On 26 July 2021 the OECD issued a stage two peer review report on Lithuania in relation to action 14 of the action plan on base erosion and profit shifting (BEPS). Action 14 of BEPS is concerned with making dispute resolution mechanisms more effective.

The minimum standard under BEPS action 14 is concerned with measures that need to be in place to ensure that dispute resolution processes are effective. Member countries of the OECD’s Inclusive Framework are being reviewed and monitored in the peer review process in relation to compliance with the minimum standard.

Lithuania has negotiated a relatively extensive tax treaty network with more than 50 tax treaties in place; and has signed and ratified the EU Arbitration Convention. There is an established MAP programme, with two cases pending on 31 December 2019.

Lithuania meets most of the elements of the Action 14 Minimum Standard. Some issues were found in the stage one peer review, and Lithuania has dealt with some of them. Progress has been monitored in the stage two peer review and Lithuania has solved most of the issues identified.

All of Lithuania’s tax treaties contain a provision relating to MAP. Those treaties mostly follow paragraphs 1 through 3 of Article 25 of the OECD Model. The treaty network is generally consistent with the minimum standard, however 7% of the tax treaties do not include a provision providing for mutual agreements to be implemented regardless of any time limits in domestic law, as required under Article 25(2), and also do not include the alternative provisions for Article 9(1) and Article 7(2) regarding a time limit for transfer pricing adjustments.

Lithuania therefore needs to update some of the tax treaties to bring them in line with the minimum standard. Lithuania has signed and ratified the Multilateral Instrument (MLI) to implement tax treaty related BEPS measures into its bilateral tax treaties, and a number of its treaties are being modified to bring them in line with the minimum standard. In the case of treaties not covered by the MLI, Lithuania intends to update them through bilateral negotiations to align them with the requirements under the minimum standard.

With regard to the prevention of tax disputes, Lithuania has a bilateral APA programme, but does not allow the roll-back of bilateral APAs as required by the minimum standard. Lithuania intends to allow roll-back in the future.

The administrative dispute resolution process is independent from the audit function in the tax administration and can only be accessed if the taxpayer requests it.

Access to the MAP is provided in all eligible cases and there is a documented bilateral consultation process where the competent authority considers the issue raised in a MAP request is not justified. Lithuania has published comprehensive guidance on the availability of the MAP and the procedure to follow.

In the years 2016 to 2019 MAP cases were closed on average within the target period of 24 months, the average time to close a case being 21.44 months, and Lithuania meets all the other requirements under the minimum standard in relation to the resolution of MAP cases.

The competent authority operates independently from the audit function in the tax administration. Lithuania is also in line with the minimum standard in relation to the implementation of MAP agreements.