– I’m going to the bank for a loan and I noticed that the turnover on my account is higher than my declared income.
– Why?🤔
– I’m a coach for a children’s sports club and I work under a business certificate. Sometimes, when we organise trips, parents transfer money to me for the bus rental or competition fees. Also, I run the activity together with another coach – he also works under a business certificate, but the parents transfer his share to me as well because it’s more convenient for them, and I pass it on to him later.
So, what do you think of this situation?👀
If parents clearly state in the payment reference that the money is for competition fees or bus rental, such amounts can be treated as reimbursement of expenses rather than income. But if the transfer is made as a single lump sum, for example “for training”, it becomes very difficult to separate income from reimbursed expenses.
Another issue is collecting money on behalf of someone else. Although this is common in practice, if the State Tax Inspectorate (VMI) raises questions, you would need solid proof that the money did not belong to the recipient and should not be treated as their income. This can also matter when assessing whether the VAT threshold has been exceeded.
If this money was transferred from the account to the colleague by bank transfer, the situation would be better still. In that case a written explanation to the VMI might be enough, together with bank statements and proof that the colleague declared the money in his own name.
But if the money was withdrawn and handed to the colleague in cash, the Republic of Lithuania Law on the Restriction of Cash Payments comes into play. In that case the situation could end not only with further questions, but also with a fine of up to EUR 3,000.⚠️
And that’s not all. Let’s not forget the Republic of Lithuania Law on the Prevention of Money Laundering and Terrorist Financing. When you come to a bank with funds that formally aren’t your income, the bank may become suspicious. And then further questions may come not only from the bank, but also from the Financial Crime Investigation Service (FNTT).
Remind me again – how many competencies does an accountant need today to answer such a seemingly simple question?😅
