Key tax factors for efficient cross-border business and investment involving Lithuania.
|China||Rep. of Ireland||Netherlands||Turkmenistan|
|Denmark||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 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.
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.
The tax 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 tax period.
Annual corporate income tax returns must be filed within five months and 15 days after the end of a tax period. As of 2017, the final corporate income tax payment for the 2016 tax year and for subsequent years, has to be made on the same date as the annual corporate income tax return is due, i.e. June 15 if the tax 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 (profit) tax rate is 15 percent (reduced to 5 percent for small companies and for agricultural 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).
10 percent (0 percent to an EEA resident company or a company registered in a country with which Lithuania has a double tax treaty).
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).
15 percent on income from real estate; income of supervisory board members; income from sports and performance 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 subject to the following conditions:
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:
Investment income (including capital gains, interest on securities, interest on deposits, etc.) is exempt under certain conditions (applicable to certain types of companies).
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.
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 have to 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% 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 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.
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 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.
The obligation to produce written transfer pricing documentation applies to companies meeting at least one of the following criteria:
Debt-to-equity ratio of 4:1. Interest and currency exchange losses exceeding this ratio are non-deductible for corporate income tax purposes.
General substance over form provisions apply.
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.
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).
A reduced 5 percent CIT rate is applied for small companies and agricultural companies.
The standard rate is 21 percent. Reduced rates apply in respect of certain transactions.
KPMG in Lithuania
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