Taxes in Lithuania

Corporate income taxes

Rate: 5% or 15%.

For the period of reporting, 5% of the company’s revenue is applied if it meets the following criteria:

• There are no more than 300,000 euros in annual sales
• Not more than 10 employees;
• The first two criteria of both companies are added if shareholders own more than 50 percent of shares in another company.

All other cases are subject to a 15 percent rate.
There is a standard CPN rate of 15%. The CPN rate can be reduced to 0% or 5% for small businesses and agricultural businesses, however. The 20% CPN rate applies to credit institutions’ taxable profits exceeding 2 million euros for the period beginning on 1 January 2020 and ending in 2022. Calculating taxable profits is subject to special rules.
Lithuanian tax residents are generally subject to the CPN on their local and international taxable income. In calculating taxable income, deductible expenditures and non-taxable income are subtracted from the total income for a tax period.
In Lithuania, resident tax companies are not taxed on their income if their income is derived from activities conducted through permanent establishments (PEs) in foreign countries that are part of the European Economic Area or have double taxation agreements (DTTs) with Lithuania.
Further, if a foreign country has a DTT with Lithuania and income from foreign sources not derived through CP is taxed at source (WHT) in that country, the CPN may be reduced or even not applied.
In Lithuania, income received by non-resident companies is taxed through their local permanent establishments and reduced by deductible expenses.
Non-profit organizations that profit from the activities of businesses must pay corporate income tax as well.

For small businesses, CPN rates have been reduced

In the first year of operation, companies with fewer than 10 employees and gross annual incomes under 300,000 euros are eligible for 0% CPN and 5% CPN thereafter.

Dividend tax

• Rate 15% (exceptional 0%)
• A 0% rate applies to recipients living in the EU or states that have signed a tax convention with the EU
• Over 55 double taxation agreements have been concluded with Lithuania, including with EU countries, India, Georgia, and Ukraine.

A physical person is subject to a 15% dividend tax. Exceptionally, 0% applies to recipients of funds residing in the EU or member states of tax conventions. Over 55 double taxation agreements have been concluded by Lithuania, including those with EU countries, India, Georgia, and Ukraine.
Residents paying dividends to residents are subject to 15 percent corporate tax, unless the parent company owns at least 10 percent of the shares of the subsidiary for at least 12 months, then dividends are tax-free. An EEA member state’s corporate income tax or equivalent is also not applicable to dividends received by foreign legal entities registered in the state.

Income tax on the population

Persons earning less than the minimum non-taxable income are virtually exempted from NPFL. Currently, the standard amount of non-taxable income is 300 euros and the minimum wage is 555 euros. Below, you will find an example of the calculation of tax-free income for wages of 555 euros and wages of 1,000 euros.

• Salary 555 euros

1. EUR 555 Wage – EUR 555 Minimum Wage = EUR 0
2. 0.15*EUR0=EUR0
3. EUR 300 standard non-chargeable amount – EUR 0 = EUR 300 of non-chargeable income

• Salary 1,000 euros

1. EUR 1000 Wage – EUR 555 Minimum Wage = EUR 445
2. 0.15 * 445 EURO = 66.75 EURO
3. Standard EUR 300 – EUR 66.75 = EUR 233.25 of unencumbered income

Property tax

Real estate tax in Lithuania ranges from 0.3% to 3%. Private property is generally taxed at 1% of the value of the property, which exceeds 220,000 euros.

Land tax

Tax payments on land constitute the land tax in Lithuania, and the provisions on how this tax is calculated and paid are determined by the local councils. Land taxes are imposed on privately owned land, and the rate ranges from 0.01 to 4 percent of the land’s value (forests are not subject to the land tax).

In the first half of the year, landowners who acquire land are required to pay a full-year tax. Taxes must be paid from the following year if the land is acquired during the second half of the year. It is not necessary to pay the tax if the land is sold during the first half of the year, but it must be paid for the whole year if it is sold during the second half.

Excises

The following products are collected by excise, which is intended to correct the consumption of goods sold in the country:

Excise is free of alcohol and its raw materials imported by State-owned enterprises licensed to produce alcohol and on exported goods.

Value added tax (VAT)

Rate 21 per cent

The company is obliged to register the VAT by the payer if:

• Income in the last 12 months exceeded €45,000
• EU purchases this year exceeded or exceed €14,000

If the shareholder has more than 50% of shares in other companies, the criteria are summed up for all companies.

The rate of 9 per cent is applied to:

The rate of 5 per cent is applied to:

Lithuania has a standard VAT rate of 21% with a reduced rate of 9% and 5%. A VAT of 9 per cent applies to books, information publications, periodicals, accommodation and passenger transport on regular routes, while a reduced rate of 5 per cent applies to equipment for disabled persons, Persons entitled to compensation under the Health Insurance Act. Registration in VAT is required when the aggregate quantity of goods and/or services supplied in the ordinary course of business exceeds 45,000 EUR over a 12-month period.

Registration of VAT payer in Lithuania

 The obligation to be registered is imposed when the turnover of a company in a financial year exceeds 45,000 euros; the procedure can be done in person at the local tax authorities or online by filling in the necessary forms – in this case, form FR 0388.

Social tax

Social insurance contributions are paid by both employers and employees. The basic contribution amounts to 33.7% of total income before taxation, thus covering all risks (except for accidents at work and occupational diseases), of which 30.7% is paid by the employer and the remaining 3% by the employee.

Taxation of representatives

Lithuanian legislation regulates representative offices and any other organizations registered in the country.

Legal entities have representations, which are subdivisions with their own registered offices and are entitled to perform the following operations. When a legal person is represented, a legal person’s interests are protected, contracts are concluded and other transactions are conducted on their behalf, and imports and exports are conducted exclusively by foreign legal entities and other entities with subsidiaries, institutions or organizations, or other subsidiary companies. There is no legal person called a legal representation.

Legal persons and organizations must inform the Register of Legal Persons upon registration of a representation if there is any change in the documents and data of a legal person, or if a legal person changes its legal status. It is the responsibility of the Administrator of the Register of Civil Law to verify the correctness of all information contained in an application for registration of foreign legal persons, to ensure that the statute is consistent with legislative requirements, and to ensure that: That foreign legal persons can be registered as representatives.

Company in Lithuania UAB listed the key issues of corporate taxation in Lithuania. For more specific tax-related questions, contact us for consultation with the accountant.

Company in Lithuania UAB will help you to register your company in Lithuania. We are also glad to offer our clients accounting services and assistance in the process of VAT registration by the payer.

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Taxation in Lithuania 2023