Corporate Tax in Lithuania

Corporate tax in Lithuania

In the broader context of Europe, Lithuania is widely known as a hub of fast-growing startups and young companies. Being a member of the EU, Lithuania offers good conditions for international collaboration whilst maintaining relatively low tax rates and an excellent selection of well-educated, prospective specialists.

When it comes to corporate taxation, companies are subject to four main tax categories:

  • Corporate income tax
  • Value added tax (VAT)
  • Personal tax
  • Immovable property and land tax

Corporate income tax

Taxable profits of a company are subject to a standard corporate income tax rate of 15%.

However, in some cases this rate can be as low as 5% or even 0%.

5% income tax rate applies to small companies who either have less than 10 employees, OR have an income of 300 000 euros or less throughout a specified taxation period.

0% income tax rate applies to new companies who, within their first taxation period, do not exceed either the limit of 10 existing employees, OR do not exceed the income limit of 300 000 euros. However, alongside this rule, special conditions apply for the following three taxation periods.

Furthermore, not all income of a corporate entity may be subject to income tax. Following this regulation, further tax deductions may apply.

Value added tax (VAT)

Legal entities are required to register as taxpayers for VAT purposes when:

  • Remuneration of a legal entity from its economic activities (supply of goods or services) subject to VAT and carried out in the territory of Lithuania exceeds EUR 45,000 per year (within a period of 12 months)
  • A legal entity purchases goods in Lithuania from another Member State of the EU for more than EUR 14,000 per calendar year
  • A legal entity is controlled by a person supervising several legal entities whose total revenue from the supply of goods/services in Lithuania exceeds EUR 45,000 per year (within a period of 12 months), or which altogether purchase more than EUR 14,000 worth of goods in Lithuania from another Member State of the EU per calendar year.

Legal entities whose business activities are subject to VAT, or legal entities already engaged in economic activities subject to VAT, but not exceeding the above thresholds, may voluntarily register as taxpayers for VAT purposes.

Personal income tax

If companies make payments to residents which are classified as class A income, they must:

  • Withhold an appropriate tax rate (5%, 15% or 20%) and pay personal income tax (PIT) on those payments;
  • Declare those payments together with PIT withheld and paid on their monthly and annual income tax returns.

If companies make payments to residents classified as class B income, they are only required to declare these payments on their annual tax return.

Class A income received from a legal entity involves work-related income, including payments for sports activities and entertainment services.

Immovable property tax and land tax

Companies and organizations are required to pay immovable property tax on immovable property owned under rights of ownership and located in Lithuania. If the immovable property (or part thereof) is owned by a natural person and is transferred to the company for an indefinite period, or for a period of more than one month, then the company must pay the immovable property tax during that period.

No property tax is payable if the construction of the immovable property has not been completed in accordance with the procedure laid down in Republic of Lithuania Law on Construction, or if the immovable property is not actually used.

The taxable value on which immovable property tax is calculated refers to the average market value of the immovable property. From 1 January 2020, immovable property tax rate are set between 0.5% and 3% of the taxable value of the immovable property. However, in some cases, deductions or exemptions may apply.

Municipal councils set the specific immovable property tax rates, applicable in the respective territory of the municipality. Immovable property tax is calculated and paid at the end of the tax period (calendar year), by 15 February of the following year.

Competent and knowledgeable experts at Company in Lithuania UAB offer valuable legal guidance and consulting services aimed to help our clients establish and operate companies in accordance with Lithuanian tax system and other legal requirements. To learn how our services can elevate your business experience in Lithuania, please contact us to schedule an initial consultation.