Key tax factors for efficient cross-border business and investment involving Lithuania.
With the following countries, territories and jurisdictions:
|Estonia||Rep. of Korea||Romania||US|
Note: (a) Treaty signed but not yet in force.
Private limited liability company (UAB), Public limited liability company (AB).
The minimum authorized (share) capital for UABs is EUR 2,500 and EUR 25,000 for ABs. One fourth of the authorized (share) capital must be monetary contributions; however, such monetary contributions may not be less than the minimum of EUR 2,500 for UABs and EUR 25,000 for ABs.
A company is a tax resident if it has been incorporated in Lithuania. It is subject to corporate income tax on its worldwide income. Non-resident companies are subject to Lithuanian corporate income tax only on their Lithuanian source income, including income earned through their permanent establishments.
The taxable period normally corresponds to the calendar year. Upon request, the tax authorities may allow a taxpayer to use a different 12-month period as a taxable period.
Annual corporate income tax returns must be filed within five months and 15 days after the end of a taxable period. The final corporate income tax payment has to be made on the same date as the annual corporate income tax return is due, i.e. June 15 if the taxable period is a calendar year. Corporate income tax must be paid in advance installments based on the result of the previous tax period.
The standard corporate income tax rate is 15 percent. A reduced 5 percent rate applies to cooperatives engaged in agricultural activities and to small companies (companies with fewer than 10 employees and annual income less than EUR 300,000). Income from certain patentable inventions (R&D) may be subject to the reduced 5 percent rate (see section IP / R&D incentives below). Newly established small companies may be subject to a 0 percent corporate income tax rate for the first year of activity, provided certain conditions are met.
0/15 percent (may be exempt if paid to a company holding not less than 10 percent of the shares granting the same percentage of votes for at least 12 months, except for dividends paid to tax haven countries. Anti-avoidance provisions to be considered).
0/10 percent (0 percent if paid to an EEA resident company or a company registered in a country with which Lithuania has concluded a double tax treaty).
0/10 percent (may be reduced to 0 percent for payments to associated companies resident in EU countries - the paying and the receiving companies are associated if (i) one of them holds directly at least 25 percent of the capital of the other, or (ii) a third company resident in an EU Member State holds directly at least 25 percent of the capital of the two companies; a two-year holding period is also required).
15 percent on income from real estate; income of supervisory board members; income from sports and performers’ activities.
An exemption (100 percent) is applicable for subsidiaries registered in EEA countries. For dividends received from other foreign (non-EEA) subsidiaries and from resident subsidiaries, the exemption (100 percent) applies (anti-avoidance provisions to be considered) subject to the following conditions:
In principle, capital gains are taxable in the same way as other income.
Capital gains on the disposal of shares are exempt from tax if the following conditions are met:
In general, tax losses can be carried forward indefinitely if the economic activity from which the loss originated is continued. Loss carry-back is not allowed.
Ordinary tax losses carried forward can only be set off against up to 70 percent of the calculated taxable profits of the taxable period. This restriction is not applicable to companies subject to the reduced corporate income tax rate of 5 percent.
Losses from the disposal of securities and financial derivatives can be carried forward for 5 years and may only be offset against gains from the disposal of other securities and financial derivatives.
Yes. Tax losses incurred by one company may be offset against the profits of another company in the group provided the following criteria are met:
Stamp duty on registration of a company is EUR 57.34. Fees for registration of other changes at the Company register range between approximately EUR 3 to EUR 30. However, company establishment documents and their amendments usually must be approved by a notary. The fees of a notary usually range between EUR 72 and EUR 290.
Real estate-related transactions are subject to a notary's approval. The fee for notarization of a sale-purchase contract is 0.45 percent of the value of real estate (i.e. sales price), but not less than EUR 29 and not more than EUR 5,792.40. The stamp duty for registration of the ownership rights depends on the value of the real estate and may range from approximately EUR 3 to EUR 1,448.10.
The annual tax rate for legal entities ranges from 0.3 percent to 3 percent of the taxable value of real estate. The rate is established by the local municipalities. Separate land tax is paid by the owners of the land. Tax rate ranges from 0.01 percent to 4 percent.
As of 2019 the Lithuanian Controlled Foreign Company (CFC) rules were tightened in line with the EU Anti-avoidance Directive. These rules apply if a domestic company, alone or together with related parties, holds, directly or indirectly, more than 50 percent of the shares or rights to dividends in a foreign company on the last day of the taxable period and if:
Certain exemptions apply.
Transfer pricing provisions follow the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Detailed transfer pricing documentation rules in respect of transactions between associated persons have been established by the tax authorities.
The obligation to produce written transfer pricing documentation applies to Lithuanian entities, foreign entities engaged in business operations through permanent establishments, financial companies, credit institutions and insurance companies.
As of 2019, if certain criteria are met, two files for transfer pricing documentation are required:
Debt-to-equity ratio of 4:1. Interest and currency exchange losses exceeding this ratio are non-deductible for corporate income tax purposes.
As of January 1, 2019, new interest limitation rules came into force. Excessive borrowing costs shall be deductible in the taxable period in which they are incurred but only up to 30 percent of the taxpayer's EBITDA. This restriction does not apply if interest expenses do not exceed EUR 3 million. Special rules apply to the calculation of interest, EBITDA and group interest costs.
The Lithuanian Law on Corporate Income Tax contains a general anti-avoidance provision. General substance over form provisions also apply.
A specific anti-avoidance provision for applies to dividends payable/receivable.
A binding ruling can be requested for future transactions and transfer pricing (“advance pricing agreement”). Non-binding opinions from the tax authorities may also be obtained.
Expenses incurred for scientific research and experimental development purposes may be deducted three times in the tax period in which they are incurred, provided that the R&D work is related to usual business activities.
"Innovation Box" regime: as of 2018, qualifying profits from the commercialization of patentable inventions and software may be eligible for a reduced 5 percent corporate income tax rate (instead of 15 percent).
There are specific incentives for companies in free economic zones; there is an investment incentive for certain groups of fixed assets (applicable 2009-2023); double tax incentive for the production of films (applicable 2014-2023).
The standard rate is 21 percent. Reduced rates apply in respect of certain transactions.
Source: Lithuanian tax law and local tax administration guidelines, updated 2019.
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