Slikto parādu piedziņa Lietuvā.
Bad Debts Practice in Lithuania
The administrative burden for the recognition of bad debts to be allowable deductions, lowering the taxable income, was reduced for companies by the decision of the Ministry of Finance as of June 10th, 2010. The new rules are already applicable for the tax period of the year 2010.
The administrative burden decreased because the bad debts proof and calculation setting rules changed. Its essence is to simplify the requirements for certain bad debts approving documents.
In addition, companies no longer need to have documents proving small debts hopelessness, and their efforts to get back them even in case it is a legal person (so far, this provision was applied only in cases when an individual person was in debt).
Additionally to this, new rules set mandatory documents' alternative in the rules. As for instance, to prove the bad debts, resulting from another company's bankruptcy it will be sufficient to have document, proving the company's, which was liquidated due to bankruptcy, deregistration from the register of legal persons. By now, in such case it was necessary to have a final court order to liquidate the company because of bankruptcy, or the creditors' meeting resolution to declare the company's liquidation due to bankruptcy.
This amendment to the rules will be applicable in counting taxable income of the year 2010 and of subsequent tax periods.
However court practice also determines further requirements in order to write-off bad debts and necessary documentation.
The Supreme Administrative Court as of 30 November 2010 detailed the procedure of determination of bad debts (case No. A575-1725/2010). The disputes was raised due to the fact that the Tax Dispute Commission and the Court disagreed with initial Tax Authorities statement that documentation and information as submitted by one Lithuanian Company were insufficient to claim the basis for recognizing a Company’s based in Kazakhstan debt as bad debt and attribute it to the allowable deductions.
Notably, Lithuanian Company disagreed with required additional documents and information stating the sufficiency of the presented material and the fact that Company based in Kazakhstan is liquidated. The liquidation of the Company is understood as direct link to the fact that the existing debt should be recognized as bad debt. Tax Dispute Commission and the Court at the initial hearings were of the opinion that documentation presented on the liquidation of Kazakhstanis Company and approved by the local institutions are sufficient.
However Supreme Administrative Court ruled that in order to write-off the debt it is necessary to prove that the debt is bad and that respective actions were taken to recover this debt. Therefore the Supreme Administrative Court indicated that the final judicial decision of Lithuanian or a foreign country Court proving that there remains the right to recover the debt and documentation proving the non-fulfillment of the above indicated Court decision presented by the bailiff. As the required documentation was not presented by Lithuanian Company, the Supreme Administrative Court supported the Tax authority’s decision upon which the debt was not accepted as bad debt and attributed to the allowable deductions of Lithuanian Company.
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