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Taxation Advantages in Lithuania

Taxation Advantages in Lithuania

Due to modern digitization efforts and easy registration processes, Lithuania is attracting more and more international players who choose to establish new companies here. Although this may look like a big, complicated transition at first, branching out and existing business or starting a completely new entrepreneurial project in Lithuania comes with multiple advantages. Among them are significant taxation benefits, which can notably lower the financial burden on eligible projects and businesses.

INCOME TAX ADVANTAGES

Standard corporate income tax rate in Lithuania is 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.

Further income tax deductions may apply to businesses who execute capital investment projects focused on one of the following objectives:

  • Acquisition of property for expansion of services / new manufacturing operations or operational capacity.
  • Implementation of new manufacturing processes or partial replacement of current manufacturing processes.
  • Implementation of technologies protected by international invention patents.
  • Businesses who meet these requirements in any given taxation period can receive up to 100% income tax deduction.

Finally, income tax deductions also apply to:

  • Manufacturers who employ individuals with disabilities.
  • Businesses who are registered within the free economic zone. Such companies will receive an exemption from income tax for a limited amount of years and, at the end of this period, will receive continued income tax deductions.
  • Companies who carry out scientific research or experimental business expansion projects.

VAT ADVANTAGES

In Lithuania, companies are obliged to pay VAT if their 12 month income exceeds the sum of 45 000 euros. Otherwise, VAT obligation also applies to businesses who, over a 12 month period, purchase goods from companies based in other EU countries for a sum that exceeds 14 000 euros.

Companies who make less income than indicated above OR purchase goods from other businesses in the EU that are worth less than 14 000 euros are exempt from VAT obligation.

SUMMARY OF THE MAIN CORPORATE TAXES IN LITHUANIA

Income tax: 15%, in special cases can be deducted to 5% or 0%.
Capital gains tax: 15%.
VAT: 21 %, exception applies in cases noted above.
Corporate tax: 5%, 15% or 20%.
Social security tax: 30,98% (paid by employer, additional 9% paid by employee).
Property tax: ~1% (varies by municipality).

To sum up, there are a multitude of tax-related deductions and exemptions that companies can take advantage of in Lithuania. Navigating the tax system with confidence is key for every business, and Company in Lithuania UAB will gladly provide accounting services and guidance tailored specifically to your needs and expectations.

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