OFFICIAL TRANSLATION

REPUBLIC OF LITHUANIA

Law on Pollution tax

13 May 1999 No VIII-1183 Vilnius

(As last amended on 29 January 2008 - X-1438)

Article 1. Scope of the Law

1. The Law shall establish the procedure for payment of the pollution tax by natural and legal persons engaged in economic activities in Lithuania as well as branches and representative offices of foreign legal entities and other organizations registered in the Republic of Lithuania (hereinafter referred to as “natural and legal persons”) and its control.

2. The purpose of the Law shall be to apply economic instruments to encourage the polluters to reduce environmental pollution, to carry out waste prevention and waste management, not to exceed the set standards for the emission of pollutants into the atmosphere and to accumulate funds for the implementation of environmental measures from the collected tax.

Article 2. Definitions

1. Taxable goods shall mean goods subject to taxation according to this Law, specified in Appendix 3 to the Law.

2. Taxable packaging shall mean a package, filled with goods, subject to taxation according to this Law, specified in Appendix 4 to this Law.

3. Maximum allowable pollution level shall mean the maximum allowable amount of a pollutant discharged into the environment per time unit.

4. Recovery of energy shall mean usage of combustible goods and/or packaging waste for energy recovery by incinerating them separately or with other waste and using the generated energy.

5. Goods or packaging waste shall mean waste produced with the expiry of a life cycle of taxable goods or packaging.

6. Recycling of goods or packaging waste shall mean recycling of the materials contained within taxable goods or packaging waste during the production process including organic recycling, except for their usage for energy recovery or for the usage of the materials contained within taxable goods or packaging waste for their primary or any other purpose.

7. Management of goods or packaging waste shall mean the collection, sorting and recycling of taxable goods and packaging waste or their usage for energy recovery.

8. Manager of goods or packaging waste shall mean a natural or legal person who manages the taxable goods or packaging waste in accordance with the set requirements and pursuant to the provisions of this Law and other legal acts.

9. Manufacturer shall mean a natural or legal person who is producing taxable goods and/or packing the goods into a taxable packaging.

10. Importer shall mean a natural or legal person who is importing taxable goods and/or goods packed into a taxable packaging into the territory of the Republic of Lithuania for placing them on the internal market of the Republic of Lithuania.

11. Placing on the internal market of the Republic of Lithuania shall mean:

1) transfer, for consideration or free of charge, of taxable goods and/or filled taxable packaging produced in the territory of the Republic of Lithuania to any other person in the territory of the Republic of Lithuania or their consumption for manufacturer’s own needs, or

2) transfer, for consideration or free of charge, of taxable goods and/or filled taxable packaging produced in the territory of the Republic of Lithuania to any other person in the territory of the Republic of Lithuania or their consumption for importer’s own needs, or

3) production and/or import into the territory of the Republic of Lithuania of taxable goods and/or goods packed into a taxable packaging, not transferred to any other person, belonging to a tax payer in liquidation or reorganisation.

12. Composite packaging shall mean a multilayered packaging made up of different types of material.

13. Temporarily allowable pollution level shall mean temporarily allowable amount of a particular pollutant discharged into the environment per time unit set for each specific object until it will be possible to establish the maximum allowable pollution level.

14. Mobile source of pollution shall mean a transport vehicle and any other moving mechanisms that use fuel.

15. Standard shall mean the amount of a particular pollutant permitted to be discharged into the atmosphere during the tax period and established in accordance with the set procedure.

16. Organic recycling shall mean the aerobic (composting) or anaerobic (biomethanization) treatment, using micro-organisms, of the biodegradable parts of goods or packaging waste, which produces stabilized organic residues or methane. A landfill shall not be considered a place of organic recycling of goods or packaging.

17. Reuse shall mean any operation by which a taxable packaging, which has been designed to accomplish within its life cycle a minimum number of trips, is refilled with auxiliary products present on the market or used for the same purpose for which it was conceived. Such reusable packaging shall become packaging waste when no longer subject to refill.

18. Tasks related to recovery and/or recycling of goods and packaging waste shall mean the amount of goods and packaging waste to be recovered and/or recycled, established by the Government and/or an institution authorised by it, expressed as a percentage of the total amount of packaging and/or taxable goods produced and/or imported by the tax payer and placed on the internal market during the tax period.

19. Stationary source of pollution shall mean a source of pollution which cannot be moved from one location to another without changing its purpose and substantially reducing its value.

20. Pollutants shall mean polluting substances emitted into the atmosphere and having a hazardous effect on a man’s health and the environment.

Article 3. Object of Taxation

The tax shall be imposed on:

1) pollutants discharged into the atmosphere;

2) goods specified in Appendix 3 to the Law;

3) filled packaging specified in Appendix 4 to the Law.

Article 4. Taxpayers

1. The pollution tax for polluting the environment from stationary sources of pollution shall be paid by natural and legal persons polluting the environment who have to have a permit for usage of natural resources and integrated pollution prevention and control permit with determined rates of the emission of pollutants into the atmosphere issued in accordance with the procedure set by the Government or institutions authorised by it.

2. The pollution tax for polluting the environment from mobile sources of pollution shall be paid by natural and legal persons polluting the environment from mobile sources of pollution used for economic and commercial activities.

3. The pollution tax for polluting the environment with goods and/or packaging waste shall be paid by manufacturers and importers of goods.

Article 5. Tax Reliefs

1. Natural and legal persons implementing environmental measures aimed at reducing the emission of pollutants into the atmosphere from stationary sources of pollution by at least 5 per cent calculating from the determined maximum allowable pollution level shall be exempted from taxes for those pollutants whose amount has been reduced by 5 per cent in accordance with the procedure established by the Government or an institution authorised by it, except for the cases when the funds from the state budget are used for the implementation of the measure and also when the implemented environmental measures are intended for use of bio-fuel. The tax exemption shall be valid for a time period not exceeding 3 years from the beginning of the implementation of the measure.

2. Where the measure aimed at reducing the emission of pollutants into the atmosphere from stationary sources of pollution fails to be implemented on the set term or the desired effect is not reached, the pollution tax shall be paid for the whole period in accordance with the procedure laid down in this Law or recovered in accordance with the procedure stipulated in the Law on Tax Administration.

3. The following persons shall be exempted from the pollution tax for pollution from mobile sources of pollution:

1) natural and legal persons polluting from transport vehicles with installed and operating exhaust gas neutralisation systems;

2) natural and legal persons polluting from transport vehicles used for agricultural activities, if their income gained from such activity account for more than 50 per cent of their total income;

3) natural persons engaged in individual activities the way they are defined in the Law on Personal Income Tax and using personal transport vehicles when pursuing these activities;

4) natural or legal persons polluting from transport vehicles using bio-fuel of established standards upon submitting the documents certifying the consumption of bio-fuel.

4. Natural or legal persons who submit documents certifying the consumption of bio-fuel shall be exempted from the pollution tax for pollution from stationary sources of pollution for pollutants discharged into the atmosphere when using bio-fuel.

5. Legal or natural persons, who either themselves or through third persons export from the territory of the Republic of Lithuania the goods subject to taxation under this Law and/or goods packed into taxable packaging, shall be exempted from the pollution tax for polluting the environment with goods or packaging waste in the amount of taxable goods or packaging equal to the amount that was exported from the territory of the Republic of Lithuania during the tax period upon submitting the documents, pursuant to the procedure established by the Government or institutions authorised by it, certifying the amount of exported taxable goods or packaging from the territory of the Republic of Lithuania.

6. Manufacturers and importers shall be exempted from the pollution tax for polluting the environment with goods and/or packaging waste in the total amount of goods and/or packaging, if they fulfil the tasks related to recovery and/or recycling of goods and packaging waste set by the Government and, pursuant to the procedure established by the Government or an institution authorised by it, submit the documents certifying the amount of goods or packaging waste reused, recycled or used for energy recovery. Where a taxpayer fulfils three fourths of the tasks related to recovery and/or recycling of goods and packaging waste set by the Government, he shall be exempted from the tax in the amount of three fourths of the taxable goods and/or taxable packaging. Where a taxpayer fulfils half of the tasks related to recovery and/or recycling of goods and packaging waste set by the Government, he shall be exempted from the tax in the amount of half of the taxable goods and/or taxable packaging. Where a taxpayer fulfils one fourth of the tasks related to recovery and/or recycling of goods and packaging waste set by the Government, he shall be exempted from the tax in the amount of one fourth of the taxable goods and/or taxable packaging. A taxpayer who has been fulfilling the tasks shall, pursuant to the procedure established by the Government or an institution authorised by it, submit the documents certifying the amount of goods or packaging waste reused, recycled or used for energy recovery.

7. The Bank of Lithuania shall be exempted from the pollution tax.

Article 6. Procedure for the establishment of taxation of pollutants, goods and packaging and the tax rates

1. The rates and coefficients of the pollution tax rates shall be established for pollutants and groups of pollutants considering their hazardousness to the environment.

2. The tax rates for polluting the environment from stationary sources of pollution, presented in Appendix 1 to the Law, shall be set for one ton of pollutants.

3. The tax rates presented in Appendix 1 to this Law for pollutants, in respect of which a temporarily allowable pollution level has been set, that are discharged into the atmosphere from stationary sources of pollution shall be increased by applying a coefficient of 1.2.

4. The tax rates for polluting the environment from mobile sources of pollution calculated per one ton of consumed fuel and, in case of aircrafts, per one take-off and landing cycle are presented in Appendix 5 to this Law.

5. The tax rates for polluting the environment from mobile sources of pollution shall be adjusted (increased or reduced) taking into consideration the technical specifications of a source of pollution by applying coefficients set by the Government or institutions authorised by it.

6. The list of pollutants subject to taxation, except for those specified in Appendix 1, and the groups thereof shall be established and approved by the Government or institutions authorised by it.

7. The list of taxable goods and the pollution tax rates for pollution with the waste of such goods are presented in Appendix 3 to the Law.

8. The types of taxable packaging and the pollution tax rates for pollution with packaging waste are presented in Appendix 4 to the Law.

9. The rates of the pollution tax, except for those set as a certain percentage of a price, shall be indexed in accordance with the procedure established by the Government or institutions authorised by it by applying the consumer price index.

Article 7. Tax Period

1. The tax period of the pollution tax for polluting the environment from stationary sources of pollution shall be:

1) a calendar quarter – if the amount of the pollution tax for polluting the environment from stationary sources of pollution payable for the previous year was LTL 10 000 or more;

2) a calendar half a year – if the amount of the pollution tax for polluting the environment from stationary sources of pollution payable for the previous year was not exceeding LTL 10 000.

2. The tax period of the pollution tax for polluting the environment from mobile sources of pollution shall be a calendar half a year.

3. The tax period of the pollution tax for polluting with goods or packaging waste shall be a calendar year.

4. The pollution tax shall, within 60 days from the end of the tax period, be paid and the pollution tax declaration form shall be submitted to the territorial state tax inspectorate in the territory whereof the taxpayer is registered with the Register of Taxpayers.

5. Natural and legal persons emitting pollutants from stationary and/or mobile sources of pollution, who are only beginning their activities, during the first year of payment shall pay the pollution tax after the end of the half of the a calendar year.

Article 8. Pollution tax accounting

1. Natural and legal persons, who have to pay the pollution tax under this Law, shall keep, in accordance with the procedure established by the Government or institutions authorised by it, the accounting of the pollutants emitted into the atmosphere.

2. The pollution tax shall be calculated and paid in accordance with the procedure set by the Government or institutions authorised by it.

3. The pollution tax for emitting pollutants from stationary sources of pollution shall be paid according to the actual amount of pollutants discharged into the atmosphere during the reporting period, for emitting pollutants from mobile sources of pollution (except for aircrafts) – according to the amount of fuel used during the reporting period and for pollutants emitted from aircrafts – according to the number of taking-off and landing cycles.

4. The pollution tax for polluting the environment with goods and/or packaging waste shall be paid according to the amount of taxable goods and/or filled taxable packaging actually placed on the internal market of the Republic of Lithuania during the reporting period.

5. The payer of the pollution tax shall be responsible for data presented in the accounting.

Article 9. Control of payment of the pollution tax

1. The Ministry of Environment shall supervise the accounting of the emission of pollutants into the atmosphere and inspect the calculation of the pollution tax.

2. For natural and legal persons who do not keep the compulsory accounting of the emission of pollutants into the atmosphere, the amount of the emitted pollutants shall be calculated in accordance with methodologies approved by the Government or institutions authorised by it.

3. The pollution tax with an increased tax rate shall be applied in case of exceeding the set amount of emission of pollutants from stationary sources or for concealing the amount of pollutants and/or taxable goods or taxable packaging.

4. The pollution tax with an increased rate shall be calculated in the following way:

1) by multiplying the amount of pollutants discharged from stationary sources of pollution exceeding the set standard, and/or concealed, by the pollution tax rate for polluting from stationary sources of pollution presented in Appendix 1 to this Law and by the coefficient of the pollution tax rate for polluting from stationary sources of pollution specified in Appendix 2 to this Law.

2) by multiplying the concealed amount of fuel used in mobile sources of pollution by the pollution tax rate for polluting from mobile sources of pollution presented in Appendix 5 to the Law and by the coefficient of the pollution tax rate for polluting from mobile sources of pollution specified in Appendix 6 to the Law.

3) by multiplying the concealed amount of taxable goods and taxable packaging by the rate specified in Appendices 3 or 4 and a coefficient equal to 2.

5. The State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania and the territorial state tax inspectorates as well as the Ministry of Environment or institutions authorised by it shall exchange information required for the administration of the pollution tax. The Ministry of Environment, having agreed with the State Tax Inspectorate under the Ministry of Environment, shall establish the procedure for the exchange of information required for the administration of the pollution tax.

Article 10. Payment, recovery and allocation of the tax

1. The pollution tax, except for that paid for polluting the environment with goods or packaging waste, shall be allocated in the following way:

1) 30 per cent – to the state budged. These funds shall be used for a purpose of financing environmental investment projects provided for in the programme of the Lithuanian Environmental Investment Fund.

2) 70 per cent – to the municipal budget of the municipality in the territory of which the object of pollution is located. These funds shall be used for a purpose of financing measures provided for in the special municipal Environment Protection Support Programme.

2. The tax for polluting the environment with goods or packaging waste shall be paid to the state budget. These funds shall be used for implementing the goals of the Programme on management of goods or packaging waste established in the Law on Waste Management.

3. The pollution tax with an increased rate, when it is applicable for a concealed amount of pollutants, taxable goods or taxable packaging, and also for the amount of pollutants exceeding the standard, shall be paid or recovered from the offender to the state budget. These funds shall be used for implementing the objectives set in the Law on Environment Protection Support Programme.

4. The unpaid pollution tax shall be paid or recovered, the penalty charges for late payment shall be calculated and the amount of the overpaid payment shall be returned in accordance with the procedure laid down in the Law on Tax Administration.

Article 11. The term of validity of the tax rates