1. The tax base of a Lithuanian entity is all income earned in the Republic of Lithuania and foreign countries, which are sourced inside and outside the Republic of Lithuania, including positive income of controlled foreign companies (CFC). In respect of change in method for elimination of double taxation of business profit (from credit to exemption method), income from activities carried on through a permanent establishment situated in a state of the European Economic Area or in a state with which a treaty for the avoidance of double taxation has been concluded and is applied, are not included in the taxable base (if income from activities carried on through a permanent establishment are subject to taxation in aforementioned countries).
2. The tax base of a foreign entity is:
1) income from activities carried on through a permanent establishment situated in the territory of the Republic of Lithuania as well as income earned in foreign countries and attributed to the said permanent establishment in the Republic of Lithuania in the event that such income relates to the activities of a foreign entity carried on through a permanent establishment situated in the Republic of Lithuania;
2) income sourced in Lithuania and received otherwise than through a permanent establishment situated in the territory of the Republic of Lithuania (interest, income from distributed profits, royalties, income from sale or lease of immovable property in Lithuania etc.).
3. The tax base of an entity also includes:
1) sponsorship received which is used for purposes other than specified in the Law of the Republic of Lithuania on Charity and Sponsorship;
2) that part of sponsorship received in cash from a single provider of sponsorship during the tax period, which exceeds the amount of 250 minimum living standards (MLS).
4. As of 2007, resident company or a permanent establishment of a company established in the territory of EEA conducting shipping and related business activities can choose to apply special taxation rules (Tonnage tax) if certain conditions are met. The tax base is calculated according to the tonnage of a vessel.
1. For the purpose of calculating taxable profits of a Lithuanian entity the following is deducted from income:
1) non-taxable income;
2) deductible expenses;
3) deductions of limited amounts.
2. The taxable income of permanent establishments is calculated by deducting from the income earned the non-taxable income, deductions of limited amounts and deductions relating to the income earned by a foreign entity through a permanent establishment.
3. The taxable profits earned by a foreign entity otherwise than through a permanent establishment include income sourced in the Republic of Lithuania:
1) interest, except interest from securities issued by Government, interest accrued and paid on deposits, and interest on subordinated loans which meet the criteria set down by the bank of Lithuania;
2) income from distributed profits;
3) royalties (including remuneration for the neighbouring rights granted and rights in copyrighted software (to demonstrate, reproduce software and prepare derivative software based on the copyright software), income received as remuneration for the right to use an object of industrial property or franchise under license agreement, remuneration for information concerning industrial, commercial or scientific experience (know-how);
4) income from sale or lease of immovable property located in Lithuania;
5) compensations for violation of copyright and neighbouring rights;
6) income from sporting and artistic activities;
7) annual bonuses to Supervisory Board members.
4. Mentioned income received by foreign entity otherwise than through a permanent establishment is taxed at source (without any deductions, except income from sale or lease of immovable property and income from sporting and artistic activities).