On 15 January 2018, a draft order amending the regulations of controlled transactions was issued by the Ministry of Finance of the Republic of Lithuania (to amend the Order No. 1K-123 dated 9 April 2004).
The main points in the draft order are the following:
- Earlier, the tax authorities were able to use the database, which was inaccessible to the taxpayer, to assess whether a controlled transaction price was consistent with the arm’s length principle. However, under the new draft regulation, the tax authorities must use the information provided or available to the taxpayer.
- The transfer pricing documentation should comprise of master and local files for certain companies.
- The master file need to be be prepared by the Lithuanian and foreign entities operating in Lithuania through a permanent establishment and having an income of more than 15 million euro during the tax period.
- Earlier, the companies had to prepare a local file if the company’s income exceeded 2,896,200 euros. However, according to the draft order this amount will be increased to 3 million euros.
- A taxpayer must renew its master file of the transfer pricing documentation at least every 3 years if all conditions of the controlled transaction remain unchanged.
- Furthermore, a taxpayer will have to renew its benchmarking study for the interval complying with the requirements of the arm‘s length principle at least every 3 years, if the economic circumstances do not change significantly.
- It should be made clear that the data submitted in the records of the controlled transaction should be updated during each tax period.
