Lithuania country profile

Lithuania country profile

Key tax factors for efficient cross-border business and investment involving Lithuania.

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EU Member State

Yes.

Double Tax Treaties

Armenia France Latvia Singapore
Austria Georgia Luxembourg Slovakia
Azerbaijan Germany Macedonia Slovenia
Belarus Greece Malta Spain
Belgium Hungary Mexico Sweden
Bulgaria Iceland Morocco(a) Switzerland
Canada India Moldova Turkey
China Rep. of Ireland Netherlands Turkmenistan
Croatia Israel Norway UAE
Cyprus Italy Poland UK
Czech Rep. Kazakhstan Portugal Ukraine
Denmark Rep. of Korea Romania US
Estonia Kuwait(a) Russia Uzbekistan
Finland Kyrgyzstan Serbia  

 Note: (a) Treaty signed but not yet in force.

Forms of doing business

Private limited liability company (UAB), Public limited liability company (AB).

Legal entity capital requirements

The minimum authorized (share) capital for UABs is EUR 2,500 and EUR 40,000 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 40,000 for ABs.
 

Residence and tax system

A company is 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.
 

Compliance requirements for CIT purposes

The taxable period normally corresponds to the calendar year. Upon request, the tax authorities may allow a taxpayer to use a different 12 months period as a taxable period.

Annual corporate income tax returns must be filed within five months after the end of a taxable period. As of 2014, for the taxable year 2013 and for successive years 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 1 if the taxable period is a calendar year. Corporate income tax must be paid in advance installments based on the result of the previous taxable period.

Tax rate

The standard corporate income (profit) tax rate is 15 percent (reduced to 5 percent for small companies and for agricultural companies).
 

Withholding tax rates

On dividends paid to non-resident companies

15 percent (may be reduced to 0 percent for EU countries, subject to 10 percent holding and minimum holding period of one year, or under applicable double tax treaties).
 

On interest paid to non-resident companies

10 percent (0 percent to an EEA resident company or a company registered in a country with which Lithuania has a double tax treaty).
 

On patent royalties and certain copyright royalties paid to non-resident companies

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 States holds directly at least 25 percent of the capital of the two companies; a two-year holding period is also required).

On fees for technical services

0 percent.

On other payments

15 percent on income from real estate; income of supervisory board members; income from sports and performance activities.
 

Branch withholding tax

No.

Holding rules

Dividend received from resident/non-resident subsidiaries

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 subject to the following conditions:

  • Participation requirement: 10 percent of the voting rights
  • Minimum holding period: 1 year (or commitment)
  • Not applicable to tax havens.
     

Capital gains obtained from resident/non-resident subsidiaries

In principle, capital gains are taxable in the same way as other income.
Exemption of taxation on capital gains from disposal of shares applies if the following conditions are met:

  • Participation requirement: More than 25 percent of the voting rights
  • Minimum holding period: Two years (three years in case of reorganization)
  • Disposed shares belong to a company registered in the EEA country or registered in a country with which Lithuania has a double tax treaty

Investment income (including capital gains, interest on securities, interest on deposits, etc.) is exempt under certain conditions (applicable to certain types of companies).

Tax losses

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.

As of the taxable year 2014, 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 mall 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 five years and may only be offset against gains from the disposal of other securities and financial derivatives.

Tax consolidation rules/Group relief rules

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:

  • The parent company directly or indirectly owns at least two-thirds of the shares in subsidiaries; and
  • The transfer of losses occurs between companies that have been continuous members of the group for at least 2 years.; or 
  • The participants of the transfer have been a part of the group as of their incorporation and will be part of the group for at least 2 years.

Registration duties

Insignificant.

Transfer duties

On the transfer of shares

Insignificant.
 

On the transfer of land and buildings

Insignificant.

Stamp duties

Stamp duty on registration of a company is EUR 57.34. Fees for registration of other changes at the Company register are approx. EUR 3-30. However, usually company establishment documents and their amendments have to be approved by 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% 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 real estate and may range from approx. EUR 3 to EUR 1,448.10.

Real estate taxes

The annual tax rate for legal entities ranges from 0.3 percent to 3 percent of the taxable value of real estate. The particular rate is established by the local municipalities. Separate land tax is paid by the owners of the land. Tax rate ranges from 0.01% to 4%.

Controlled Foreign Company rules

Yes. Applies where a domestic company 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 (or owns at least 10 percent and, together with its related parties, owns more than 50 percent) and where the foreign company is taxed at a corporate tax rate lower than 75 percent of the Lithuanian rate. Certain “white listed” countries are excluded. An exemption is applicable if the CFC’s profits represent less than 5 percent of the income of the Lithuanian controlling company. Credit is given for foreign taxes.
 

Transfer pricing rules

General transfer pricing rules

Transfer pricing provisions follow the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as of January 1, 2004. Detailed transfer pricing documentation rules have been established by the Minister of Finance.

Documentation requirement

The obligation to produce written transfer pricing documentation applies to companies meeting at least one of the following criteria:

  • Sales income of the entity before the taxable year when the transaction was actually carried out exceeded EUR 2,896,200;
  • Financial companies and credit institutions;
  • Insurance companies;
  • Foreign entities, engaged in activities through permanent establishments, if the attributable income exceeds EUR 2,896,000 before the taxable year when the transaction was actually carried out.

Thin capitalization rules

Debt-to-equity ratio of 4:1. Interest and currency exchange losses exceeding this ratio are non-deductible for corporate income tax purposes.
 

General Anti-Avoidance rules (GAAR)

General substance over form provisions apply.

Specific Anti-Avoidance rules/Anti Treaty Shopping Provisions

No.

Advance Ruling system

Binding rulings came into force as of January 1, 2012. The rules are applied for future transactions and transfer pricing (“advance pricing agreement”). Opinions from the tax authorities still may be requested in some cases.
 

IP / R&D incentives

Specific incentives are established for companies in free economic zones; there is an investment incentive for certain groups of fixed assets (applicable 2009-2018); special incentive for expenses incurred for scientific research and experimental development purposes; double tax incentive for movie making (applicable 2014-2018).

Other incentives

A reduced 5 percent CIT rate is applied for small companies and agricultural companies.

VAT

The standard rate is 21 percent. Reduced rates apply in respect of certain transactions.

Other relevant points of attention

No.

Contact us

Birute Petrauskaite

KPMG in Lithuania

T: +370 5 210 2613

E: bpetrauskaite@kpmg.com

EU Tax Centre

KPMG’s EU Tax Centre, working together with our network of EU tax law specialists throughout the European Union.

 
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