Company reorganisation in Lithuania: what to tell VMI and Sodra
When a company is reorganised in Lithuania, the Regulations of the Register of Legal Entities do not require a certificate from the State Tax Inspectorate (VMI) or the State Social Insurance Fund Board (Sodra) for deregistration. The main notice goes to Sodra: the 6-SD notice of the insurer’s reorganisation. In a merger by absorption or a division by absorption, the company being reorganised files it within 3 days of the registration of its “being reorganised” status. In a merger into a new company or a division into new companies, the new company files it within 10 days of its registration. The Law on Tax Administration, the Law on Corporate Income Tax and the Law on VAT set no separate notice to VMI about the reorganisation. But the successor takes over the tax obligations, a newly registered company files registration data, and for operations listed in Article 41 of the Law on Corporate Income Tax the reorganisation data are stated in the explanatory note to the successor’s financial statements.
What goes to the Register of Legal Entities first
A reorganisation starts at the Register of Legal Entities, run by the Centre of Registers (Registrų centras). No later than on the first day of public notice of the terms of reorganisation, the register receives an application to register the status “being reorganised” or “participating in a reorganisation”, together with the terms of reorganisation and, where the law requires them, the evaluation and management reports and the supervisory authority’s permit (point 149 of the Regulations of the Register of Legal Entities, JAR nuostatų 149 p.). The decision on the reorganisation is filed with the register no later than five days after it is adopted (point 152 of the JAR Regulations).
To deregister the company, the register receives an application and, where the Law on Financial Reporting by Undertakings and Groups applies to the company, the financial statement at the end of the reorganisation, or financial statements prepared under IFRS (point 212 of the JAR Regulations). No VMI or Sodra certificate is listed there. By contrast, in a liquidation VMI itself sends the register a notice on whether the company has settled with the budget (Article 90(4) of the Law on Tax Administration of the Republic of Lithuania (MAĮ)). How the dates of a reorganisation are counted is covered in Company reorganisation: dates, shareholders and the notary.
What to tell Sodra
Article 13 of the Law on State Social Insurance of the Republic of Lithuania (VSDĮ) requires insurers to submit social insurance notices and other documents needed to calculate contributions, benefits and insurance record. Insurers must provide correct data about themselves and the insured persons (Article 17(3) VSDĮ). The specific notices and deadlines are set by the Rules on submitting and correcting data on insured persons and insurers, approved by order of the director of the State Social Insurance Fund Board (the Sodra Rules).
The 6-SD notice is filed when a legal person is reorganised, whatever the method of reorganisation (point 22 of the Sodra Rules). Who files it and when depends on the method.
Merger by absorption and division by absorption. The company being reorganised files the 6-SD notice with a certified copy of the terms of reorganisation within 3 days of the registration of its “being reorganised” status (point 28 of the Sodra Rules). If several companies are absorbed, each of them files the notice (point 29). In a division by absorption, a notice is filed for each company to which rights and obligations pass (point 30).
The employees’ insurance with the company being reorganised is ended by a 2-SD notice within 3 working days of the end of the insurance (point 31). The company with which the insurance continues files a 1-SD notice within 3 working days of the start of the insurance (point 32).
Merger into a new company and division into new companies. Here the new company files everything: the 6-SD notice with a copy of the terms of reorganisation and the 2-SD notice, and the 1-SD notice at its own Sodra division (point 24). In a merger, a 6-SD notice is filed for each company being reorganised (point 25). In a division, each new company files it (point 26).
Two points set the deadlines differently. The 6-SD notice is filed within 10 days of the day of reorganisation, when the new company is registered (point 27). The 1-SD and 2-SD notices are filed within 10 working days together with the 6-SD notice (point 18.4). It is safer to file all three within 10 calendar days.
Separation. The Rules provide no 6-SD notice for a separation: the 6-SD form lists only merger by absorption, merger into a new company, division by absorption and division into new companies (point 33.11 of the Sodra Rules). Moving employees to the new company is documented by 1-SD and 2-SD notices with the reason “insurer being reorganised or a separation being carried out” (point 16.3 of the Sodra Rules). The Rules set no special deadline for these notices in a separation (points 18.1, 18.4 and 18.5 of the Sodra Rules). Whether employees must consent to a reorganisation is covered in Company reorganisation: creditor and employee consent.
What the law says about VMI
The Law on Tax Administration, the Law on Corporate Income Tax and the Law on VAT set no separate notice to VMI of the start of a reorganisation. The following general and special rules apply.
Registration data. A newly registered company files its registration data with the Register of Taxpayers no later than 5 working days after its legal registration or, if it starts activity earlier, no later than the day activity starts (Article 46(1) MAĮ). Changes to the data are reported within 5 working days (Article 46(2) MAĮ). Data that VMI receives from another register under a data supply agreement need not be filed directly (Article 46(3) MAĮ). Insurers register in the Register of Taxpayers as the Law on Tax Administration provides, except insurers registered automatically (Article 17(1) VSDĮ).
Tax obligations. The tax obligation of a reorganised company must be met by its successor to rights and obligations (Article 91(1) MAĮ). If the company being reorganised has no tax arrears, its tax overpayment is refunded or offset to the successor (Article 91(3) MAĮ). In a reorganisation a tax audit may be carried out regardless of the usual limits on the frequency of audits (Article 117(3)(1) MAĮ).
Corporate income tax. Article 46 of the Law on Corporate Income Tax of the Republic of Lithuania (PMĮ) is headed “Accounting statements”. Where the reorganisation is one of the operations listed in Article 41 PMĮ, the acquiring company’s explanatory note for the tax period states in which tax period the assets and rights were transferred (Article 46(1) PMĮ). The last balance sheet of the reorganised company (Article 46(2) PMĮ) and the differences in the residual value of depreciable assets (Article 46(3) PMĮ) are filed with it. Failure to give this data to the tax administrator on time carries liability under the law (Article 46(5) PMĮ).
VAT. Where a VAT payer takes over assets because of another VAT payer’s reorganisation, the successor accounts for and pays the VAT calculated in the document issued by the ending company (Article 96(1)(1) of the Law on Value Added Tax of the Republic of Lithuania (PVMĮ)). A person deregistered from the VAT register files a special VAT return within 20 days of deregistration (Article 88(1) PVMĮ). The law sets no separate deadline for a reorganisation, and the obligations of the company that ended are met by the successor (Article 91(1) MAĮ).
Cross-border merger or division
When a public or private limited company merges with a limited liability company of another EU Member State, the Law on Cross-Border Conversions, Mergers and Divisions of Limited Liability Companies of the Republic of Lithuania (VVRPĮ) applies. When applying for the pre-merger certificate, the company also gives the register information on how it has met its obligations to public sector bodies (Article 22(2)(9) VVRPĮ). Among other institutions, the institution administering taxes issues an opinion on legality (Article 22(4)(3) VVRPĮ). It does so no later than 10 weeks after receiving the documents (Article 22(7) VVRPĮ). The same institutions give opinions in a conversion (Article 10(4)(3) VVRPĮ) and in a division (Article 35(4)(3) VVRPĮ).
More on reorganisation
- Reorganisations and separations of companies: service page
- Tax on company reorganisation in Lithuania: corporate tax, VAT, losses
- Employees in a company reorganisation: Article 51, CEO and works council
- Reorganisation filings with the Centre of Registers: steps and time limits
How to start
Send us the terms of reorganisation or their draft and the Centre of Registers extracts, and tell us how many employees each company has and which of them are VAT payers. We will prepare a list of notices to the Centre of Registers, Sodra and VMI with their deadlines.
Phone +370 5 212 1506, email info@linden.lt
More about this service: Reorganisations and separations of companies.
