Lithuania’s Competition Council has raised concerns that proposed amendments to the Law on Value Added Tax (VAT) could distort competition and create unequal conditions for businesses operating in the market. In an opinion submitted to the Seimas, the authority urged lawmakers to carry out a more thorough assessment of the competitive impact of the draft measures and to evaluate whether their effects would be proportionate to the policy objectives pursued.
One of the proposed amendments would introduce a reduced VAT rate of 5 percent for fresh fruits, vegetables and berries sold in Lithuania. According to the Competition Council, this preferential treatment would not extend to processed products, such as frozen fruits and vegetables. As a result, businesses trading in processed products could be placed at a competitive disadvantage compared with those benefiting from the reduced rate.
Another draft amendment sets out the application of a preferential VAT rate to organic products and goods produced under the national food quality system when supplied to state- and municipally funded institutions, including educational, healthcare and social care facilities. The Competition Council noted that private entities providing similar services would not benefit from the reduced rate when purchasing food products, potentially leading to higher operating costs and weaker competitive conditions for private providers.
The authority also highlighted concerns related to the certification requirement attached to the proposed VAT relief. Since the reduced rate would apply only to products holding a national certificate, suppliers offering products of comparable quality but without such certification could face additional barriers to market access. In the Council’s view, this approach risks favoring domestic producers and creating unequal competitive conditions.
While acknowledging that the draft VAT amendments aim to promote public health objectives, the Competition Council emphasized the need for a comprehensive assessment to ensure that the expected benefits outweigh the potential harm to competition. It also recalled that the principle of competition forms an integral part of EU tax law and suggested that the Ministries of Finance and Justice provide further analysis from this perspective.
Finally, the Council recommended that the planned VAT incentives be notified to the European Commission, given that they would benefit only certain categories of businesses. Such notification, it argued, would help mitigate the risk that the measures could later be classified as unlawful state aid under EU rules.