| Income Tax Rates for a Resident of Lithuania - An income tax rate of 15% is applied to all income, except income from distributed profits and non-taxable income.
- An income tax rate of 20% is applied to income from distributed profits.
Income from activities exercised under a business certificate are subject to a fixed amount of income tax determined by municipality councils.
The object of income tax of a resident of Lithuania is income sourced in and outside Lithuania.
For the purpose of payment and declaration of personal income tax, a resident of Lithuania is an individual meeting at least one of the criteria below:
- whose permanent place of residence is in Lithuania during the calendar year;
- whose place of personal, social or economic interests is in Lithuania rather than in a foreign country during the calendar year;
- who is present in Lithuania for a period or periods in the aggregate of 183 days or more during the calendar year;
- who is present in Lithuania for a period or periods in the aggregate of 280 days or more during successive calendar years and who stayed in Lithuania for a period or periods in the aggregate of 90 days or more in any of such periods (in such case a person is deemed to be a resident of Lithuania for both years of presence in Lithuania).
Requirements for Personal Income Tax Calculation for a Resident of Lithuania
For the purpose of calculating taxable income the following is deducted from income:
1) non-taxable income;
2) income from activities exercised under a business certificate;
3) allowable deductions related to income derived from individual activities;
4) the acquisition price of property other than that used for the purpose of individual activities, which was sold or otherwise transferred into ownership during the tax period, as well as expenses incurred by the sale or other transfer into ownership of the said property;
5) tax-exempt amount of income and additional tax-exempt amount of income, for the purpose of calculating the monthly taxable income for the tax period.
6) specific expenses incurred by a resident of Lithuania (life insurance contributions, pension contributions, interest on credit for housing construction or purchase, payments for studies).
Tax-Exempt Amounts of Income for a Resident of Lithuania
The basic tax-exempt amount of income for residents of Lithuania from 1 January 2009 is applicable to income incidental to employment relations or relations in their essence corresponding to employment relations. The basic tax-exempt amount of income depends from income amount. As income is smaller as tax-exempt amount is major.
An additional tax-exempt amount (hereinafter referred to as the "ATEA"), which is equal to 100 LTL per month for one children (adopted children) and 200 per month for two and every subsequent children (adopted children).
ATEA, is applied to parents or adoptive parents (residents of Lithuania) with children (adopted children) under 18 years of age and older, if they study at full-time general education schools, in respect of each child (adopted child). During the tax period, the ATEA is applied at the place of receipt of income incidental to employment relations or relations in their essence corresponding to employment relations in which the TEA is applied by dividing the total amount of the ATEA equally between the parents (adoptive parents).
Personal Income Tax Rates for a Non-Resident of Lithuania- An income tax rate of 15% is applied to all income, except income from distributed profits and non-taxable income.
- An income tax rate of 20% is applied to income from distributed profits.
Income from activities exercised under a business certificate are subject to a fixed amount of income tax determined by municipality councils.
For the purpose of income tax payment and declaration, a non-resident of Lithuania is an individual who is not deemed to be a resident of Lithuania, i.e.:
- who has a permanent place of residence only in a foreign state during a calendar year;
- whose place of personal, social or economic interests is concentrated in a foreign state rather than in Lithuania during the calendar year;
- who is present in Lithuania for a shorter period or periods in the aggregate of 183 days during the calendar year; and
- who is present in Lithuania for a shorter period or periods in the aggregate of 280 days during successive two calendar years.
Lithuania Corporate Income TaxStarting from 1 January 2010 profits of Lithuanian companies and permanent establishments is taxed at the rate of 15%.
The tax base of a permanent establishment includes income from goods sold or services provided in the territory of the Republic of Lithuania and income earned from the activities of such permanent establishment in foreign countries.
The tax base
The tax base of a Lithuanian entity shall be all income earned in the Republic of Lithuania and foreign countries, they also include the positive income of its controlled foreign entity or part of such income.
The tax base for foreign entities (i.e. those registered in foreign countries) comprises income received from activities carried out through permanent establishments in Lithuania and other income sourced in Lithuania, such as: interest, dividends, royalties, proceeds from rent/sale of immovable property, etc.
The taxable profit
The taxable profit is calculated on the income earned less the non–taxable income (the list of non–taxable income is established under the Law), allowable deductions (i.e. related with ordinary activities of the entity) and limited allowable deductions (their list is established under the Law).
Non-taxable income includes insurance payments received (with certain limitations), dividends subject to certain conditions, penalties received as well as certain other income.
Allowable deductions are all expenses actually incurred in the ordinary course of business of the entity and necessary for that entity to earn income or derive economic benefit.
Limited allowable deductions include: depreciation of fixed assets; business travel; representation; natural losses; bad debts; contributions for the benefit of employees, etc. The Law establishes certain limitations for deductibility of limited allowable deductions.
The Law also establishes the list of prohibited deductions. The following expenses are generally treated as tax non-deductible: corporate income tax, fines and penalty interest paid, indemnification for damages inflicted by the entity, dividends or profit distributions, expenses related to non-taxable income, other expenses that are not related to deriving of income and not attributed to operating activities of the entity, etc.
Investment incentives
Investments into substantial technological improvements will entitle the companies to reduce the taxable profit down to 50%. This incentive will be applicable to the expenses incurred during years from 2009 to 2013.
Dividends
Dividends are also subject to corporate profit tax at the rate of 15%. The Law provides participation exemption - dividends are exempt if a parent company holds at least 10% of shares for at least 12 months (some restrictions are determined in Law).
Dividends received from foreign entity, which is registered in European economic area and which profit is subject to profit tax or any identical or substantially similar tax, are exempted starting from 1 January 2009 (some restrictions are determined in Law).
Advance payments
Entities have an obligation to pay advance corporate profit tax payments during the calendar year. The rate of 15% has to be taken into account while calculating the advance payments for the year 2009. Advance payments are also compulsory to the entities, which previously (before 1 January 2009) enjoyed the incentive (credit unions, agricultural companies, etc.). If the company chooses to calculate advance payments based on the forecast of the coming taxable period, the possible decrease in taxable profit due to investment incentive cannot be taken into the consideration.
Tax returns
The annual profits tax return should be submitted by the first day of the tenth month of the following tax year. The payment of the tax liability should also have been paid by that date. The fiscal year is in principle the same as the calendar year. In some circumstances the fiscal year can be adjusted in consultation with the Lithuanian tax administration.
Value Added Tax (VAT) in LithuaniaThe Standard VAT rate is 21%.
By 30 June 2009:
- a reduced 5% VAT rate is applicable to the supply of pharmaceuticals and medical aids to persons who have the right to the total or partial reimbursement of the acquisition expenses of these goods in accordance with the Law on Health Insurance;
- a reduced 9% VAT rate is applicable to books and not periodical informational publication.
Real Estate TaxReal estate tax is payable by Lithuanian and foreign natural and legal persons.
The object of the tax includes:
1) real estate used for commercial purposes (e.g., administrative, hotel, trade, services, catering purposes) owned by natural persons by the ownership right; real estate used for dwellings, gardening, greenhouses, auxiliary businesses and other purposes specified in the law are taxed only if they are used for economic or individual activities or have been transferred to a legal person for use for a period of unlimited duration or a period longer than one month;
2) real estate owned by legal persons by the ownership right and located in the Republic of Lithuania.
In accordance with the law the real estate tax rate can vary from 0.3% to 1.0% of the taxable value of the real estate. Specific tariff rates are set by municipal councils taking into account one or more of the following criteria:
- purpose of the real estate;
- technical maintenance condition of the real estate;
- taxpayer category (size, legal form or social position);
- location of the real estate in the municipal territory.
Taxable Value: The average market value of a real estate object is its taxable value.
Land TaxPrivate land is the object of land tax. Land tax must be paid by owners of private land (both natural and legal persons).
The annual tax rate is 1.5% of the land price (the price of standing timber is excluded when calculating the price for forest land). A resolution adopted by the government establishes that the following coefficients are applied for the purposes of calculation of land tax: 0.35 - for agricultural land, land owned by multi-apartment building owners' and apartment construction associations, cooperatives and cooperative companies; 0.5 - for land lots owned by gardeners' societies and their members, land on which private houses have been built, land lots for multi-apartment buildings, and land lots used for economic, commercial and other activities.
Inheritance TaxBoth permanent and non-permanent residents of the Republic of Lithuania who have inherited property must pay inheritance tax. A citizen is treated as a permanent resident of Lithuania if he/she meets the criteria established in the Republic of Lithuania Law on Income Tax of Individuals (e.g., his/her permanent place of residence is in Lithuania, his/her personal, social or economic interests are located in Lithuania, he/she stays in Lithuania for a certain period etc.).
Inherited property (any movable or immovable objects, securities, cash) is the tax object in the case of a permanent resident of Lithuania.
Inherited movable property is the tax object in the case of a non-permanent resident of the Republic of Lithuania, provided that the object is subject to legal registration under Lithuanian law and has been (or must be) registered in Lithuania. Non-permanent residents must also pay inheritance tax on immovable property located in Lithuania.
The tax base consists of the taxable value of the inherited property, which is calculated in accordance with the Rules Governing the Calculation of Taxable Value of Inherited Property.
The tax amount is calculated as a percentage of the taxable value of inherited property at the following rates:
1) 5% - where taxable value of inherited property does not exceed LTL 0.5 million;
2) 10% - where taxable value of inherited property exceeds LTL 0.5 million.
Lottery and Gambling TaxLotteries and gambling are subject to the lottery and gambling tax.
Taxpayers are legal persons organizing lotteries in accordance with the Law on Lotteries and organizing gambling in accordance with the Law on Gambling.
Tax base and tariff rates:
1) a 5% tax rate is imposed on the nominal value of lottery tickets distributed while organising a lottery;
2) a 15% tax rate is imposed on the amount of receipts from bingo, totalisators and bets - less the amount of winnings actually paid;
3) a fixed tax rate is imposed on gambling machines and table gambling:
- for a gambling machine Category A - LTL 800 per month;
- for a gambling machine Category B - LTL 300 per month;
- for a roulette, card or dice table - LTL 6,000 per month.
A quarter of a calendar year is the tax period for lottery and gambling tax. The tax is to be calculated and paid at the end of the tax period by the 15th day of the first month of the subsequent tax period, with the exception of organizations using table gambling and gambling machines. In the latter case the tax for each gambling unit installed must be paid within five working days from the beginning of the month.
The Republic of Lithuania Law on Gambling was adopted on 17 May 2001 and came into effect on 1 July 2001. On 1 July 2004, a new version of the law came into effect: Law on Lottery and Gambling Tax. A comment on the law has been published on the website of the State Tax Inspectorate.
Excise DutiesThe following goods are subject to excise duties:
- Ethyl alcohol and alcoholic beverages;
- Manufactured tobacco;
- Energy products;
- Electricity;
- Coal, coke and lignite.
Electricity will be subject to excise duty from 1 January 2010 on completion of a transitional period.
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