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Lithuania Tax Rates

Lithuania personal income tax

All income of individuals (except dividends and other profit distributions) is subject to personal income tax at the standard rate of 15%.

Dividends and other profit distributions are taxed at the personal income tax rate of 20%. Income received by an owner of an unlimited civil liability entity from the entity's taxable profits is taxed at 15%.

Basis - Lithuanian residents are subject to tax on their worldwide income; nonresidents are subject to tax only on income sourced in Lithuania and on income derived from activities through a fixed base in Lithuania, including foreign-source income attributed to that fixed base.

Residence - An individual is treated as a resident if at least 1 of the following conditions is satisfied: (1) the individual's permanent place of residence is in Lithuania during the tax period; (2) the individual's personal, social or economic interests are in Lithuania rather than abroad during the tax period; (3) the individual is present in Lithuania for at least 183 days during the tax period; (4) the individual is present in Lithuania for at least 280 days during the 2 consecutive tax periods and has stayed in Lithuania for at least 90 days in either of the tax periods; or (5) the individual is a citizen of Lithuania who does not meet the criteria set out in (3) and (4) above and who receives employment-related remuneration or whose costs of living in another country are covered by the state budget or municipal budgets of Lithuania (e.g. diplomats, consuls, etc.).

Tax Filing status - Joint filing is not allowed.

Taxable income - Taxable income includes employment income, income from commercial activities, royalties, income from the lease of assets and all other personal income.

Capital gains - Individuals are taxed at a rate of 15% on gains from the disposal of property, including shares. Gains from the disposal of shares that have been held continuously for at least 366 days are exempt, subject to certain requirements (including that the seller's participation, together with associated persons during the previous 3 years, does not exceed 10% of the share capital). Capital gains from the sale of immovable property located in the EEA are exempt if the property is owned for at least 3 years before the sale (unless the sale of immovable property constitutes the business activities of the individual). Gains derived from the sale of a residence are not taxable if the individual lived in the premises for at least 2 years, or if less than 2 years, when the income from the sale is used within 1 year to purchase another residence where domicile will be declared.

Tax Deductions and tax allowances - The annual tax-exempt amount (TEA) of LTL 5,640 is applicable if annual income does not exceed LTL 9,600. The annual TEA is reduced accordingly on annual income from LTL 9,600 to LTL 37,800 and no TEA is applicable if annual income exceeds LTL 37,800. The annual TEA is calculated taking into account all income received (not only employment income). Additional TEA is deducted from income received by individuals raising children (LTL 1,200 is deducted for 1 child and an additional LTL 2,400 for the second and each subsequent child). The additional TEA is allocated to both parents equally without taking into account the income received by either. When filing the annual tax return, if one parent did not use the full amount of the additional TEA, the other parent can use it. Deductions also are available for life insurance, pension funds and vocational training or study (subject to certain limitations).

A resident individual carrying out individual business activities can deduct 30% of his/her annual income without providing documentary proof of the expenses.

Deductible expenses, however, are generally similar to those available for corporate income tax purposes.


Other taxes on individuals:

Capital duty - No

Stamp duty - There is no stamp duty, but a notary fee may apply to certain transactions.

Capital acquisitions tax - A 15% personal income tax is levied on gifts valued at more than LTL 8,000, but only the portion of the gift exceeding LTL 8,000 is subject to tax. Gifts received from a spouse, child, brother, sister, parent or grandparent are tax exempt.

Real property tax - The real property tax rate ranges from 0.3%-1% of the value of real estate owned by individuals, depending on the municipality.

An individual is required to pay the real property tax for buildings used for individual or economic activities. Buildings intended for certain purposes (manufacturing, industry, services, trading, hotels, etc.) are subject to the real property tax, regardless of whether used in individual or economic activities (unless the building is rented or transferred under a loan-for-use contract to a legal entity). The type of property involved will determine the applicable valuation method and thus the taxable amount.

Inheritance tax - The inheritance tax rate is 5% of inheritable assets valued at LTL 500,000 or less and 10% on inheritable assets valued at more than LTL 500,000. However, the taxable base is only 70% of the inherited assets. The taxable value not exceeding LTL 10,000 is exempt. Exemptions also apply to assets inherited by family members.

Net wealth/net worth tax - No

Social security and health insurance - The employer must withhold a 3% pension social insurance contribution and a 6% health insurance contribution on behalf of its employees.

Royalties received from the employer are subject to a 6% health insurance contribution and a 2% social security contribution in 2010 (the social security contribution increases to 3% as from 2011). In addition, the entity that pays the income, i.e. the insurer, must pay a 3% health insurance contribution and a 14% social security contribution in 2010 (the social security contribution increases to 28% in 2011). Royalties received from an entity other than the employer are also subject to the 6% health insurance and 3% social security contributions. In addition, the entity paying the income must pay a 3% health insurance contribution and 26.7% social security contribution. The basis for the health and social security contributions is 50% of the income with a cap of 48 times the annual insured income (currently LTL 1,170 x 48).

Income from individual activities generally is subject to a 9% health insurance contribution (except where the individual holds a business certificate). This income is also subject to social security contributions at a rate of 28.5%. Caps for both health insurance and social security contributions are set so that annual contributions are calculated on the amount of income not exceeding 48 times the annual insured income (currently LTL 1,170 x 48). As from 1 January 2010, the base of health insurance and social security contributions is 50% of taxable income before the deduction of health insurance and social security contributions.

Income of owners of unlimited civil liability entities and members of partnerships is subject to a 6% health insurance contribution due by the owner/member receiving the income and 3% by the unlimited civil liability entity/partnership. Income of owners of unlimited civil liability entities and members of partnerships is also subject to a 28.5% social security contribution. The base of these contributions is the remuneration received by the owners of the unlimited civil liability entity and members of partnerships, which must be agreed upon with the local office of the State Social Security Fund and State Tax Inspectorate. The monthly remuneration cannot be lower than the minimum statutory monthly salary (currently LTL 800). The maximum amount on which the health and social security contributions are calculated is 48 times the annual insured income (currently LTL 1,170 x 48).

The health insurance contribution on income derived from carrying on individual activities with a business certificate is 9% of the monthly minimum salary (currently LTL 800).

Social security contributions on such income are 50% of the base pension benefit (the contribution is LTL 180 per month).

Special provisions apply to the income derived by athletes, income from entertainment activities, income from farming and certain other types of income.


Administration and compliance:

Tax year - Calendar year

Filing and payment - Employment income is taxed by withholding at source. Individual tax returns are due by 1 May following the end of the taxable year. An individual must file an annual return unless (1) he/she does not want to use unused additional TEA and deduct expenses; or (2) did not receive income other than employment income during the tax year.

Tax Penalties - Penalties equal to 10%-50% of the tax liability may be imposed, depending on the type of violation, whether the taxpayer cooperates with the tax authorities and other circumstances the authorities deem relevant. For late tax payment, daily late penalties of 0.05% apply as from 1 April 2009.


 

Lithuania Corporate Income Tax

The general corporate tax rate in Lithuania is 15%.

Micro companies (those with up to 10 employees and up to LTL 500,000 income per year) may be entitled to a reduced rate of 5%.

Residence - A corporation is resident if it is incorporated in Lithuania.

Basis - Lithuanian entities are subject to tax on their worldwide income minus the income of their permanent establishments (PEs) provided the PEs are based in EEA countries or countries that have concluded a tax treaty with Lithuania. Nonresident entities are subject to tax on income sourced in Lithuania and on income received by a PE in Lithuania.

Taxable income - Corporate income tax is imposed on a company's profits, which consist of business/trading income, passive income, capital gains and positive income of a Lithuanian entity's controlled foreign entity or part of such income. Normal business expenses may be deducted in computing taxable income.

Taxation of dividends - Dividends are taxable at a rate of 15% unless the participation exemption applies (i.e. dividends are exempt from corporate income tax if a parent company holds at least 10% of shares for at least 12 months).

As from 2009, if a Lithuanian entity distributes profits to an individual shareholder and the profits (or part thereof) were exempt from corporate income tax as a result of corporate income tax incentives, the distribution results in taxation of a part of the distributed profits proportionate to the shareholding at a rate of 15%. Dividends received from a foreign entity that is registered in an EEA member state are exempt from tax.

Capital gains - Capital gains of resident and nonresident companies are taxed as general taxable income at a rate of 15%. An exemption may apply to capital gains derived by a Lithuanian resident holding company or PE of a foreign company on the disposition of shares in a company (that is subject to corporate income tax) located in Lithuania, another EU/EEA member state or a country that has concluded a tax treaty with Lithuania. To qualify for the exemption, the Lithuanian company or PE must hold more than 25% of the voting rights for an uninterrupted period of at least 2 years. In the case of a reorganisation, the exemption applies if a company or PE has held more than 25% of the voting rights for an uninterrupted period of at least 3 years.

Losses - Operational losses may be carried forward indefinitely if the entity continues carrying on the activity that resulted in the losses. Losses from the sale of securities may be carried forward for 5 years and may only be offset against income from the sale of securities. The carryback of losses is not permitted. As from 1 January 2010, losses may be transferred within a group of companies provided certain criteria are met.

Surtax - No
Alternative minimum tax - No

Foreign tax credit - Foreign tax paid may be credited against Lithuanian tax on the same profits, but the credit is limited to the amount of Lithuanian tax payable on the foreign income. An exemption applies under some of Lithuania's tax treaties.

Holding company regime - Lithuania does not have a holding company regime, but an exemption on capital gains in the case of a disposal of shares may be available (see under "Capital gains").

Incentives - Scientific research and experimental development costs may be deducted 3 times when calculating corporate income tax. Under an incentive on investments in substantial technological improvements, a company may reduce its taxable profits by 50% for expenses incurred between 2009 and 2013. Incentives also are provided for micro companies and companies in free economic zone.


Withholding tax:

Dividends - The withholding tax on dividends paid to a nonresident is 15%, unless the rate is reduced under a tax treaty or the EC parent-subsidiary directive applies.

Interest - As from 1 January 2010, withholding tax on interest is abolished for EEA companies and companies resident in countries that have concluded a tax treaty with Lithuania. Otherwise, the rate is 10%.

Royalties - Royalties paid to a nonresident company are subject to a 10% withholding tax unless the rate is reduced under a tax treaty. The 10% withholding tax on EU affiliated companies will be abolished as from 1 July 2021 in accordance with the transition rules in the EC interest and royalties directive.

Branch remittance tax - No


Other taxes on corporations:

Capital duty - No
Payroll tax - No

Real property tax - Depending on the municipality, the rate varies from 0.3% to 1% of the value of real property owned by a legal person or an individual and transferred for use to a legal person for an indefinite period or a period exceeding 1 month. The type of property involved will determine the applicable valuation method and thus the taxable amount.

Social security contributions - In addition to withholding a 3% pension social insurance and 6% health insurance contributions on behalf of an employee, an employer must contribute to social insurance (including pension social insurance, sickness and motherhood social insurance, unemployment insurance, health insurance, occupational accident and disease contributions) at a rate between 30.98% and 31.7% of the employee's gross salary, depending on the risk group. For social security contributions on royalties paid to individuals, see under "Other taxes on individuals".

Stamp duty - No, although a notary fee may apply to certain transactions.

Transfer tax - No

Other - An employer must contribute 0.1% of an employee's gross wages to the Guarantee Fund.


Anti-avoidance rules:

Transfer pricing - The transfer pricing rules are based on the OECD transfer pricing guidelines. Companies must document transfer prices if the annual turnover exceeds LTL 10 million (this threshold does not apply to financial and credit institutions or insurance companies).

Thin capitalisation - Thin capitalisation restrictions apply to interest paid to controlling entities. A creditor qualifies as a controlling entity if it owns more than 50% of the shares in the company paying the interest (or more than 50% of the shares are owned together with associated persons and the "own" holding is 10% or more). A group company also qualifies as a controlling entity.

A debt-to-equity ratio of 4:1 applies and any interest attributable to the debt in excess of this ratio is nondeductible. The thin capitalisation restrictions do not apply if the paying entity can demonstrate that the same loan would have been granted under the same circumstances by an unrelated party. No thin capitalisation restrictions apply to third party loans (e.g. loans from banks or other financial institutions).

Controlled foreign companies - A foreign company is treated as a CFC if it is controlled by the controlling person on the last day of the tax period and the controlling person holds directly or indirectly more than 50% of the shares (or the controlling person, together with related persons, holds more than 50% of the shares and the portion controlled by the controlling person accounts for at least 10% of the shares) in the controlled entity or other rights to a portion of distributable profits or pre-emptive rights to the acquisition thereof.

Other - The substance-over-form principle applies under the statutory GAAR provisions.

Disclosure requirements - No


Administration and compliance:

Tax year - The tax year is a financial year that coincides with the calendar year. However, at the request of the taxpayer and taking into account the characteristics of its activities, the tax authorities may set a tax period other than a calendar year subject to the requirement that the tax period is 12 months.

Consolidated returns - Consolidated returns are not permitted; each company must file a separate return.

Tax Filing requirements - Companies make advance payments of corporate income tax on a quarterly basis, with the final balance due on the same date as the annual tax return, i.e. 1 October of the following tax year.

Penalties - Penalties equal to 10%-50% of the tax liability may be imposed, depending on the type of violation, whether the taxpayer cooperates with the tax authorities and other circumstances the authorities deem relevant. For late tax payment, a daily late penalty of 0.05% applies as from 1 April 2009.

Rulings - While rulings are available, they are not binding on the tax authorities or on the taxpayer.


 

Value Added Tax (VAT) in Lithuania

The standard rate of VAT in Lithuania is 21%, with reduced rates of 9%, 5% and 0%.

VAT applies on the sale of goods and provision of services.

VAT Registration - Registration is compulsory for Lithuanian businesses whose annual turnover exceeds LTL 100,000, but voluntary registration also is possible. The turnover threshold does not apply to foreign companies; they must register irrespective of turnover. Foreign taxable persons must register either through a local affiliate or through a fiscal agent. Only companies established in an EU member state may register directly.

Filing and VAT payment - VAT must be paid on a monthly basis, no later than 25 days after the end of the taxable period. In some instances, a calendar half year or other taxable period basis can be applied. If the average monthly income exceeds LTL 100,000 (LTL 200,000 for companies engaged in construction work) for 3 months in a row, a company is required to make advance VAT payments 3 times per month (5th, 13th and 20th days of the month).

The annual tax return is due on 1 October of the following tax year.

 

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Lithuania
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Last Update:  Nov 2010

(This page may show previous year's tax rates. Always check last update time)

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