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Generic Tax Name Corporate income tax
Tax name in the national language Pelno mokestis
Tax name in English Corporate income tax
Member State LT-Lithuania
Tax in force since 1991/01/01
If abolished, date on which the tax ceases to apply
Business version date 2015/01/01
Version date 2015/02/17
This file was last updated on

Type of tax
Direct taxes Personal income tax
Corporate income tax
Other

Indirect taxes VAT
Excise duty (EU harmonised)
Alcoholic beverages
Energy products and electricity
Manufactured tobacco
Other

Social security contribution Employers
Employees
Other
 
Legal base

Law of the Republic of Lithuania on Corporate income tax No IX-675 was adopted by the Seimas of the Republic of Lithuania on 2001/12/20. The Law entered into force as of 2002/01/01. This Law replaced Law of the Republic of Lithuania on Taxes on Profits of Legal Persons No I-442, which was adopted on 1990/07/31 and repealed on 2003/01/01.

 
Who sets
The tax rate is set by




The tax base is set by




The reliefs are set by




Comments
 
Beneficiary





Comments

Corporate income tax is entered in the state budget.

 
Geographical Scope All territory of the Republic of Lithuania.
 
Taxpayers
Domestic-source income of non-resident entities is Taxed
Not Taxed
Comments
 
Tax object and basis of assessment
As general rule, taxable income under corporate income tax includes also








Comments

Income considered Domestic income
Worldwide income (subject to double-tax relief)
Comments

Comments

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).

 
Deductions, Allowances, Credits, Exemptions
Valuation of inventory
System First-in first-out (FIFO)
Last-in first-out (LIFO)
Average cost
Specific identification (unit method)

Comments

Depreciation rules
 
Buildings
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Depreciation rate: 6.67 - 12.50%.

Average depreciation period 15  Years
Average depreciation rate
 
Movable (tangible) assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Depreciation rate: 16.57 - 25%.

Average depreciation period 5  Years
Average depreciation rate
 
Movable fixed assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Depreciation rate: 16.57 - 25%.

Average depreciation period 8  Years
Average depreciation rate
 
Intangible assets
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments

Depreciation rate: 25 - 33.33%.

Average depreciation period 3  Years
Average depreciation rate
 
Land (if any)
System Straight-line method
Declining balance
Production method
Combination of above
Other
Not-depreciable

Comments
Average depreciation period
Average depreciation rate


Comments

Are there limits to interest deductions? Yes No
If yes:
Definition of deduction limit

Comments

Interest for loans of associated persons are fully deductible. For Interest of loans from controlling parties the Thin Capitalization rule applies.


Is there an Allowance for Corporate Equity? Yes No
If yes:
Notional rate applied for allowance

Comments

Losses
Loss carry-forward exists? Yes No
If yes:
Time limit: Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No
If yes:
Time limit: Indefinite
 
Size limit:
 

Comments

Losses, except losses resulting from disposals of securities and derivative financial instruments, may be carried forward for an unlimited period. Effective from the 2014 tax year, taxpayers (except for small entities) will be able to cover only up to 70% of their taxable profit with accumulated tax losses. This limitation does not apply to losses incurred prior to FY 2014. Loss resulting from disposals of securities and/or derivative financial instruments may be carried forward for five years. However, such losses may be covered only by future gains from the disposal of securities and/ or derivative financial instruments.



Comments

Corporate income tax is not paid by:

  1. budget-financed institutions;
  2. the Bank of Lithuania;
  3. the State and municipalities;
  4. state and municipal institutions, agencies, services or organisations;
  5. state company “Deposit and Investment Insurance”;
  6. European Economic Interest Groupings.

Non-Taxable Income:

  1. insurance benefits received; that part of insurance premiums reimbursed and insurance benefits which is in excess of insurance premiums deducted from income;
  2. income received by a bankrupt entity from the sale of assets;
  3. balance of the organizational fund of an insurance undertaking in accordance with the procedure laid down in the Law of the Republic of Lithuania on Insurance;
  4. investment income of variable capital investment companies, except for dividends and other distributed profits; specified life insurance premiums received by insurance undertakings; investment income of insurance undertakings (except for insurance companies non-life insurance  investment income) except for dividends and other distributed profits;
  5. income received by health care institutions from services financed from the Compulsory Health Insurance Fund;
  6. income resulting from the revaluation of assets and obligations performed in accordance with the procedure prescribed by legal acts, except for income resulting from the revaluation of derivative financial instruments acquired to cover the risks;
  7. penal interest;
  8. profits or part of profits received from legal persons of unlimited civil liability whose income is subject to corporate income tax;
  9. seaport charges, air navigation charges and funds collected from the lease of seaport land;
  10. correction of errors and inaccuracies of the previous tax periods in accordance with the Law on Accounting;
  11. compensations for damage received by an entity;
  12. compensations received under the EU financial support to the Republic of Lithuania programmes for handing over fishing vessels for metal scrap;
  13. as of 1 January 2007 capital gains income derived from transfer of shares if: 1) the company is transferring shares of the entity which is registered in EEA member states or in other countries which have a treaty for the avoidance of double taxation with Lithuania, 2) entity mentioned is subject to corporate income or substantially similar tax, 3) the company holds in that entity over 25 % of shares for more than two years or in case of reorganization or acquisition – for more than three years;
  14. direct and other compensatory payments received by entities engaged in agricultural activity and which are designated to maintain income level of these entities;
  15. life insurance premiums if the term of life insurance contract is more than ten years or the insurance benefit paid after the retirement; also insurance company’s investments, except dividends and other distributed profits as well as insurance company’s investments according to the occupational life insurance contracts.

Deductible expenses:

Deductible expenses shall include all the usual costs that an entity actually incurs for the purpose of earning income or receiving economic benefit and expenses for the subject to personal income tax benefit of the employees.

Deductions of limited amounts:

  1. depreciation or amortization costs of long-term assets;
  2. operating, repair and renovation costs of long-term tangible assets;
  3. costs of business trips;
  4. costs of advertising and promotional activities;
  5. costs of natural loss;
  6. taxes;
  7. bad debts;
  8. contributions for the benefit of employees;
  9. specific provisions of credit institutions and insurance undertakings;
  10. sponsorship;
  11. membership fees, payments and contributions;
  12. losses for the tax period.

Allowances:

The following incentives are applied to entities investing into research and development (R&D):

  1. expenses incurred by entities while carrying out R&D as well as by acquiring R&D carried out in EEA countries or tax treaty partners can be deducted from taxable income thrice;
  2. acquisition price of particular fixed assets used in the R&D activities can be written-off within two years.

Entities are allowed to reduce taxable profit up to 50 percent by the amount of expenses relating to the acquisition of new technologies. The expenses exceeding 50 per cent limit can be carried forward for 4 years. From the year 2014 the incentive is applied to the long-term asset group: goods vehicles, trailers and semi-trailers, busses, not older than 5 years. The cost incurred for the acquisition of this asset can not exceed EUR 300,000.

Until a separate decision is adopted by the Seimas of the Republic of Lithuania, the taxable profit of free economic zone enterprises, legal persons in which persons with limited capacity for work are employed shall be subject to taxation as follows:

  1. a free economic zone enterprise in which capital investments amount to at least EUR 1 million and not less than 75% of its income for the relevant tax period comprises of income form specified activities in within the zone shall not pay corporate income tax for 6 tax periods beginning with the tax period in which such an amount was reached and shall be subject to a 50% reduced corporate income tax rate for the subsequent 10 tax periods;
  2. As of 1 January 2005 legal persons whose income from own production exceeds 50% of the total income received and which employ persons with limited capacity for work shall reduce the calculated corporate income tax as follows:

Proportion of persons with a limited work capacity within the total of persons employed

Reduction of calculated CIT

More than 50%

100 %

40-50 %

75 %

30-40 %

50 %

20-30 %

25 %

 

 

Intra-group relief for losses incurred from 2010 is available.

 
Rate(s) Structure
Nominal corporate income tax rate Rate: 15.00 %

Central government surcharge Rate:
Regional government surcharge Rate:
Local government surcharge Rate:
Combined rate (all-in rate) Rate: 15.00 %


Comments

Special tax rate for SMEs
Special tax rates apply to SMEs: Yes No
If yes:
Nominal corporate income tax rate Rate: 5.00 %
Central government surcharge Rate:
Regional government surcharge Rate:
Local government surcharge Rate:
Combined rate (all-in rate) Rate: 5.00 %


Comments

The following tax rates are imposed:

For Entities:

1) a 15 % tax rate is imposed on the taxable profits of Lithuanian entities and permanent establishments, unless the Law provides otherwise;

2) on income which is sourced in the Republic of Lithuania and received by foreign entities otherwise than through their permanent establishments situated in the Republic of Lithuania 10 % or 15 % tax rate is imposed depending on type of income mentioned; Since 2010-01-01 interest received by foreign entities, which are registered or otherwise organised 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 exempt.

3) a 15 % tax rate is imposed on income from distributed profits unless participation exemption is applied.

4) sponsorship received which is used for purposes other than specified in the Law of the Republic of Lithuania on Charity and Sponsorship and that part of sponsorship received in cash from a single provider of sponsorship during the tax period, which exceeds the amount of 250 MLS is taxed at 15 % (without any deductions).

5) a 15 % tax rate is applied to taxable profits of entities calculating the tax base according to the special rules on Tonnage tax.

6) taxable profits of entities whose number of employees does not exceed 10 and whose income over the tax period does not exceed EUR 300,000 is taxed at a rate of 5 %, except for the specified cases;

  1. Starting from 1 January 2005 that part of taxable profits of non-profit entities, whose income from economic and commercial activity over the tax period does not exceed EUR 300,000, which amounts to EUR 7,250 are taxed at a rate of 0% and the remaining part of taxable profits are taxed at a rate of 15 %.
  2. Starting from 1 January 2005 taxable profits of Lithuanian entities is taxed at 0% if:

1) over the tax period, the number of employees of an entity who are attributed to the target groups listed in the Law of the Republic of Lithuania on Social Enterprises accounts for not less than 40% of the annual average number of the employees on the staff list; and

2) over the tax period, an entity does not perform the activities included in the list of non-supported activities of social enterprises as approved by the Government of the Republic of Lithuania or the income received from such activities over the tax period accounts for not more that 20% of the total income received by the entity; and

3) on the last day of the tax period, entities have the status of a social enterprise.

The taxable profit of agricultural entities which meet certain criteria and are engaged in agricultural activity are subject to CIT rate of 5 per cent.

 
International aspects
Treaty countries Non-treaty countries
 
Repatriated profits are taxed according to the following system Exemption system Exemption system
Tax credit Tax credit
Deduction Deduction
 
Interest received is taxed Yes No Yes No
Tax rate on interest received 15.00 % 15.00 %
Outgoing dividends withholding tax 15.00 % 15.00 %
Outgoing interest payments withholding tax 10.00 % 10.00 %
 
Foreign losses can be set-off Yes No Yes No
If yes:
Minimum direct or indirect shareholding to qualify loss-offset (if applicable) 66.00 %
 
Loss carry-forward exists? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Loss carry-backward exists? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Controlled foreign company (CFC-)rules exist? Yes No Yes No
If yes:
Time limit: Indefinite
 
Indefinite
 
Size limit:
 
Threshold for capital or voting power held directly or indirectly by resident in non-resident company 50.01 % 50.01 %
CFC-rules apply if foreign tax rate is lower than 74.99 % 74.99 %
CFC-rules apply for passive income only? Yes No Yes No

Comments   Treaty countries

Outgoing dividends withholding tax: 0 - 15%

Outgoing interest payments withholding tax: 0 - 10%

Foreign losses:

Under certain conditions tax losses of a foreign subsidiary resident in an EU member state which cannot be carry forward under the laws of the respective EU member state are deductible under certain conditions.


Comments   Non-treaty countries

Outgoing dividends withholding tax: 0 - 15%

Outgoing interest payments withholding tax: 0 - 10%

Foreign losses:

Under certain conditions tax losses of a foreign subsidiary resident in an EU member state which cannot be carry forward under the laws of the respective EU member state are deductible under certain conditions.

 
Measures against profit shifting
 
Do Thin Capitalization (TC) rules exist? Yes No
If yes:
Date of first introduction
2004/01/01
Introduced as Explicit TC law
Part of CIT law
Test for TC Ratio
Arm's length
If ratio
Value of numerical ratio: 4 : 1
Definition numerator
Definition denominator equity
 
Debt considered for test Internal
Internal and external
TC depends on shareholding? Yes No
Substantial shareholding threshold 50.01 %
 
Type of shareholding Direct
Indirect
Automatic remedy Yes No
Remedy Non-deductibility of interest
Reclassification as dividend
 
Rules apply to All companies
Foreign companies
Non-EU companies
Transfer pricing rules exists? Yes No
If yes:
Arm’s length principle applied? Yes No
 
Remedy Fee
Tax base increase
 
Tax due date

1. Advance CIT is paid by the last day of each quarter of the tax period, while the advance CIT for the last quarter of the tax period must be paid by the 25th day of the last month of the said quarter.

2. CIT is paid till the first day of the sixth month of the next tax period.

3. CIT calculated in respect of the income amounts paid to foreign entities (i.e. tax withheld at source) is paid not later than the last day of the term for filling the tax return. This tax return is filled not later than within 15 days after the end of the month during which the income amounts were paid out.

The CIT for taxable dividends received/paid out for the shares, portion of capital or other rights held in Lithuanian entities/foreign entities is calculated, withheld and paid to the budget by the Lithuanian entity paying/receiving the dividends by the 10th day of the month following the month during which the dividends were paid out/received.

 
Tax collector

The tax is collected by the State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania.

 
Special features

 
Economic function







Comments
 
Environmental taxes



Comments
 
Tax revenue
ESA95 code d51ba

Year
Annual tax revenue (millions)
Currency
Tax revenue as % of GDP
Tax revenue as % of total tax revenue
2012 1,494.78 LTL 4.48
2011 873.11 LTL 2.79
2010 953.87 LTL 3.40
2009 1,689.36 LTL 6.27
2008 3,065.30 LTL 9.38
2007 2,535.60 LTL 8.73
2006 2,290.00 LTL 9.51
2005 1,507.70 LTL 7.18
2004 1,169.00 LTL 6.41
2003 784.90 LTL 4.71
2002 307.70 LTL 2.02
2001 259.20 LTL 1.83
2000 311.70 LTL 2.33
1999 360.80 LTL 2.84
1998 580.20 LTL 4.46
1997 620.90 LTL 5.30
1996 583.70 LTL 6.01
1995 550.90 LTL 7.09

Comments