Lithuania
Scope of Income Tax
Taxable
entities are resident companies (including
partnerships) and the permanent establishments
of non-residents that derive income from a
Lithuanian source.
The
criterion for establishing a company's residence
for tax purposes is its incorporation in Lithuania.
A permanent establishment is created if an
entity is engaged in commercial
activity in Lithuania either directly or through
a dependent agent, or if it is engaged in
construction work.
Corporate
income tax applies to a resident entity's
worldwide income, and to the Lithuanian-source
income of a non-resident entity. Consolidation
is not permitted.
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Lithuania Income Tax Rates
The rate of corporate income tax in Lithuania
for 2010 is 15%. A reduced rate of 5% applies
to micro-enterprises (turnover
below EUR144,810 and fewer than 10 employees).
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Lithuania Calculation of Taxable Base
Taxable income includes trading income, passive
income, capital gains and the profits of CFCs
(Controlled Foreign Corporations). Dividends
are included in taxable income unless they
are covered by Lithuania's participation exemption,
which applies to EEA-source dividends and
also more generally to a minimum 10% participation,
unless the dividends were not taxed at source.
There is also an exemption for some types
of capital gains resulting from the sale of
a participation when the Lithuanian seller
has owned at least 25% of the company concerned.
Operating
losses can be carried forward indefinitely;
losses on the sale of securities can be carried
forward for five years and can only be offset
against comparable profits.
There
is no alternative minimum tax.
Normal
business expenses are deductible from income.
Tax credits are available for various types
of investment. Foreign tax credits are available
up to the level of Lithuanian tax that would
have been payable on the income concerned.
Lithuania Filing Requirements and Payment
of Tax
The tax year is the calendar year, but permission
may be given for an alternative 12-month period
to be used. Tax is payable quarterly in advance
based on previous results. A tax return is
due by October 1 in the year following the
tax year, and any balance of tax due must
be paid then.
Consolidated
tax returns are not permitted. Penalties for
infringement range up to 50% of the tax due;
late payments are charged at 0.04% daily of
the amount unpaid.
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Lithuania Withholding Taxes
The withholding tax on dividends is 15%; but
under the Parent/Subsidiary Directive, dividends
paid to connected corporate recipients in
the EU (minimum 10% shareholding) are exempt.
The
withholding tax rate on royalty payments is
10%, but under the Interest and Royalties
Directive such payments will be exempt as
from 2011 if made to connected corporate recipients
in the EU (minimum 10% shareholding). No withholding
tax is payable on interest for EEA countries
and countries with which Lithuania has a double
tax treaty.
Certain
types of payment in respect of the rental,
sale or lease of real estate are also subject
to withholding, at 10% or 15%.
Lithuania Sales Taxes and VAT
The
standard VAT rate is 21% , with a reduced
rate of 9% for construction, renovation and
insulation of residential houses, pharmaceuticals,
and books and newspapers. Exports and associated
services are zero-rated.
Supplies
of goods and services within Lithuania and
imports of goods are subject to VAT. Exemptions
without credit include health, education,
postage, broadcasting, gambling, residential
letting, insurance and financial services.
There is an option to tax applicable to the
sale or letting of immoveable property or
the provision of some financial services.
Excise
taxes apply to alcohol, tobacco, fuel and
electric power. There are environmental taxes
on pollutants discharged into the environment,
a few specified products (e.g. tyres, batteries)
and all kinds of filled package. A tax is
payable on the value of extracted natural
resources.
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