Some in Lithuania are more equal than most

Most Lithuanian entrepreneurs, including the largest ones, have learned how to avoid taxes by buying cars, fuel and more on behalf of the company. At best, for entrepreneurs, very expensive cars are bought using the support money given by the state. Most Lithuanians do not have their own businesses, receive a salary in euros and pay the taxes from those euros; taxes that entrepreneurs avoid. We have come to terms with that, which is why we have such a shamefully poor state. We have now started to check, and the image is stunning: 

“Lithuanian State Tax Inspectorate (STI) shakes up companies that have bought luxury cars: family members are driving, but managers are looking for ways to get away. 

As soon as the State Tax Inspectorate started asking companies about the luxury cars they had, hundreds of thousands of sums began to fall into the budget. But this is just the beginning - not all are so benevolent. It is shocking that even the managers of the country's large companies are covering up the fact that the companies use supercars for personal needs - at that time they do not have their own cars, and the spouses receive fines with the company car in the resorts. 

In the country 41 thousand. companies have about 118 thousand cars - an average of three each. Are all cars really for company activities only? In order for the budget to start replenishing, it was enough to send questions from the STI. The STI currently operates in several directions. The first initiative is to ask to explain in good faith the purpose for which companies use cars. The STI sent 18.6 thousand. questionnaires. Half of the companies have already submitted answers: 7.7 thousand companies have not previously calculated that employees or other persons would receive personal benefits, that is, income in kind. 15 percent companies have confirmed that they use cars for private purposes. 

"After sending the questionnaires to more than 2.5 thousand, companies independently revised their declarations and additionally declared 445 thousand EUR VAT, 83 thousand euro of personal income tax ”, - the STI shares the results. The STI went even further - 190 companies were selected, which in the last three years acquired for a price of more than 50 thousand euro cars - a total of 511 vehicles. More than half of these companies were included in the lists of victims of the COVID-19 pandemic before purchasing cars and were able to benefit from a variety of support. Monitoring and control actions have been initiated for them, and as a result - 84 taxpayers have already declared an additional 0.54 million euro taxes. It turns out that 266 cars were used in companies for personal purposes, but only 15 percent companies calculated income in kind. 

“First of all, the STI seeks to encourage companies to self-assess the current situation and draws attention to the risks identified in their company related to the use of cars for private purposes. Unfortunately, interviews do not always bring tangible benefits - some taxpayers who do not calculate income in kind continue to provide untrue information,” - regrets Vaimira Jakienė, Director of the STI Large Taxpayer Consulting and Monitoring Department. 

Unexpectedly, among the crooks are large companies that declare to value their reputation, are audited by major international audit firms, even have their shares traded on a stock exchange, and companies declare extreme transparency. It is unfortunate, however, in accordance with the Law on Tax Administration, the names of these companies cannot be made public. 

Earlier, Mykolas Majauskas, Chairman of the Seimas Budget and Finance Committee, drew attention to the fact that companies have bought luxury cars and are using state aid at the same time. He asked the STI to find out whether the luxury property is not used for private purposes or whether tax deductions and state support are being misused. Shocking examples: a company argues that Porsche is for work, but fines go to spouse in sea resort. The STI shared examples that even companies with supercars are trying to prove that all this is for the company's activities. One manufacturing company, whose shares are publicly traded, owns more than 170 cars. According to the company, all cars are used only for economic activities and no income in kind has been calculated for any car so far. The STI visited - the company explained that it had organized a discussion with employees on the use of cars for personal purposes, during which a decision was made to provide opportunities for employees to use cars for work and personal needs. These changes are expected to take effect from August. and taxes will be declared for the first time in September. The STI was not convinced by the company's offer. “The information available to the STI shows that the cars have been used for private purposes in the past, which is clearly visible from the records of the Administrative Offenses Registers. 

For example, a company-owned Porsche car is assigned to one of the executives, but 3 administrative violations were recorded with this car for a spouse who is not employed by the company, including recorded in Neringa municipality, on the Smiltynė - Nida road over the weekend, ”says V. Jakienė. With a car with a value exceeding 100 thousand. Eur and which is assigned to another manager, violations were recorded for his spouse and son who are not employees of the company on weekends or holidays. Another car with a value exceeding 100 thousand. Eur, which is assigned to the manager, in 2021 as many as 54 speeding offenses were recorded, including on weekends, and some of them were also committed by his family members. "From the information we have, we could conclude that this company, due to the cars used by employees for personal purposes, generates about 160 thousand taxes payable in euros that have not been declared and paid,” - shared V. Jakienė. 

Another case is that the official representative of an international company uses about 40 cars, but the income in kind is not calculated for any of them. STI took an interest in 7 most luxurious cars with a total value of 750 thousand EUR - cars are assigned to the CEO, managers. In most cases, the people who used the cars or their spouses did not have cars registered in their own name. "The records of the register of administrative offenses for the use of these cars are very colorful, the violations were recorded on weekends, holidays and family members. Nevertheless, during the first conversation, the company tried to convince that the cars are used only in economic activities, ”says V. Jakienė. After that, the company changed its mind - informed that an inspection and review of the entire car fleet is being carried out in order to find out whether the cars are used for personal purposes and initiated a meeting with the STI. 

 "During the second meeting, the company's representatives changed their mind and informed that they would calculate the income in kind for 9 cars, but only from July. The STI is not satisfied with such an offer, as there is evidence that the cars have been used before,” - V. Jakienė shrugged. 

The third example is a transport company. Here, the CEO, Purchasing Director, Marketing Director, and Chairman of the Board each have a assigned car, each worth more than 100 thousand euros - to perform official duties. As in previous cases, income in kind has not been calculated for any car, although neither managers nor spouses have cars registered in their own name at all. "The company reacted quite quickly and calculated revenue in kind for 10 cars for a period of 1.5 years from the beginning of the pandemic," - V. Jakienė shared the result. 

She mentioned that there was another company that did not calculate taxes for any car, but ordered a very luxurious set for a Porsche car, the value of which alone amounted to 60 thousand. euros. "The company has explained that it does not use such cars for private purposes either, as it always travels only to / from work for meetings with customers. We could name more similar cases,” - the STI representative sighs.  

So far, STI has been benevolent towards companies, but not for long. "In summary, it can be said that for companies that do not agree to cooperate with the tax administrator in good faith we will have no choice but to initiate control actions," - V. Jakienė promises. 

Not all companies declare additional taxes - they avoid looking at the previous year. "After the STI contact, there is a delay in companies making decisions or companies are trying to trick them into deciding when to start calculating taxes, instead of simply assessing when the car was used for private purposes. This raises the issue of the responsibility of audit companies performing audits of companies,” - says V. Jakienė. 

How is the employee benefit from the car calculated? The STI shares the fact that most companies calculate the benefits in kind received by an employee by applying a value of 0.75 per cent of the market value of the car. For example, if a company provides an employee with an unrestricted use of a car with a market value of $ 30,000. and covers fuel costs, the value of such income amounts to 225 euros per month (30 thousand euros multiplied by 0.75 percent). The personal income tax and social security contributions calculated on such income are usually around € 90 per month. If the car is more expensive, let's say its market value is 50 thousand. The value of income in kind would be EUR 375 per month, respectively - about 150 euros of GPM and Sodra contributions would have to be paid. 

Of the 156 large companies that own 5,169 cars, about 60 percent (92 companies) accounted for $ 4.7 million in the first half of this year alone. EUR in kind income for 2343 cars. 64 companies did not calculate such income."