TaxLink Baltic UAB
Konstitucijos ave. 26, Vilnius,
+370 650 17900
+370 650 17900
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:
|Transfer pricing in Lithuania|
|Arm’s length principle||since 2004|
|Documentation liability||since 2004|
|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
|direct or indirect control|
|Safe harbours||Low value added services:
Level of attention paid by Tax Authority:
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|
|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|
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%|
|Personal income tax*||11||15,00%||103||15,00%|
* Non taxable allowance of EUR 200,0 (minimum wage) and EUR 69,1 (average wage)