The business needs to provide declarations and various forms to both State Tax Inspectorate (STI) and The State Social Insurance Fund Board (SODRA). For the accountant as well as the business, it is most important that the obligations are fulfilled properly. Usually, everyone tries to provide declarations and forms in good faith and in a timely manner. However, is that benevolence expressed by STI and SODRA? In my opinion, STI makes effort in some cases, while at the same situation SODRA takes a totally opposite position.
The application of the provisions of the Second Book of the Civil Code, in the same situation, is interpreted differently by the STI and by SODRA. Looking from the side, it would seem that SODRA still lives in extremely large bureaucratic clutches, as if the clock was turned back several decades ago. But the time does not stand still, therefore should SODRA make a change?
The essence of the problem
In order to make declarations, the business can and/or must authorize the person concerned to do so, i.e. authorize the person to log in the relevant systems. There is no problem if the business is represented by the company.
On the other hand, in the media we constantly see encouragements for natural persons to start their own businesses under an individual activity certificate because such activity is easy to start and the tax burden is low.
Individual activities performed under an individual activity certificate (IAC) is one of the easiest ways for a natural person to start a business. It takes only a few minutes to register an activity under IAC. Moreover, such type of business tends to be mobile in terms of working time and place compared to employment relationships when employing a person under an employment contract. It is common for a person with IAC to employ other people, also, he can register himself as a VAT payer. For these and other reasons, persons with IAC entrusts his bookkeeping to bookkeeping firms instead of taking care of accounting himself.
Nowadays, most of us have electronic signatures, so empowering the accountant and/or accounting firm is easy. STI system allows the accountant to take over very quickly – one just needs to check a few marks and the accountant or accounting firm is given a legal right to take over declarations.
At the same time, SODRA makes huge obstacles for such an easy empowerment. A person working under IAC must go to the notary in order to give the accountant access to the SODRA system.
A silly idea crosses one’s mind – is this the way to give notaries more work? Is a notarial authorization mandatory only for the natural person to authorize another natural person (and/or legal entity) to submit the relevant forms? According to SODRA representatives <... if a natural person who carries out an individual activity under the certificate would like to assign another natural person to perform the relevant actions (in SODRA electronic system) - a notarial authorization is required ...>.
It is a common practice that business representatives can easily provide accountants with the access to e-banking systems and such functions as order preparation, bank statement printing and other similar functions without a notarial authorization. Well, it is hard to judge, but in a broad sense, banking related functions such as a money transfer could be considered of more importance compared to submitting relevant forms of payroll or other reporting (employee recruitment, dismissal, vacation, etc.).
The representatives of both institutions - STI and SODRA – were asked to explain why the provisions of the Civil Code are applied in a different manner in quite similar situations. The answers are provided below:
“Article 2.138 of the CC lays down specific cases where the approval of a power of attorney is necessary - a power to conclude transactions requiring a notarial form; power to act on behalf of a natural person in connection with legal persons; the authorization given by a natural person for the management, use and disposal of immovable property.
Article 2.139 (1) of the CC provides for a simplified power of attorney that may be given for correspondence, wages and other employment-related benefits, pensions, allowances, scholarships or public administrative services.
As provided for in paragraph 2 of this Article, such authorization shall not be required if it has been created by a natural person by means of information technology and has been entered in the Register of Authorizations.
Taking into account that a natural person who electronically connects to STI systems authorizes another person (natural or legal person's representative), a notarised attestation by the STI is not required.”
“Strict adherence to:
The provisions of the Civil Code of the Republic of Lithuania
• Article 2.138 (1) (2) and
• Article 2.139 (1)
when a policyholder is a natural person and his/her authorization must be certified by a notary so that the person performing the functions of the accountant can submit obligatory notifications in the SODRA system.”
In conclusion, SODRA requirements are superfluous. Either it is SODRA‘s reluctance to change, renew their e-system, or it is their indirect way to increase the income of notaries.
On the other hand, if SODRA is right in demanding a notarial authorization, then the question remains: why do STI lawyers understand the provisions of Article 2.139 of the Civil Code differently than SODRA‘s lawyers.
Who is right in this simple situation: STI or SODRA?
I would consider STI to be right, and SODRA seems to be unwilling to change, also, it could be uncomfortable, because for so many years no one had any objections to existing rules. After all, silence always implicitly implies approval.