Taxation of Non-Residents in Lithuania
As Lithuania is a member of the EU and the Schengen area, it offers advantageous tax regulations and financial incentives for foreign nationals who work or conduct business here. However, non-residents who conduct business activity in Lithuania may be subject to different taxation requirements and deadlines to those who are classified as residents. The taxation system for non-residents does involve multiple exceptions and may seem rather complex to navigate at first, but understanding it can bring significant gains and even help avoid double taxation to those who receive their income from multiple countries.
WHO IS CLASSIFIED AS A NON-RESIDENT?
To be classified as a non-resident, a natural person must match the following criteria:
- Maintain a stable address of residence only in a foreign country throughout the entire calendar year
- Maintain greater personal, social and economic interests in a foreign country (compared to Lithuania) throughout the entire calendar year
- Excluding traveling and other periods of leave, spend less than 183 days in Lithuania throughout an entire calendar year (or less than 280 days in two years).
Residents of a foreign country who spend more than 183 days in Lithuania throughout an entire calendar year (excluding travelling and other periods of leave), or spend more than 280 days in Lithuania in two calendar years (no less than 90 days in any one of the two years) are treated as non-residents if:
- They utilize a permanent business establishment in Lithuania solely to conduct individual business-related activity
- They are employed in Lithuania but receive their salary as foreign income
- They are employed at a diplomatic organization or consulate of a foreign country, or work at a sub-branch of an international organization.
INCOME TAX DECLARATION FOR NON-RESIDENTS
Non-residents who receive taxable income from individual business-related activity conducted through a base located in Lithuania must declare their income before May 1st of the following year.
Non-residents who receive other taxable income sourced in Lithuania must submit an annual income tax declaration before May 1st of the following year.
This regulation affects the following sources of income:
- Work-related income sourced in Lithuania that is subject to tax-free allowance
- Interest that is subject to a tax-free allowance of 500 euros
- Profit related to real estate sales
- B class income has to be declared within 25 days from the day it is obtained.
- B class income includes the following:
- Winnings related to lottery and gambling
- Income from individual activities (with certain exceptions)
- Income from the sales or other means of transfer related to financial instruments.
- All other income not attributable to Class A.
AVOIDING DOUBLE TAXATION
Currently, Lithuania is signatory to a double tax treaty with 57 other countries. This agreement serves as an effective tool in helping both residents and non-residents with mixed source income avoid overlapping tax duties. The treaty regulates mixed source income, allowing taxpayers to offset tax paid in one country against tax due in another country. In addition, according to this agreement, some forms of income are exempt from tax or qualify for reduced rates.
In cases where income is sourced in countries and territories that are not part of the double tax treaty, full taxation duties in multiple countries can still be reduced. However, the means of achieving this objective are very case specific and have to be studied on an individual basis.
Competent specialists at Company in Lithuania UAB are ready to provide valuable legal guidance and international tax advice specific to your case. Please contact us to learn how we can help you start and conduct business or other professional activity in Lithuania with confidence.