Seimas to adjust the VAT relief for farmers

A proposal to amend the personal income tax (PIT) allowance for farmers, adopted in June as part of the tax reform, is due to be submitted to Parliament on Tuesday.

Seimas agreed that the preferential rates of 15 and 20 per cent of the taxable income of farmers should be reduced to 15 and 20 per cent respectively. The 20/20 and 20/20 rates of GPT will be applied from next year to the incomes of people with farmer's certificates. 

However, as soon as the amendments to the law were adopted, doubts were raised as to whether loopholes had been left that would allow the abuse of this benefit – criticism was voiced by both the Presidency and the Minister of Finance, Kristupas Vaitiekūnas.

Members of the Seimas Matas Skaramakas, Vytautas Jucius and Kęstutis Mažeika, who had previously submitted these proposals to the Parliament, now argue that the preferential tax rates should only apply to income from agricultural activities, including income from the sale or other disposal of property used for such activities, if it is classed as self-employed income.

The draft law also proposes to exclude income from the sale of agricultural activities and property used for such activities from the annual income, which will be subject to progressive tax rates of 20, 25 and 32 per cent from next year.

According to the drafters of the draft law, the vaguely worded tax relief for farmers could cost the state tens of millions if the GPT law adopted in the summer enters into force.

If the amendments registered by the parliamentarians are adopted by the Seimas, they would enter into force together with the tax amendments adopted at the end of the spring session.

ELTA recalls that after the Seimas agreed in June to tax personal income at three progressive rates, it decided to apply 15 or 20 per cent rates to the income of persons holding a farmers' certificate.

According to the draft adopted, the rate would be applied depending on whether the farmer's annual income is below or above 60 average wages (around €138,000).