LITHUANIA

CORRESPONDENT OF
MAZARS IN LITHUANIA

TaxLink Baltic UAB
Konstitucijos ave. 26, Vilnius,
Lithuania

Phone:
+370 650 17900

www.taxlink.lt

Justinas BASALYKAS

Partner

Mobile:
+370 650 17900

E-mail:
justinas@taxlink.lt

LITHUANIA

Corporate taxes and other direct taxes

The general corporate income tax rate is 15% in Lithuania. An incentive corporate income tax rate of 5% is applied for small companies with an annual turnover up to EUR 300,000 and having not more than 10 employees.

In Lithuania, the ordinary losses incurred may be carried forward to the subsequent taxable periods for an unlimited time, as long as the entity continues the activities that generated the losses. The amount of losses carried to the subsequent taxable periods is limited to the 70% of taxable income of the corresponding taxable period. The 70% limit does not apply for small companies. Capital losses incurred associated with the transfer of derivative financial instruments and securities may only be carried forward for 5 years and can only be covered from future capital gains.

Lithuania applies thin capitalization (4:1) and CFC rules. Tax allowances apply for certain new investments and R&D. Furthermore, Lithuania provides a tax exemption on holding structures: capital gains on shares and dividends received under certain conditions are tax-free. Under certain conditions there is no withholding tax on dividends, interest and royalty paid by a Lithuanian company to a foreign company.  Lithuania has a wide international treaty network with more than 50 double tax treaties.

Companies are also subject to two types of taxes on capital:

  • Immovable property tax – tax on property, deemed to be immovable by law and located in Lithuania (buildings, constructions, except unfinished constructions). The annual tax rate varies from 0.3% to 3% of the taxable value of immovable property. Tax rates are set by municipalities according to the territory where the immovable property is located. The tax period is a calendar year.
  • Land tax – tax on land owned in Lithuania, to be paid by both resident and non-resident entities and individuals. The tax rate varies from 0.01% to 4% of the taxable value of the land. Tax rates are set by municipalities and depend on the location of the land. The tax period is a calendar year.

 

Transfer pricing in Lithuania
Arm’s length principle since 2004
Documentation liability since 2004
APA since 2012
Penalty    
Lack of documentation EUR 1.400 - 4.300/EUR 2.900 - 5.800 (missing documents
 on recurrent basis)
Tax shortage 10% - 50% on tax underpayment
+ late payment interest
Related parties 25%
<
direct or indirect control
Safe harbours Low value added services:
3-10% mark-up

Level of attention paid by Tax Authority:

9/10

VAT and other indirect taxes

The general rate is 21%, the reduced rates are 9% (e.g. journals, newspapers, books, central heating (until 31 May 2017), public transportation, tourist accommodation) and 5% (medicine). The options/limits based on the EU Directive are presented within the VAT legislation:

Other indirect tax types in Lithuania include excise duty, environmental protection charge and data storage device tax.

VAT options in Lithuania Applicable / limits
Distance selling EUR 35,000/year
Call-off stock
VAT group registration
Cash accounting No, only optional regime for agricultural producers
Import VAT deferment
Local reverse charge Taking over the property as a transfer of contribution to a legal entity;
taking over a material improvement of a building; supply of goods and services from a supplier which is under bankruptcy; supply of certain metal scraps and certain timber materials, supply of construction services
Option for taxation
- letting of real estate
- supply of used real estate
- certain financial services
VAT registration threshold Local taxable person - 45,000 EUR/12 months; Foreing taxable person - No

Personal income tax / Social security system

There is a flat rate of PIT, which is 15%, and it is generally applicable to active (e.g. employment, assignment fee) and passive income (e.g. capital gains, dividend and interest). Certain tax allowances apply for persons having children. Income in general is recognized at the moment of its actual receipt.

The employee’s gross salary is subject to a mandatory health insurance contributions of 6%, and the employer is required to withhold this tax. The employer also has to pay a 3% mandatory health insurance contribution on top of the employee’s gross salary. The employer deducts 3% from the employee’s gross salary as the social insurance contribution paid by the employee. Employers must also pay social insurance contributions equalling to 30.98% of the gross salary. An additional 2% contribution may be paid by individuals who have decided to accumulate an additional pension using the formula 2+2+2.

Lithuania is subject to EU regulations laying down social security principles for persons migrating between EU Member States.

The examples below show the cost of the employer and employee in case of minimum wage level and the average wage in the private sector.

Wage- related taxes in Lithuania Minimum wage Average wage in private sector
  in EUR   in EUR  
TOTAL WAGE COST 498 131,18% 1 041 131,18%
Vocational training contribution 1 0,20% 2 0,20%
Social contribution tax 118 30,98% 246 30,98%
GROSS SALARY 380 100,00% 793 100,00%
Personal income tax* 11 15,00% 103 15,00%
Employees' contributions 34 9,00% 71 9,00%
NET SALARY 335 88,24% 618 77,96%

* Non taxable allowance of EUR 200,0 (minimum wage) and EUR 69,1 (average wage)

 
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