Tax Law in Lithuania

AT A GLANCE

Lithuania has a competitive corporate tax framework: corporate income tax (pelno mokestis — PM) is levied at 15% on taxable profit, with a reduced 5% rate for small companies meeting specific criteria and a 0% rate for qualifying startups in the first year of activity.
VAT (pridėtinės vertės mokestis — PVM) is levied at 21% as the standard rate; reduced rates of 9% and 5% apply to specific categories including residential heating, press and periodicals, and hotel accommodation.
Personal income tax (gyventojų pajamų mokestis — GPM) is levied at 20% on income up to the social insurance ceiling and 32% above it. Dividend withholding tax is 15% for non-resident shareholders (reduced by applicable double taxation treaties).
Lithuania has concluded over 55 double taxation treaties — covering all major trading partners — which reduce or eliminate withholding tax on dividends, interest, and royalties paid to foreign shareholders and creditors.
We advise on Lithuanian tax law: corporate structure optimisation, transfer pricing documentation, VAT issues, tax dispute representation before VMI and courts, and cross-border tax planning for foreign-owned companies.

Short answer

Tax law services in Lithuania cover advisory on the Lithuanian tax framework applicable to companies and their shareholders — from structuring the corporate group to minimise overall tax exposure within the law, to preparing transfer pricing documentation, advising on VAT issues, representing companies in VMI tax audits, and appealing unfavourable VMI decisions. We work at the intersection of the Law on Corporate Income Tax (PMĮ), the Law on VAT (PVMĮ), and Lithuania’s double taxation treaties — always grounded in the actual statutory provisions, not general principles.

Lithuanian Tax System Overview

Lithuania operates a territorial-based corporate tax system — Lithuanian companies pay corporate income tax on their worldwide income, while foreign companies pay Lithuanian tax only on income sourced in Lithuania. The tax authority is the State Tax Inspectorate (Valstybinė mokesčių inspekcija — VMI), which is responsible for tax administration, audit, and collection. VMI operates both at the national level (through the Central Office) and at the regional level (through 10 regional offices).

The principal tax statutes

The Lithuanian tax system is governed by a series of specific laws rather than a single consolidated tax code. The most commercially relevant statutes are:

Law on Corporate Income Tax (Pelno mokesčio įstatymas — PMĮ): the primary statute governing corporate income tax; sets out taxable income, allowable deductions, tax rates, exemptions, anti-avoidance provisions, and advance pricing agreement procedures
Law on VAT (Pridėtinės vertės mokesčio įstatymas — PVMĮ): the primary VAT statute implementing EU Directive 2006/112/EC (the VAT Directive); sets out taxable persons, taxable transactions, rates, exemptions, and VAT registration obligations
Law on Personal Income Tax (Gyventojų pajamų mokesčio įstatymas — GPMĮ): governing income tax for individuals; sets out taxable income categories, rates, deductions, and withholding obligations for employers
Law on Tax Administration (Mokesčių administravimo įstatymas — MAĮ): the procedural framework for all Lithuanian taxes; sets out taxpayer rights, VMI powers, audit procedures, appeal mechanisms, interest and penalties, and the limitation periods for tax assessments
Law on Real Estate Tax (Nekilnojamojo turto mokesčio įstatymas): annual tax on buildings and structures owned by legal entities; rate set by municipal councils within the statutory range of 0.5–3% of the tax value

VMI — powers and limitations

VMI has broad investigative powers under the Law on Tax Administration — it can inspect premises, request documents and information, interview directors and employees, conduct cross-checks with third parties (banks, counterparties), and issue tax assessments without the taxpayer’s agreement. However, VMI’s powers are subject to the limitation period: VMI cannot assess additional tax for periods more than 5 years before the current calendar year (Article 68 MAĮ), or 10 years in cases of deliberate tax evasion. The taxpayer has the right to appeal VMI decisions — first to the Central VMI Office (administrative appeal), then to the Tax Disputes Commission (Mokestinių ginčų komisija — MGK), and finally to the administrative courts.

Corporate Income Tax (Pelno Mokestis)

Standard rate and reduced rates

The standard corporate income tax (CIT) rate in Lithuania is 15% on taxable profit — one of the most competitive rates in the EU. Two reduced rates are available:

5% reduced rate — available to qualifying small companies (mažos įmonės) under Article 5(2) PMĮ: average number of employees does not exceed 10 AND annual income does not exceed €300,000. The 5% rate cannot be applied in the same year the company was incorporated or in subsequent years if the company distributes dividends during those years.
0% rate for qualifying startups — under Article 5(4) PMĮ, companies in their first tax period (where the tax period is the first financial year of the company’s activities) and meeting the small company criteria may apply a 0% rate to their first-year taxable profit. This is effectively a one-year CIT exemption for newly incorporated small companies.
15% tonnage tax — a special flat-rate regime for shipping companies under Articles 39–40(1) PMĮ replacing standard CIT on qualifying shipping income.

Taxable income — allowable deductions

Lithuanian CIT is levied on taxable profit — the difference between gross income and allowable deductions. The key deduction rules under the PMĮ:

Business expenses — Article 17 PMĮ: all expenses directly connected to generating income or to the economic activity of the company are deductible; the expense must be supported by proper documentation
Depreciation — Article 18 PMĮ: tangible assets are depreciated for tax purposes using methods and rates prescribed in Annex 1 of the PMĮ; buildings: 15 years minimum useful life; vehicles: 5 years; machinery: 5–10 years
R&D expenses — Article 17(1)(1) PMĮ: qualifying research and experimental development costs can be deducted at 300% of actual cost (triple deduction for R&D), making Lithuania particularly attractive for R&D-intensive businesses
Interest deduction limitation — Article 30(1) PMĮ implements EU ATAD Directive 2016/1164 thin capitalisation rules: net interest costs exceeding 30% of EBITDA (or €3 million, whichever is higher) are non-deductible in the current year (but can be carried forward for 5 years)
Non-deductible expenses — Article 31 PMĮ: expenses not connected to income generation; entertainment above statutory limits; fines and penalties; loss on disposals to related parties below market value

Tax loss carry-forward

Under Article 30(4) PMĮ, tax losses can be carried forward indefinitely — there is no time limit on using accumulated tax losses. However, the annual utilisation is capped at 70% of the taxable profit of the year in which the loss is being used. The remaining 30% of taxable profit is therefore always subject to CIT even where there are significant accumulated losses. Loss carry-back is not permitted.

Participation exemption — dividend income

Under Article 12(15) PMĮ, dividends received by a Lithuanian company from a subsidiary are exempt from Lithuanian CIT where the Lithuanian company holds at least 10% of the shares of the distributing company for at least 12 months (or acquires 10% with the intention of holding for 12 months). This participation exemption removes the double taxation of corporate profits distributed up the ownership chain within corporate groups. Dividends from companies in EU blacklisted jurisdictions are excluded from the participation exemption.

 R&D triple deduction — a significant incentive

Lithuania’s R&D triple deduction (Article 17(1)(1) PMĮ) allows qualifying R&D expenditure to be deducted at 300% of actual cost for CIT purposes. This means that for every €100 of qualifying R&D expenditure, the company’s taxable income is reduced by €300 — saving €45 of CIT at the 15% rate (an effective subsidy of 45% of R&D costs in reduced tax liability). Qualifying R&D activities must relate to research or experimental development aimed at creating new or substantially improved products, processes, or services. We advise on qualifying R&D activity classification and documentation as part of our tax advisory service.

Value Added Tax (Pridėtinės Vertės Mokestis — PVM)

Registration thresholds and obligation

A Lithuanian company or foreign company with a fixed establishment in Lithuania must register for VAT when its taxable turnover exceeds €45,000 in the preceding 12 months (Article 71 PVMĮ). Registration is mandatory at the threshold — voluntary registration is available below the threshold and is often commercially beneficial (allowing input VAT recovery). Foreign companies without a fixed establishment in Lithuania must register for VAT if they supply goods or services with the place of supply in Lithuania (with no threshold — the first such supply triggers registration).

Standard and reduced rates

The standard Lithuanian VAT rate is 21% (Article 19(2) PVMĮ). Reduced rates apply to specific categories:

9% reduced rate — hotel accommodation and other tourist accommodation services; periodical publications (newspapers, magazines, journals — both print and digital under the EU digital content VAT amendments)
5% reduced rate — books and non-periodical publications (including e-books); medicines and medical devices reimbursed from the compulsory health insurance fund; public heating supply for residential purposes
0% rate — exports of goods to non-EU countries; intra-Community supplies of goods to VAT-registered businesses in other EU member states; international passenger transport; and certain other supply categories

Reverse charge and import VAT

For B2B services received from abroad, Lithuania applies the reverse charge mechanism — the Lithuanian VAT-registered recipient accounts for VAT on behalf of the foreign supplier. This applies to most cross-border B2B services under the general place of supply rule (Article 13 PVMĮ), including consulting, IT services, financial advisory, and professional services. Import VAT (on goods imported from outside the EU) is accounted for at customs and is recoverable as input VAT by VAT-registered importers.

VAT groups

Lithuania permits VAT grouping under Article 71(4) PVMĮ — related companies meeting the ownership threshold (one company owns at least 50% of the other, or a common parent owns at least 50% of both) can form a VAT group. Within the VAT group, supplies between group members are disregarded for VAT purposes — effectively eliminating the VAT cost of intra-group services. The VAT group is treated as a single taxable person and files a single VAT return. VAT grouping is commercially significant for holding structures and groups with significant intra-group services volumes.

Common VAT issues we advise on

VAT registration — mandatory and voluntary registration; non-EU companies registering for Lithuanian VAT without a fixed establishment
Input VAT recovery — goods and services used for both taxable and exempt supplies; partial recovery calculations; the pro-rata method
Intra-Community transactions — OSS (One Stop Shop) for cross-border B2C sales post-2021 EU VAT reform; distance selling rules; triangular transactions
VAT on real property — the distinction between exempt land and property disposals and taxable new build sales; option to tax
VAT refund applications — excess input VAT repayment from VMI; standard and accelerated refund procedures
VAT inspection defence — responding to VMI requests for additional information or documentation during VAT audit

Withholding Tax and Double Taxation Treaties

Lithuania levies withholding tax on certain payments made by Lithuanian companies to non-resident persons — primarily dividends, interest, and royalties. The statutory rates are often significantly reduced or eliminated by Lithuania’s extensive network of double taxation treaties.

Statutory withholding tax rates

Under the PMĮ and GPMĮ, the standard withholding tax rates on payments to non-residents are:

Dividends — 15% (Article 34(2) PMĮ); reduced to 0% for EU/EEA resident corporate shareholders meeting the EU Parent-Subsidiary Directive conditions (10%+ holding for 12 months)
Interest — 10% (Article 37(1) PMĮ); reduced by treaty; 0% for interest paid to EU/EEA credit institutions and certain other EU resident persons
Royalties — 10% (Article 37(2) PMĮ); reduced by treaty; 0% for royalties paid to associated companies in EU/EEA meeting the EU Interest and Royalties Directive conditions
Services income — 15% where services are performed in Lithuania by a non-resident individual; 0% where the services are performed outside Lithuania
Capital gains — 15% on gains from the disposal of Lithuanian real estate or shares in Lithuanian companies whose value derives primarily from Lithuanian real estate

Lithuania’s double taxation treaty network

Lithuania has concluded double taxation treaties (DTTs) with over 55 countries — covering all major trading partners including the US, UK, Germany, France, Netherlands, UAE, Singapore, China, and all EU member states. Lithuanian DTTs generally follow the OECD Model Tax Convention structure. The reduced withholding tax rates under Lithuania’s DTTs are among the most favourable in the EU — many treaties reduce dividend withholding to 5% or 0% for qualifying corporate shareholders, and eliminate withholding on interest and royalties entirely.

Country	Dividends (qualifying companies)	Dividends (other)	Interest	Royalties
United States	5%	15%	10%	10%
United Kingdom	5%	15%	10%	5%
Germany	5%	15%	10%	5%
Netherlands	5%	15%	10%	5%
United Arab Emirates	0%	5%	0%	5%
Singapore	5%	10%	10%	7.5%
EU Parent (PSD)*	0%	—	—	—
EU Interest/Royalties*	—	—	0%	0%

 EU Parent-Subsidiary and Interest & Royalties Directives

The EU Parent-Subsidiary Directive (2011/96/EU) eliminates withholding tax on dividends paid by a Lithuanian subsidiary to an EU/EEA parent company holding at least 10% of the Lithuanian company’s shares for a minimum of 12 months. The EU Interest and Royalties Directive (2003/49/EC) eliminates withholding tax on interest and royalty payments between associated companies (25%+ ownership) within the EU. These Directives are implemented in Articles 34 and 37 PMĮ and are directly applicable — no separate treaty claim is required. We advise on the documentation requirements for applying both Directives and manage the VMI reporting obligations.

Transfer Pricing

Transfer pricing rules govern the pricing of transactions between related parties — companies within the same corporate group. Under the arm’s length principle, transactions between related parties must be priced as if they were concluded between independent parties in comparable circumstances. Lithuania’s transfer pricing framework is set out in Article 40 PMĮ and implemented through the Order of the Minister of Finance No. 1K-123 on the Determination of Transfer Prices.

Who must prepare transfer pricing documentation

Lithuanian transfer pricing documentation requirements apply to companies that have transactions with related parties (as defined in Article 2(31) PMĮ — companies with 25%+ common ownership or control). The documentation threshold varies:

Small companies (fewer than 50 employees and annual income ≤€8 million) — no mandatory transfer pricing documentation, but the arm’s length principle applies
Medium companies (fewer than 250 employees and annual income ≤€50 million) — simplified transfer pricing documentation required for transactions exceeding €90,000 per year with each related party
Large companies — full OECD-compliant transfer pricing documentation required for all related party transactions
Country-by-Country Report (CbCR) — required for multinational groups with consolidated revenue exceeding €750 million; Lithuanian entities of such groups must file a CbCR or notify VMI of the group entity that will file

Transfer pricing methods

Lithuania follows the OECD Transfer Pricing Guidelines in selecting the most appropriate method for each transaction type. The approved methods are: Comparable Uncontrolled Price (CUP); Cost Plus; Resale Price; Transactional Net Margin Method (TNMM); and Profit Split. The choice of method depends on the nature of the transaction, data availability, and the functional profile of the tested party. For intercompany services, TNMM or Cost Plus is most commonly applied; for intercompany loans, the CUP method using comparable market interest rates is typical.

Transfer pricing documentation — what it must contain

Entity file (Master File equivalent) — description of the group structure, business model, intercompany transactions, and global transfer pricing policies
Transaction file (Local File equivalent) — detailed analysis of each related party transaction: transaction description, parties involved, amounts, functions performed, risks assumed, assets used, and benchmarking analysis
Benchmarking study — comparable uncontrolled transactions from public databases (Amadeus, Bureau van Dijk) demonstrating that the related party pricing is within the arm’s length range
Intercompany agreements — service agreements, loan agreements, IP licences, and distribution arrangements with related parties must be documented and consistent with the transfer pricing analysis

Transfer pricing risk — VMI focus areas

VMI has significantly increased its transfer pricing audit activity in recent years. The highest-risk areas are: intercompany management fees without clear economic substance; IP royalties to low-tax jurisdictions; intercompany loans at non-arm’s length rates; and recharacterisation of transactions disguised as equity contributions or dividend distributions. A transfer pricing audit can result in income adjustments and additional CIT liability plus interest at 0.03% per day (10.95% per annum), and in cases of deliberate evasion, a 50% penalty surcharge.

Tax Disputes — VMI Audits and Appeals

VMI audit types

VMI conducts three types of audit: desk audits (kamerinis patikrinimas) — reviewing documents submitted by the taxpayer without physically attending the premises; field audits (mokestinis patikrinimas) — inspecting the taxpayer’s premises, books, and records in person; and operational audits (operatyvusis patikrinimas) — a lighter-touch inspection of specific aspects of compliance. The taxpayer has the right to be present during field and operational audits, to access the audit documentation, and to submit additional evidence before the audit is concluded.

The tax dispute process

If VMI issues a tax assessment (mokestinis sprendimas) with which the taxpayer disagrees, the dispute proceeds through three stages:

Stage 1 — Internal VMI appeal: the taxpayer appeals to the Central VMI Office within 30 days of the assessment. The Central Office must decide within 90 days. Submitting an appeal suspends the obligation to pay the disputed tax during the appeal period.
Stage 2 — Tax Disputes Commission (Mokestinių ginčų komisija — MGK): if the Central VMI Office upholds the assessment, the taxpayer can appeal to the MGK — an independent body — within 20 days. The MGK must decide within 90 days.
Stage 3 — Administrative court: if the MGK upholds the assessment, the taxpayer can appeal to the Vilnius Regional Administrative Court within 20 days. Further appeal to the Supreme Administrative Court is available on points of law.

Interest and penalties on unpaid tax

Under the Law on Tax Administration, late payment of tax attracts daily interest at 0.03% per day (equivalent to approximately 10.95% per annum). Where additional tax is assessed as a result of an audit, the interest runs from the original payment deadline, not from the audit date — meaning the interest accumulation on older audit periods can be significant. In addition to interest, VMI can impose a fine of 10–50% of the additional tax assessed: 10% where the understatement was unintentional, 25% where it was intentional but not fraudulent, and 50% where there was deliberate fraud or tax evasion.

 Advance pricing agreements (APAs)

Lithuania’s tax law allows companies to enter into advance pricing agreements with VMI under Article 40(3) PMĮ — binding rulings on the acceptable transfer pricing methodology for specific related party transactions for a defined future period (typically 3 years, renewable). An APA eliminates transfer pricing uncertainty for the covered transactions and provides full protection against transfer pricing adjustments during the APA period. APAs are most valuable for large groups with significant and complex intercompany transactions. We advise on APA eligibility and manage the APA application process.

Lithuanian Tax Rates at a Glance

Tax	Rate	Basis	Key Statute
Corporate Income Tax — standard	15%	Taxable profit	Article 5(1) PMĮ
Corporate Income Tax — small co.	5%	Taxable profit; ≤10 employees; ≤€300k revenue	Article 5(2) PMĮ
Corporate Income Tax — startup	0% (year 1)	First tax period; small company criteria	Article 5(4) PMĮ
VAT — standard	21%	Taxable supplies in Lithuania	Article 19(2) PVMĮ
VAT — reduced (accommodation/press)	9%	Hotel accommodation; periodicals	Article 19(3) PVMĮ
VAT — reduced (books/medicine)	5%	Books, e-books; reimbursed medicines	Article 19(4) PVMĮ
Personal income tax — standard	20%	Up to 60 avg wages/year threshold	Article 6(1) GPMĮ
Personal income tax — upper	32%	Above 60 avg wages/year threshold	Article 6(1) GPMĮ
Dividend WHT — domestic	15%	Dividends to non-resident shareholders	Article 34(2) PMĮ
Dividend WHT — EU parent (PSD)	0%	10%+ holding, 12 months; EU/EEA parent	Article 34(5) PMĮ
Interest WHT	10%	Interest to non-residents (treaty may reduce)	Article 37(1) PMĮ
Royalty WHT	10%	Royalties to non-residents (treaty may reduce)	Article 37(2) PMĮ
Real estate tax	0.5–3%	Annual tax on buildings/structures; rate set by municipality	Art. 6 NTMĮstatymas
Social insurance (employer)	~4.26%	On gross salary; pension, sickness, maternity components	SoDra regulations
Social insurance (employee)	19.5%	Deducted from gross salary	SoDra regulations

Tax Law Services Pricing

Tax advisory and dispute representation are priced individually based on complexity. The indicative fees below cover defined engagement types; complex tax structuring, multi-jurisdiction planning, and full audit defence are quoted after an initial assessment.

Service	Price
Tax position assessment — single issue Written opinion on the applicable tax treatment of a specific transaction or structure	€500
Corporate structure tax review Reviewing the tax efficiency of the existing holding structure; identifying risks and optimisation opportunities	€900
Holding structure advisory (new setup) Designing a tax-efficient holding structure for a new Lithuanian investment; DTT analysis; CIT and WHT modelling	€1,200
Double taxation treaty rate application — per shareholder Confirming applicable DTT rate; residency certificate coordination; PMĮ Article 34/37 compliance	€250
R&D triple deduction qualification assessment Assessing which activities and expenses qualify for 300% R&D deduction; documentation requirements	€600
Transfer pricing documentation — simplified (medium company) Transaction file for one related party transaction type; benchmarking summary	€800
Transfer pricing documentation — full OECD (large company) Master File + Local File + benchmarking study; quoted by number of transaction types	On request
Intercompany agreement drafting — TP consistent Service agreement, loan agreement, or licence consistent with TP documentation; English + Lithuanian	€500
APA application — preparation and VMI submission Advance pricing agreement; typically 3-year coverage; quoted after scoping	On request
VAT registration — Lithuanian company Mandatory or voluntary VAT registration; VMI submission and certificate	€800
VAT registration — non-resident company Foreign company registering for Lithuanian VAT without fixed establishment	€1,500
VAT advisory — single issue Written opinion on the VAT treatment of a specific transaction type; place of supply, exemption, or rate query	€500
VAT refund application Excess input VAT refund application; standard or accelerated procedure; VMI correspondence	€300
Tax audit support — document preparation and VMI liaison Organising and presenting documentation during a VMI desk or field audit; written responses to queries	€900
VMI assessment appeal — Stage 1 (Central VMI Office) Written appeal submission within 30-day deadline; representing the taxpayer through the Stage 1 process	€900
Tax Disputes Commission (MGK) appeal Full written submission and hearing representation; Stage 2 of the administrative appeal process	€1,200
Administrative court — tax case Court proceedings; quoted by complexity and anticipated duration	On request

Frequently Asked Questions

The standard corporate income tax rate in Lithuania is 15% on taxable profit under Article 5(1) of the Law on Corporate Income Tax (PMĮ). Small companies — defined as having no more than 10 employees AND annual income not exceeding €300,000 — are eligible for the reduced 5% rate under Article 5(2) PMĮ. Newly incorporated companies in their first tax period that also meet the small company criteria can apply a 0% rate to their first-year taxable profit under Article 5(4) PMĮ. The 5% and 0% reduced rates cannot be applied where the company distributes dividends in the year or years to which the reduced rate would apply. We advise on eligibility for reduced rates as part of the annual CIT compliance cycle.

Under the EU Parent-Subsidiary Directive (2011/96/EU), as implemented in Article 34(5) of the Lithuanian Law on Corporate Income Tax, dividends paid by a Lithuanian company to an EU/EEA corporate parent are exempt from Lithuanian withholding tax where: the parent holds at least 10% of the Lithuanian company’s shares; and the parent has held (or will hold) that participation for at least 12 continuous months. The 0% rate requires the Lithuanian company to obtain a certificate of tax residency from the parent, confirm the ownership percentage and holding period, and file a withholding tax return with VMI showing the 0% rate applied. The Directive applies automatically under Lithuanian law — it does not require a separate treaty claim. We prepare the documentation package for each dividend distribution.

Transfer pricing documentation is required for any Lithuanian company that has transactions with related parties (as defined in Article 2(31) PMĮ — typically companies with 25%+ common ownership). The documentation threshold depends on company size: large companies must document all related party transactions; medium companies (fewer than 250 employees, annual income ≤€50 million) must document transactions exceeding €90,000 per year with each related party; small companies (fewer than 50 employees, annual income ≤€8 million) are not required to prepare formal documentation but the arm’s length principle still applies. The documentation must be available for VMI on request — it is not filed annually. We prepare transfer pricing documentation and annual benchmarking updates for companies of all sizes.

A company established in Lithuania must register for VAT when its taxable turnover exceeds €45,000 in any 12-month period under Article 71 PVMĮ. Registration must be completed before the first supply that takes the total above the threshold — a company that discovers it crossed the threshold in a prior month must register retroactively and account for VAT on past supplies. Voluntary VAT registration below the threshold is available and is commercially beneficial where the company has significant input VAT (e.g., on equipment purchases or imported services) that it wants to recover. Foreign companies without a Lithuanian establishment that make taxable supplies in Lithuania must register for VAT from the first such supply — there is no threshold for non-established companies. We manage VAT registration for both Lithuanian and non-established companies.

A VMI tax assessment you disagree with should be appealed within 30 days of receipt. The appeal process has three stages: (1) appeal to the Central VMI Office — the same body but at the national level; (2) appeal to the Tax Disputes Commission (MGK) — an independent quasi-judicial body; (3) appeal to the Vilnius Regional Administrative Court, with further appeal to the Supreme Administrative Court on points of law. Filing a Stage 1 appeal suspends the obligation to pay the disputed tax. The entire administrative appeal process (Stages 1 and 2) typically takes 6–12 months. We represent taxpayers at all three stages and advise on the strength of the case at each stage before recommending whether to continue the appeal.

Intercompany management fees are deductible under Article 17 PMĮ as business expenses, provided they satisfy two conditions: (1) the services were actually provided and benefit the Lithuanian company; and (2) the fees are at arm’s length — consistent with what an independent party would pay for comparable services in comparable circumstances. VMI scrutinises management fee deductions particularly carefully because they are a common vehicle for profit shifting. The risk of disallowance is highest where: the fee is based on a percentage of turnover or profit without reference to actual services rendered; the service provider is in a low-tax jurisdiction; there is no service agreement; and the Lithuanian company cannot demonstrate the specific benefit received. We structure intercompany management fee arrangements to satisfy both the arm’s length requirement and the VMI documentation expectations.

Capital gains from the disposal of shares in a Lithuanian company are subject to Lithuanian corporate income tax at the standard 15% rate — they form part of the company’s taxable income. However, there is a participation exemption under Article 12(15) PMĮ: capital gains from the disposal of shares in a qualifying subsidiary (at least 10% shareholding held for at least 12 months) are exempt from CIT, mirroring the dividend participation exemption. For non-resident sellers, Lithuanian withholding tax at 15% applies to capital gains from Lithuanian companies where the company’s value derives primarily from Lithuanian real estate — under Article 35(1) PMĮ and most Lithuanian DTTs. Capital gains from other Lithuanian company share disposals by non-residents are generally not subject to Lithuanian withholding tax under the OECD Model structure followed by most Lithuanian treaties.

Ready to discuss your Lithuanian tax matter?

Contact us with a description of the specific tax issue — whether it is a structure review, a VMI assessment, a transfer pricing question, or a withholding tax calculation. We will confirm the applicable statutory provisions, assess the position, and provide a fixed-fee quote for the engagement.