Thus, under the Constitution, it is only the Seimas who
may establish taxes and it may be done only by a law. When
establishing state taxes the principles and norms of the
Constitution must be paid heed to.
In its rulings the Constitutional Court has held more than
once that the essential elements of a tax, such as the taxable
object, entities of tax relations, their rights and duties,
sizes (tariffs) of the tax, payment periods, exceptions and
preferences, fines and default interest should be established
only by the law.
3. In order to ensure proper payment and collection of
taxes, it is not sufficient only to establish taxes as the duty
to the state, it is essential also to regulate the procedure of
their payment, which would inter alia comprise procedures of
tax administration, methodology of calculation of taxes, etc.
Legal regulation of tax relations is not only establishment of
taxes by law, but also establishment of a procedure of
implementation of tax laws. It is not required in the
Constitution to establish the Procedure of Enforcement of Laws
on Taxes only by the law: under the Constitution the procedure
of implementation of tax laws, as well as the procedure of
calculation of particular payable tax established by a law may
be established not only by a law, but also by a substatutory
act (Constitutional Court rulings of 15 March 2000, 17 November
2003).
The Constitutional Court has also held that the
substatutory acts establishing the procedure of implementation
of tax laws may not contain norms establishing the legal
regulation other than the one established by the law, nor
competing with the norms of the law (Constitutional Court
ruling of 17 November 2003).
III
On the compliance of Item 11 of the Procedure of
Registration of Value Added Tax Payers confirmed by Item 2.4 of
Government Resolution No. 546 "On Value Added Tax" of 9 May
1996 with Paragraph 3 (wordings of 7 April 1994 and 14 October
1997) of Article 6 of the Law on Value Added Tax.
1. It was established in Item 11 of the Procedure:
"The persons who have not registered themselves as VAT
payers and whose income from sales exceeds LTL 50 thousand per
year (during the last 12 months) must calculate VAT according
to this tariff-15.25 (8.26) percent of the value of the sold
goods (provided services)-starting at the month, when the
income from sales exceeded LTL 50 thousand, and have no right
to indicate VAT in the invoices, as well as the right to deduct
VAT for the purchased goods (received services) from the sum of
VAT calculated for the sold goods (provided services)."
2. It was mentioned that it is clear from the legal
regulation established in Item 11 of the Procedure that in this
item of the Procedure a rule was established according to which
the sum of VAT to be paid to the budget is calculated in regard
to the persons who have not registered themselves as VAT
payers.
Thus, the following provisions expressing the
above-mentioned rule, according to which the sum of VAT to be
paid to the budget is calculated in regard to the persons who
have not registered themselves as VAT payers, were consolidated
in Item 11 of the Procedure:
1) the persons who have not registered themselves as VAT
payers and whose income from sales exceeds LTL 50 thousand per
year (during the last 12 months) must calculate VAT according
to this tariff-15.25 (8.26) percent of the value of the sold
goods (provided services)-starting at the month, when the
income from sales exceeded LTL 50 thousand;
2) the persons who have not registered themselves as VAT
payers and whose income from sales exceeds LTL 50 thousand per
year (during the last 12 months) have no right to indicate VAT
in invoices, as well as the right to deduct VAT for the
purchased goods (received services) from the sum of VAT
calculated for the sold goods (provided services).
The petitioner doubts as to the compliance of one of the
provisions expressing the above-mentioned rule, according to
which the sum of VAT to be paid to the budget is calculated in
regard to the persons who have not registered themselves as VAT
payers, namely the provision "The persons who have not
registered themselves as VAT payers and whose income from sales
exceeds LTL 50 thousand per year (during the last 12 months)
<...> have no right to deduct VAT for the purchased goods
(received services) from the sum of VAT calculated for the sold
goods (provided services)" with the provision of Paragraph 3
(wordings of 7 April 1994 and 14 October 1997) of Article 6 of
the Law that the persons whose income for the sold goods and
provided services exceeds LTL 50 thousand "must calculate VAT
<...> under the common procedure".
It should be stressed that the provisions of Item 11 of
the Procedure comprise a single whole, and are inseparable from
one another. Therefore, if one held that any single provision
of Item 11 of the Procedure is in conflict with a law (part
thereof) and/or the Constitution, this would mean that it was
entire Item 11 of the Procedure that was in conflict with this
law (part thereof) and/or the Constitution.
3. When deciding whether the provision "The persons who
have not registered themselves as VAT payers and whose income
from sales exceeds LTL 50 thousand per year (during the last 12
months) <...> have no right to deduct VAT for the purchased
goods (received services) from the sum of VAT calculated for
the sold goods (provided services)" of Item 11 of the Procedure
was not in conflict with the provision of Paragraph 3 (wordings
of 7 April 1994 and 14 October 1997) of Article 6 of the Law
that the persons whose income for the sold goods and provided
services exceeds LTL 50 thousand "must calculate VAT <...>
under the common procedure", it is necessary to find out
beforehand as to what common procedure of VAT calculation was
established in the Law at the specified period (i.e. from 16
May 1996 till 30 June 1998), and to investigate the compliance
of the provision "The persons who have not registered
themselves as VAT payers and whose income from sales exceeds
LTL 50 thousand per year (during the last 12 months) <...> have
no right to deduct VAT for the purchased goods (received
services) from the sum of VAT calculated for the sold goods
(provided services)" of Item 11 of the Procedure with the
articles (parts thereof) of the Law, in which the common
procedure of VAT calculation was established during the
specified period (i.e. from 16 May 1996 till 30 June 1998).
4. It needs to be noted that the common procedure of VAT
calculation was not established in the provision of Paragraph 3
(wordings of 7 April 1994 and 14 October 1997) of Article 6 of
the Law that the persons whose income for the sold goods and
provided services exceeds LTL 50 thousand "must calculate VAT
<...> under the common procedure"; this procedure in various
aspects was established for the period from 16 May 1996 till 30
June 1998 in various articles (parts thereof) of the Law.
In the context of the case at issue it should be stressed
that all the provisions of Paragraph 3 of Article 6 (wordings
of 7 April 1994 and 14 October 1997) comprise a whole, and they
are inseparable from one another. Thus, if it was held that
entire Item 11 of the procedure or any single provision of Item
11 of the Procedure is in conflict with any provision of
Paragraph 3 (wordings of 7 April 1994 and 14 October 1997) of
Article 6 of the Law, this would mean that Item 11 of the
Procedure is in conflict with entire Paragraph 3 (wordings of 7
April 1994 and 14 October 1997) of Article 6 of the Law.
Consequently, if it was held that entire Item 11 of the
Procedure or any single provision of Item 11 of the Procedure
is in conflict with the provision of Paragraph 3 (wordings of 7
April 1994 and 14 October 1997) of Article 6 of the Law that
the persons whose income for the sold goods and provided
services exceeds LTL 50 thousand "must calculate VAT <...>
under the common procedure", this would mean that Item 11 of
the Procedure is in conflict with entire Paragraph 3 (wording
of 7 April 1994 and 14 October 1997) of Article 6 of the Law.
5. The persons who have the duty to pay VAT to the budget
were specified in Article 6 of the Law.
5.1. On 16 May 1996, the following wording of Article 6 of
the Law was effective:
"VAT for the sold goods and provided services shall not be
calculated and paid to the budget by the persons whose income
from sales, excluding sales of long-term assets, which were
used for more than a year, does not exceed LTL 5 thousand per
year. VAT for the purchased goods or received services, paid by
such persons, shall not be compensated for.
The persons whose income specified in the first paragraph
of this article comprises from LTL 5 to 50 thousand per year,
shall be granted the right to register themselves, upon their
wish, as tax payers. Such persons shall pay VAT to the budget
(VAT shall be reimbursed to them from the budget) starting at
the next month after the registration.
If the income of these persons for the sold goods and
provided services exceeds LTL 50 thousand per year, VAT is to
be calculated and paid to the budget under the common procedure
starting at the month when the exceeding occurred.
VAT shall not be calculated and paid to the budget by the
companies of free economic zones acting in these zones."
5.2. It was mentioned that when Paragraph 3 (wording of 7
April 1994) of Article 6 of the Law on Value Added Tax was
amended by Article 3 of the Law on Amending Articles 4, 5, 6,
16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on Value
Added Tax, which was adopted by the Seimas on 14 October 1997,
the notions "per year" and "income" were specified in more
detail in Paragraph 3 (wording of 14 October 1997) of Article 6
of the Law. It was also mentioned that the same legal
regulation was established in Paragraph 3 (wordings of 7 April
1994 and 14 October 1997) of Article 6 of the Law.
Article 6 (wording of 14 October 1997) of the Law was set
forth as follows:
"VAT for the sold goods and provided services shall not be
calculated and paid to the budget by the persons whose income
(earnings) from sales, excluding sales of long-term assets,
which were used for more than a year, does not exceed LTL 5
thousand per year (during the last 12 months). VAT for the
purchased goods or received services, paid by such persons,
shall not be compensated for.
The persons whose income (earnings) specified in the first
paragraph of this article comprises from LTL 5 to 50 thousand
per year (during the last 12 months), shall be granted the
right to register themselves, upon their wish, as tax payers.
Such persons shall pay VAT to the budget (VAT shall be
reimbursed to them from the budget) starting at the next month
after the registration.
If the income (earnings) of these persons for the sold
goods and provided services exceeds LTL 50 thousand per year
(during the last months), VAT is to be calculated and paid to
the budget under the common procedure starting at the month
when the exceeding occurred.
VAT shall not be calculated and paid to the budget by the
companies of free economic zones acting in these zones."
5.3. Article 7 (wording of 26 January 1995) of the Law
used to provide:
"The persons who are considered to be VAT payers under the
provisions of Article 6 must register themselves as VAT payers
at a state tax inspectorate.
A state tax inspectorate shall also register newly
established enterprises, which predict that their income from
sales will exceed the sum established in Article 6.
The farmers who are subject to the compensational tariff
of VAT must also register themselves at a state tax
inspectorate."
During the period from 16 May 1996 till 30 June 1998
Article 7 of the Law was neither amended, nor supplemented.
5.4. Thus, under Articles 6 and 7 of the Law, during the
period of 16 May 1996 to 30 June 1998 the following persons
were obliged to pay VAT:
1) the persons whose income for the sold goods and
provided services exceeded LTL 50 thousand per year (Paragraph
3 of Article 6); such persons had to register themselves as VAT
payers at a state tax inspectorate (Paragraph 1 of Article 7);
the obligation to pay VAT used to appear in all the cases, when
the income for the sold goods and provided services exceeded
LTL 50 thousand per year, irrespective of the fact whether the
person had registered himself as a VAT payer at a state tax
inspectorate or not (Paragraph 3 of Article 6); VAT was started
to be paid at the month when the income for the sold goods and
provided services exceeded LTL 50 thousand per year;
2) the persons whose income for the sold goods and
provided services amounted to LTL 5 to 50 thousand per year, if
they voluntarily used to register themselves as VAT payers at a
state tax inspectorate (Paragraph 2 of Article 6 and Paragraph
1 of Article 7); such persons had to pay VAT to the budget
starting at the next month after their registration (Paragraph
2 of Article 6).
6. VAT tariffs were established in Article 14 (wording of
23 January 1996), Paragraph 1 of Article 38 (wordings of 31
October 1995 and 16 May 1996), and Paragraph 2 of Article 38
(wording of 14 November 1996) of the Law.
6.1. The following was established in Article 14 (wording
of 23 January 1996) of the Law:
"VAT shall be calculated on the basis of 18 percent
tariff, calculated from taxable value of the sold or imported
goods (provided services), or of 15.25 percent tariff,
calculated from the value of goods and services, including VAT.
The 15.25 percent tariff is applied when calculating VAT:
1) if the goods are sold (services are provided) for cash,
and no VAT invoice is issued;
2) if the size of the price of goods (tariff of services)
is established by state governing institutions;
3) if VAT is not indicated in the invoice for the taxable
goods (services). Those, who receive the goods and services
have no right to calculate VAT of the purchase in this way and
to include it in the deductibles;
4) in other cases established by the Government of the
Republic of Lithuania."
6.2. The following was established in Paragraph 1 of
Article 38 (wording of 31 October 1995) of the Law:
"The compound feedingstuff, fish and agricultural
production, with the exception of soft-coated carnivorous
animals, nutrias and their fur, as well as foodstuff produced
from this production, which was not subject to the general
excise tax prior to VAT introduction, and which was produced by
producers of the Republic of Lithuania, shall be subject to a
provisional 9 percent (and in cases provided for in the second
paragraph of Article 14 of this Law-8.25 percent) VAT tariff
until 1 January 1997. The list of these goods shall be
established by the Government of the Republic of Lithuania."
6.3. Paragraph 1 of Article 38 (wording of 31 October
1995) of the Law was amended by Article 1 of the Law on
Amending Article 38 of the Republic of Lithuania Law on Value
Added Tax, which was adopted by the Seimas on 16 May 1996: in
the amendments the taxable objects were specified in more
detail.
6.4. Article 38 (wording of 16 May 1996) of the Law was
supplemented by Article 2 of the Law on Supplementing Articles
25 and 38 of the Law on Value Added Tax, which was adopted by
the Seimas on 14 November 1996, whereby Article 38 of the Law
was supplemented with new Paragraph 1; the content of former
Paragraph 1 of Article 38 (wording of 16 May 1996) remained
unchanged, but it became Paragraph 2 of Article 38 (wording of
14 November 1996).
In Article 38 (wording of 14 November 1996) of the Law the
same VAT tariffs were established as in Article 38 (wordings of
31 October 1995 and 16 May 1996) of the Law.
6.5. Thus, the following VAT tariffs were established in
Article 14 and 38 of the Law from 16 May 1996 till 30 June
1998:
1) the 18 percent tariff calculated from the taxable value
of sold or imported goods (provided services) (Paragraph 1 of
Article 14);
2) the 15.25 percent tariff calculated from the value of
goods and services, VAT included (Paragraph 1 of Article 14),
is applied: (a) if the goods are sold (services are provided)
for cash, and no VAT invoice is issued; (b) if the size of the
price of goods (tariff of services) is established by state
governing institutions; (c) if VAT is not indicated in the
invoice for the taxable goods (services) (those who receive the
goods and services have no right to calculate VAT of the
purchase in this way and to include it in the deductibles); (d)
in other cases established by the Government (Paragraph 2 of
Article 14);
3) the provisional (until 1 January 1997) 8.26 percent
tariff applicable in cases provided for in Paragraph 2 of
Article 14 of the Law, when imposing the tax on the compound
feedingstuff, fish and agricultural production, with the
exception of soft-coated carnivorous animals, nutrias and their
fur, as well as foodstuff produced from this production, which
was not subject to the general excise tax prior to VAT
introduction, and which were produced by producers of the
Republic of Lithuania (Article 38).
7. The rule of calculation of the sum of VAT payable to
the budget was established in Article 15 (wording of 22
December 1993) of the Law. It was established therein:
"Upon expiry of the taxation period, VAT payers must pay
to the budget the difference between the sum of VAT calculated
for the sold goods and provided services and the deductible sum
of VAT."
Article 15 (wording of 22 December 1993) of the Law was
not amended or supplemented.
8. The provisions according to which the sum of VAT
payable to the budget was calculated were consolidated in other
articles (parts thereof) of the Law, as well.
8.1. The sum which is to be considered a "deductible sum
of VAT" was established in Article 16 (wording of 23 January
1996) of the Law. It was established therein:
"The deductible sum of VAT is a sum of VAT for the goods
supplied, and services provided by a supplier, as well as the
imported goods, which is included in the accounting and meant
for production or sale of taxable goods, and provision of
taxable services. If the goods or services which were received
on credit, are paid for upon the expiry of the period of 30
calendar days, only the sum paid to suppliers for the goods
supplied or services provided by them may be deducted."
8.2. By Article 4 of the Law on Amending Articles 4, 5, 6,
16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on Value
Added Tax, which was adopted by the Seimas on 14 October 1997,
the sentence: "If the goods or services which were received on
credit, are paid for upon the expiry of the period of 30
calendar days, only the sum paid to suppliers for the goods
supplied or services provided by them may be deducted" was
excluded from Article 16 (wording of 23 January 1996). The rule
established in Article 16 (wording of 23 January 1996) of the
Law regarding the sum which is considered to be a "deductible
sum of VAT" remained unchanged.
8.3. It was inter alia established in Paragraph 1 of
Article 17 (wording of 23 January 1996) of the Law that "if the
deductible sum of VAT during the taxation period exceeds the
sum of VAT for the sold goods and provided services, the payer
may submit to a territorial state tax inspectorate an
application of the established form to recover the difference.
The difference shall be recovered not later than within 10 days
of the date of submission of the written application by the
payer, but not earlier than the beginning of the period of VAT
payment to the budget, established in Article 35 of the Law."
The circumstances under which the said difference is recovered
to the VAT payer were also specified in Paragraph 1 of Article
17 (wording of 23 January 1996) of the Law.
8.4. Article 17 (wording of 23 January 1996) of the Law
was supplemented by Article 1 of the Republic of Lithuania Law
on Amending Articles 17, 18, 26, 27, 28, and 41 of the Law on
Value Added Tax which was adopted by the Seimas on 25 February
1997: in the amendment an additional circumstance was
established under which the difference which occurred due to
the fact that the deductible sum of VAT is bigger than the sum
of VAT for the sold goods and provided services is recovered to
the VAT payer.
8.5. Article 17 (wording of 25 February 1997) of the Law
was supplemented by Article 5 of the Law on Amending Articles
4, 5, 6, 16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on
Value Added Tax, which was adopted by the Seimas on 14 October
1997: in the amendment one of the circumstances was specified
in more detail, under which the difference which occurred due
to the fact that the deductible sum of VAT is bigger than the
sum of VAT for the sold goods and provided services is
recovered to the VAT payer.
8.6. The cases in which the VAT sums due to be paid by
other VAT payers may be deducted were established in Article 18
(wording of 23 January 1996) of the Law. It was established
therein:
"The sums of the tax which are due to be paid by other VAT
payers may only be deducted if they are specified in VAT
invoices. The sums of VAT for the imported goods may be
deducted only when the import documents of the goods contain a
respective customs mark, stating that the tax has been
calculated and paid by the importer to the budget. VAT for the
imported long-term assets for production may be set off under
procedure established by the Government of the Republic of
Lithuania.
Special shops may calculate the price of purchased goods
and deduct VAT upon selling second-hand goods, which were
purchased from the residents of the Republic of Lithuania,
according to procedure established by the Government of the
Republic of Lithuania."
8.7. Article 18 (wording of 23 January 1996) of the Law
was supplemented by Article 2 of the Law on Amending and
Supplementing Articles 17, 18, 26, 27, 28, and 41 of the Law on
Value Added Tax, which was adopted by the Seimas on 25 February
1997. In these amendments more details were provided about the
cases when it is possible to deduct sums of VAT due to be paid
by other VAT payers: "VAT sums due to be paid by other VAT
payers may be deducted" also when "in cases provided for by the
Government of the Republic of Lithuania they are specified
<...> in other accounting documents". In these amendments the
notion "long-term assets for production" used in Article 18
(wording of 23 January 1996) of the Law was specified in more
detail.
8.8. In Article 18 (wording of 23 January 1996) of the Law
it was established what VAT for goods and services which was
included in accounting is not deducted from the calculated sum
of VAT for the sold goods and services.
8.9. Article 19 (wording of 23 January 1996) of the Law
was amended by Article 6 of the Law on Amending Articles 4, 5,
6, 16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on Value
Added Tax, which was adopted by the Seimas on 14 October 1997:
it was corrected as to what VAT for the sold goods and
services, which was included in the accounting, is not deducted
from the calculated sum of VAT for the sold goods and services.
8.10. In Article 20 (wording of 22 December 1993) of the
Law it was established in what way the sum of VAT for goods and
services which is included in the accounting payable to the
suppliers within the taxation period is deducted in case the
producer produces goods (provides services), which are taxable
and non-taxable with VAT:
"If the payer produces goods (provides services), which
are taxable and non-taxable with VAT, the sum of VAT for goods
and services (with the exceptions specified in Article 19),
which is included in the accounting, payable to the suppliers
within the taxation period shall be deducted in proportion to
the value of the taxable and non-taxable goods (services)
dispatched (provided) to the buyers within this period.
In regard to the cases listed in this article the
Government of the Republic of Lithuania may establish a
different procedure of VAT deduction as well."
8.11. Article 20 (wording of 22 December 1993) of the Law
was amended by Article 7 of the Law on Amending Articles 4, 5,
6, 16, 17, 19, 20, 23, 25, 29, 35, and 36 of the Law on Value
Added Tax, which was adopted by the Seimas on 14 October 1997:
in the amendments the procedure of deduction of the sum of VAT
for the goods and services, which is to be paid to the
suppliers, when the payer produces goods (provides services)
taxable and non-taxable with VAT, was specified in more detail.
8.12. Other cases where the paid VAT is recovered were
established in Article 21 (wording of 23 January 1996) of the
Law. It was established in this article as follows:
"The paid VAT shall be recovered:
1) on a parity basis to the diplomatic and consular
missions of foreign states for the goods purchased and services
received in the Republic of Lithuania, which are meant for the
official activity of the mission, as well as to the officials
of these missions and their family members for the goods
purchased according to the list compiled by the Government of
the Republic of Lithuania for their personal needs;
2) to the international organisations for the goods
purchased and services received in the Republic of Lithuania,
which are meant for the official activity of the mission, and
to the officials of these organisations and their family
members for the goods purchased, according to the list compiled
by the Government of the Republic of Lithuania, for their
personal use, if the agreements of these organisations with the
Republic of Lithuania provide that no VAT or a tax identical to
it shall be taken or that they will be recovered;
3) under the procedure established by the Government of
the Republic of Lithuania for the imported goods and services,
which are paid for according to the technical or humanitarian
assistance programs by using funds of foreign states,
international organisations and funds, and loans granted to the
state, as well as state-secured funds granted to the
establishments that are financed from the budget. If the term
of VAT payment has not expired and the tax has not been paid,
it may be annulled. Under the procedure established by the
Government of the Republic of Lithuania this tax may also be
recovered for goods and services, purchased in the Republic of
Lithuania according to the technical assistance programs and
for the funds of loans granted to the state and the
state-secured funds of loans granted to the establishments that
are financed from the budget. If the international treaties
provide for other rules of taxation with VAT and these treaties
are ratified by the Republic of Lithuania, the rules of the
international treaties shall apply."
8.13. By Article 8 of the Republic of Lithuania Law on
Amending and Supplementing Articles 2, 4, 9, 10, 11, 12, 13,
21, 22, 23, 24, 25, 35, 36, and 38 of Law on Value Added Tax,
adopted on 9 December 1997, Article 21 (wording of 23 January
1996) of the Law was supplemented with new Item 4, according to
which the paid VAT is recovered "in cases established in the
Customs Code".
9. When summarising the above mentioned legal regulation
in the context of the case at issue, it is to be held that
within the period from 16 May 1996 till 30 June 1998 the
following common procedure of calculation of the sum of VAT
payable to the budget was established in the Law:
1) the persons whose income for the sold goods and
provided services exceeded LTL 50 thousand per year had the
obligation to pay VAT; such persons had to register themselves
as VAT payers at a state tax inspectorate; the duty to pay VAT
used to originate in all cases, when income for the sold goods
and provided services exceeded LTL 50 thousand per year,
irrespective of the fact whether the person had registered
himself as a VAT payer at a state tax inspectorate or not; VAT
used to be started to be paid at the month when the income for
the sold goods and provided services exceeded LTL 50 thousand
per year;
2) the persons whose income for the sold goods and
provided services amounted to LTL 5 to 50 thousand per year had
the obligation to pay VAT, if they had voluntarily registered
themselves as VAT payers at a state tax inspectorate; such
persons had to pay VAT to the budget starting at the next month
after the registration;
3) all VAT payers had the duty to pay the difference
between the calculated sum of VAT for the sold goods and
provided services and the sum of deductible VAT;
4) the sum of deductible VAT is a sum of VAT, calculated
upon the procedure established by the law and included in the
accounting, for the goods supplied and services provided by
suppliers, as well as imported goods, which are meant for
production and sale of taxable goods or provision of taxable
services;
5) it was possible to deduct sums of VAT due to be paid by
other VAT payers only in cases then they were specified in VAT
invoices;
6) if the VAT payer produced (provided) goods (services)
both taxable and non-taxable with VAT, the included in the
accounting sum of VAT for goods and services (save the
exceptions specified in the Law) payable to suppliers within
the taxation period would be deducted in proportion to the
value of both taxable and non-taxable goods dispatched
(services provided) to buyers during the said period.
10. In Articles 7, 8, 15, 18 and others (the wordings of
the period from 16 May 1996 till 30 June 1998) the notion "VAT
payer" was used. This notion was not separately defined in the
Law; it was established therein as to what persons must pay VAT
(Paragraphs 2 and 3 of Article 6), and it was consolidated that
the persons who are VAT payers under the provisions of Article
6 of the Law must register themselves as VAT payers at a state
tax inspectorate (Paragraph 1 of Article 7).
According to Article 2 (wording of 28 June 1995) of the
Law on Tax Administration, in which the notions used in the tax
law are defined, the tax payer is "a person, to whom obligation
to pay taxes is established under the tax law". In Article 2
(wording of 28 June 1995) of the Law on Tax Administration it
was also established that the notions used therein have the
content which is specified in this (i.e. tax administration)
law, if it is not established in a different way in the tax
law. Thus, if no other content of the notion "VAT payer" was
established in the Law on Value Added Tax, the content of this
notion could not be construed on the basis other than the
content of the notion "tax payer" defined in Article 2 (wording
of 28 June 1995) of the Law on Tax Administration: the tax
payer is a person, to whom an obligation to pay VAT is
established under the Law on Value Added Tax.
It was established in the Law on Value Added Tax as to
what persons have the obligation to pay VAT: these are the
persons whose income for the sold goods and provided services
exceeded LTL 50 thousand per year, irrespective of the fact
whether the person has registered himself as a VAT payer at a
state tax inspectorate or not, as well as the persons whose
income for the sold goods and provided services amounted to LTL
5 to 50 thousand per year, if they voluntarily used to register
themselves as VAT payers at a state tax inspectorate. Thus,
under Article 2 (wording of 28 June 1995) of the Law on Tax
Administration and Article 6 (wordings of 7 April 1994 and 14
October 1997) of the Law on Value Added Tax, the notion "VAT
payer" in the Law on Value Added Tax comprised all the persons
to whom the obligation to pay VAT was established.
It needs to be stressed that the Law on Value Added Tax
(the wordings which were effective in the period from 16 May
1996 till 30 June 1998) contained no provisions under which the
notion "VAT payer" would comprise not all, but only some of the
persons to whom the obligation to pay VAT was established,
inter alia that it would not comprise the persons who have the
obligation to pay VAT, but have not registered themselves as
VAT payers at a state tax inspectorate.
11. It was mentioned that in Article 15 (wording if 22
December 1993) of the Law the rule of calculation of the sum of
VAT payable to the budget was established: upon expiry of the
taxation period VAT payers had to pay to the budget the
difference between the calculated sum of VAT for the sold goods
and provided services and the deductible sum of VAT. As, under
Article 2 (wording of 28 June 1995) of the Law on Tax
Administration and Article 6 (wordings of 7 April 1994 and 14
October 1997) of the Law on Value Added Tax, the notion "VAT
payer" in the Law on Value Added Tax comprised all the persons
to whom the obligation to pay VAT was established, then the
rule of calculation of the sum of VAT payable to the budget,
established in Article 15 (wording of 22 December 1993) of the
Law, was aimed at all the persons specified in the Law on Value
Added Tax, to whom the obligation to pay VAT was established
under the Law on Value Added Tax: all of them had to pay to the
budget the difference between the calculated sum of VAT for the
sold goods and provided services and the deductible sum of VAT.
It needs to be stressed that the Law on Value Added Tax
(the wordings which were effective from 16 May 1996 till 30
June 1998) contained no provisions according to which any
persons, under the notion "VAT payer" used in the Law, would
have no right to deduct the included in the accounting the sum
of VAT for the goods supplied and services provided by a
supplier, as well as the imported goods meant for production or
sale of taxable goods, and provision of taxable services, inter
alia according to which this right would not be granted to the
persons who have the established by the Law duty to pay VAT,
but have not registered themselves as VAT payers at a state tax
inspectorate.
12. The rule of calculation of the sum of VAT payable to
the budget, established in Article 15 (wording of 22 December
1993) of the Law, determines the size of the sum of VAT payable
to the budget.
The rule of calculation of the payable to the budget sum
of the tax, which determines the size of the payable to the
budget sum of the tax, is the essential element of the tax.
In this Constitution Court Ruling it was held that
substatutory acts establishing the procedure of implementation
of tax laws may not contain norms establishing the legal
regulation other than the one established by the law and
competing with the norms of the law.
13. It was mentioned that under Paragraph 3 (wordings of 7
April 1994 and 14 October 1997) of Article 6 and Article 15
(wording of 22 December 1993) of the Law, all the persons to
whom the obligation to pay VAT was established in the Law, thus
also the persons who, according to the Law, had the obligation
to pay VAT but had not registered themselves as VAT payers at a
state tax inspectorate, upon expiry of taxation period had the
duty to pay to the budget the difference between the calculated
sum of VAT for the sold goods and provided services and the
deductible sum of VAT; all of them, thus also the persons who,
according to the Law, had the obligation to pay VAT, but had
not registered themselves as VAT payers at a state tax
inspectorate, had the right to deduct the included in the
accounting sum of VAT for the goods supplied and services
provided by a supplier, as well as the imported goods, which
were meant for production or sale of taxable goods, and
provision of taxable services (had the right to deduct VAT for
the purchase).
Meanwhile, according to Item 11 of the Procedure the
persons who had not registered themselves as VAT payers, but
who had the duty to pay VAT, had no right to deduct the sum of
VAT for the purchased goods (received services) from the sum of
VAT calculated for the sold goods (provided services).
Having compared the provision "The persons who have not
registered themselves as VAT payers and whose income from sales
exceeds LTL 50 thousand per year (during the last 12 months),
<...> have no right to indicate VAT in invoices, as well as the
right to deduct VAT for the purchased goods (received services)
from VAT calculated for the sold goods (provided services)" of
Item 11 of the Procedure with the provision of Paragraph 3
(wording of 7 April 1994 and 14 October 1997) of Article 6 that
the persons whose income for the sold goods and provided
services exceeds LTL 50 thousand "must calculate VAT <...>
under the common procedure", and Article 15 (wording of 22
December 1993) of the Law, it is to be held that by the
provision "The persons who have not registered themselves as
VAT payers and whose income from sales exceeds LTL 50 thousand
per year (during the last 12 months), <...> have no right to
indicate VAT in invoices, as well as the right to deduct VAT
for the purchased goods (received services) from VAT calculated
for the sold goods (provided services)" of Item 11 of the
Procedure the range of the persons who, under the Law, had the
right to deduct the included in the accounting sum of VAT for
the goods supplied and services provided by a supplier, as well
as the imported goods, which were meant for production or sale
of taxable goods, and provision of taxable services, was
narrowed. Alongside, it is to be held that Item 11 of the
Procedure established the rule of calculation of the sum of VAT
payable to the budget, designed to the persons who had not
registered themselves as VAT payers and determining the size of
the sum of VAT payable to the budget, which competed with the
one established in the Law.
14. Having held this, it is to be held also that the
provision "The persons who have not registered themselves as
VAT payers and whose income from sales exceeds LTL 50 thousand
per year (during the last 12 months), <...> have no right to
indicate VAT in invoices, as well as the right to deduct VAT
for the purchased goods (received services) from VAT calculated
for the sold goods (provided services)" of Item 11 of the
Procedure was in conflict with the provision of Paragraph 3
(wording of 7 April 1994 and 14 October 1997) of Article 6 that
the persons whose income for the sold goods and provided
services exceeds LTL 50 thousand "must calculate VAT <...>
under the common procedure", and Article 15 (wording of 22
December 1993) of the Law.
15. In this Constitutional Court Ruling it was held that
the provisions of Item 11 of the Procedure comprise a single
whole and are inseparable from one another, and if it was held
that any single provision of Item 11 of the Procedure is in
conflict with a law (part thereof) and (or) the Constitution,
this would mean that it was entire Item 11 of the Procedure
that was in conflict with this law (part thereof) and/or the
Constitution.
It was also held that all provisions of Paragraph 3
(wordings of 7 April 1994 and 14 October 1997) of Article 6 of
the Law comprise a single whole and are inseparable from one
another, and if it was held that entire Item 11 of the
Procedure or any single provision of Item 11 of the Procedure
is in conflict with any provision of Paragraph 3 (wordings of 7
April 1994 and 14 October 1997) of Article 6 of the Law, this
would mean that Item 11 of the Procedure is in conflict with
whole Paragraph 3 (wordings of 7 April 1994 and 14 October
1997) of Article 6 of the Law.
16. Having taken account of the arguments set forth, a
conclusion is to be made that Item 11 of the Procedure was in
conflict with Paragraph 3 (wordings of 7 April 1994 and 14
October 1997) of Article 6, and Article 15 (wording of 22
December 1993) of the Law.
IV
On the compliance of Item 11 of the Procedure of
Registration of Value Added Tax Payers confirmed by Item 2.4 of
Government Resolution No. 546 "On Value Added Tax" of 9 May
1996 with Item 15 of Article 67 and Paragraph 3 of Article 127
of the Constitution.
1. It was mentioned that according to Item 15 of Article
67 and Paragraph 3 of Article 127 of the Constitution it is
only the Seimas who may establish taxes and it may be done only
by a law; the essential elements of the tax, such as the size
of the tax, may be established only by the law.
2. It was held in this Constitutional Court Ruling that by
the provision "The persons who have not registered themselves
as VAT payers and whose income from sales exceeds LTL 50
thousand per year (during the last 12 months), <...> have no
right to indicate VAT in invoices, as well as the right to
deduct VAT for the purchased goods (received services) from VAT
calculated for the sold goods (provided services)" of Item 11
of the Procedure the range of the persons who, under the Law,
had the right to deduct the included in the accounting sum of
VAT for the goods supplied and services provided by a supplier,
as well as the imported goods, which were meant for production
or sale of taxable goods and provision of taxable services, was
narrowed, that in Item 11 of the Procedure established the rule
of calculation of the sum of VAT payable to the budget,
designed to the persons who had not registered themselves as
VAT payers and determining the size of the sum of VAT payable
to the budget, which competed with the one established in the
Law, and that Item 11 of the Procedure was in conflict with
Paragraph 3 (wordings of 7 April 1994 and 14 October 1997) of
Article 6, and Article 15 (wording of 22 December 1993) of the
Law.
3. Having held this, it is to be held that Item 11 of the
Procedure was in conflict with Item 15 of Article 67 and
Paragraph 3 of Article 127 of the Constitution, as well.
Conforming to Articles 102 and 105 of the Constitution of
the Republic of Lithuania and Articles 1, 53, 54, 55 and 56 of
the Law on the Constitutional Court of the Republic of
Lithuania, the Constitutional Court of the Republic of
Lithuania has passed the following
ruling:
1. To recognise that Item 11 of the Procedure of
Registration of Value Added Tax Payers confirmed by Item 2.4 of
Government of the Republic of Lithuania Resolution No. 546 "On
Value Added Tax" of 9 May 1996 was in conflict with Item 15 of
Article 67 and Paragraph 3 of Article 127 of the Constitution
of the Republic of Lithuania.
2. To recognise that Item 11 of the Procedure of
Registration of Value Added Tax Payers confirmed by Item 2.4 of
Government of the Republic of Lithuania Resolution No. 546 "On
Value Added Tax" of 9 May 1996 was in conflict with Paragraph 3
(wordings of 7 April 1994 and 14 October 1997) of Article 6,
and Article 15 (wording of 22 December 1993) of the Republic of
Lithuania Law on Value Added Tax
This Constitutional Court ruling is final and not subject
to appeal.
The ruling is promulgated in the name of the Republic of
Lithuania.
Justices of the Constitutional Court: Armanas Abramavičius
Egidijus Jarašiūnas
Egidijus Kūris
Kęstutis Lapinskas
Zenonas Namavičius
Augustinas Normantas
Jonas Prapiestis
Vytautas Sinkevičius
Stasys Stačiokas