Lithuania

General Information

main laws governing the direct selling industry in Lithuania are:

1. regulations Regarding sale of goods outside the sale premises (Cabinet Regulation No. 226, Adopted 11 July 2001) – hereinafter referred to as Regulations
2. Lithuanian Civil Code.

Cooling-Off Period
14 days if the receipt on purchase is issued
3 months if the receipt on purchase was not issued

Point 8 of Regulations;

Pyramid Schemes
It is forbidden by EU law.

Currently there is no valid local legal act that would forbid pyramid schemes. However there is a draft of law on unfair commercial practice towards consumers that forbids such schemes- article 5 specifically indicates that “Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products“. It is planned to come into force starting with 1 July 2007.

Multi-Level Marketing
It is allowed. However there is no official definition of multi level marketing.

Prohibition on Products
There is no specific prohibition in relating to the direct selling excepts those which are applicable in general (for example such type of goods as medicine, guns, alcohols and etc. can be sold in specific places).

Credit Restrictions Country

1. Lithuanian Civil Code governs the Consumer Credits. (Book 6, Chapter XLIII, section 3, articles 6.886-6.891)
2. Cabinet regulations No. 82 as of 25 Jan 2001 regarding the approval all the rules on calculation of the mark up in the consumer credit

Governing Lithuanian law

SECTION THREE CONSUMER CREDIT

Article 6. 886. Concept of the consumer credit agreement

1. By the consumer credit agreement the creditor grants or undertakes to grant the debtor-natural person (consumer):
   1. the credit by way of deferred payment or apportionment of payment (payment in parts);
   2. credits, including the credit of the current account, the aggregate lump-sum credit and the credit for purchase of a thing or service.
2. The consumer credit agreement shall also be deemed an agreement on purchase-sale by instalments (leasing) or any other agreement of similar nature when the things which are the subject-matter of the agreement pass into the consumer’s ownership upon payment within the term set forth in the agreement of the price of the thing, the interest on the credit and other fees established in the agreement.
3. The provisions of this Chapter shall not apply when under the credit agreement:
   1. the credit is granted by mortgaging an immovable thing;
   2. the consumer does not pay any interest or other fees;
   3. the consumer undertakes to repay the credit within a period not exceeding three months or when the amount of the credit does not exceed one thousand litas;
   4. for a certain constantly provided service the consumer pays in instalments during provision of the service.
4. For the purposes of this Article the creditor shall be a person or a group of persons who in the procedure and cases prescribed by laws are entitled to grant the consumer credit by virtue of their commercial and professional activities.

Article 6.887. Form and contents of the consumer credit agreement

1. The consumer credit agreement shall be made in writing.
2. One copy of the agreement shall be handed to the debtor. In case of a dispute, the fact of the handing to the debtor of a copy of the agreement shall be proved by the creditor.
3. The consumer credit agreement shall specify:
   1. the amount of the credit or the limit of the credit, if any:
   2. the annual credit repayment rate, the interest rate, fees and other expenses of the debtor related to the receipt and usage of the credit;
   3. the credit repayment term or – if the credit should be repaid in instalments – the amount of each instalment and the payment term;
   4. in case of the credit assigned for the purchase of a thing or service – the price of the thing (service) and the aggregate amount of the credit;
   5. the right of the debtor to repay the credit prior to the repayment term in compliance with the provisions of Article 6.888 of this Code;
   6. the conditions and procedure of the change of the annual credit repayment rate if such possibility is stipulated in the agreement on condition that no unilateral changes shall be made by the creditor.
4. If the creditor must provide the credit insurance, the agreement shall also specify the value of the credit insurance as well as the conditions under which the amount of insurance will be transferred to the creditor.
5. At the time of execution of the agreement the debtor shall be notified in writing about:
   1. the restrictions on the credit granted, if any;
   2. the annual interest rate and fees imposed from the moment of execution of the agreement, as well as the provisions under which they may be changed;
   3. the procedure for amendment of the agreement.
6. Within the validity term of the agreement, the debtor shall be notified on each change of the annual interest rate or similar expenses at the time of occurrence of such changes.
7. The procedure for calculation of the annual credit repayment rate shall be established by the Government and the Bank of Lithuania.
8. In all cases, notwithstanding the proposed to the consumer way of execution of the credit agreement (including the advertisement), the annual credit repayment norm shall be specified. The written offer shall contain an example of calculation of the aggregate credit amount.

Article 6.888. Rights of the debtor

1. Unless no obligatory conditions stipulated in clause 3 of Article 6.887 of this Code are provided for in the agreement or if the information contained in the agreement is misleading, the debtor shall have the right to waive the agreement. In such case the debtor shall have to repay the credit without an obligation to pay the interest or other fees established in the agreement.
2. The debtor shall be entitled to repay the credit prior to expiration of its repayment term, however he shall pay the interest and other fees calculated until the credit repayment day.

Article 6.889. The termination of the agreement at the debtor’s request
The creditor shall have the right to terminate the agreement in the presence of the following two conditions:

1. the payment is delayed longer than one month and its amount is not less than ten percent of the total amount of the credit;
2. the payment has not been made within two weeks from additional notification to the debtor.

Article 6.890. Prohibition to accept bills of exchange, checks and debt instruments

1. The creditor shall be prohibited to accept contributions from the debtor in bills of exchange, checks and debt instruments.
2. If the creditor accepted the contributions in the means of payment established in clause 1 of this Article, he shall indemnify the debtor all the damages related to further use of such means.

Article 6.891. The credit agreement concerning the purchase of a certain thing or service

1. If the debtor and the creditor enter into agreement on financing of the purchase of certain things or services, and there is an agreement made between the creditor and the seller or the provider of services in respect of the sale of such things or provision of such services, when the seller or the provider of services fails to perform or properly perform his contractual obligations, the debtor shall be entitled to:
   1. suspend the performance of his obligation under the credit agreement;
   2. demand the creditor to refund the payments already made.
2. The debtor may exercise the rights established in clause 1 of this Article only after he had addressed the seller or the provider of services with the request to duly perform the agreement, however the conditions of the purchase-sale agreement or the agreement on provision of services were not performed within a reasonable term after such address.
3. The debtor whose rights have been infringed shall be entitled to defend them in judicial procedure or through institutions protecting consumer rights.

Money Collections
During the sale upon the buyer’ s request a direct seller must issue the check/invoice that would prove the sale of goods.

Licenses
Lithuanian laws establish list of economical activities that are licensed and can be executed only upon receiving it. As an example such activities are pharmaceutical activity, financial activities, insurance, gun trade, security services, beauty salons and etc.

Issuance of license for each activity is governed by a separate law.

Status of Direct Sellers Independent entrepreneurs.
The direct sellers can choose whether to execute the activity by obtaining business license or by registering individual activity.

The business license can be issued for certain limited period which cannot be shorter than one month and not longer than calendar year. It is issued in the municipal tax office.

The registration of individual activity is valid till the direct seller terminates it himself/herself.

Earnings Claims
Both Direct sellers and company must declare their income.

Taxes and Fees
The following taxes are payable by direct sellers: income tax, health insurance tax, social security tax.

In case of business licenses income tax amount per month and year  is defined in advance and vary from county to county.

In case of individual activity registration direct sellers are obliged to pay income tax  in rate of 15% (if they will not deduct allowed deductions) or 27% (if they will deduct allowed deductions), health insurance tax which consist 30% of income tax. Health insurance tax amount cannot be smaller that certain amount prescribed by law (currently it is about 10 euros per month). The tax rate is applied on the total income received less allowed deductible expenses.

Income tax and health insurance tax should be paid in advance (if the activities are executed by obtaining business license) or till 1 May of each year after the end of taxable year by submitting Personal income declaration (if the activity is executed by registering individual activity within local tax board).

Governing Lithuanian law

• Law on personal income tax
• Law on State Social Insurance

Social Security
Social security tax must be paid on quarterly bases in advance.

The amount of social security tax is 50% of base pension amount approved by government (currently this amount would about 50 euros).

Others
Entities whose sales, excluding exempted sales, exceed LTL 100 000 within a 12-months period must register as VAT payers in Lithuanian Tax Board within the following 30 days.