According to the Lithuanian Income Tax Law, a foreign company is obliged to pay income tax in the Republic of Lithuania only if it works in Lithuania through a permanent establishment. A foreign company must register a permanent establishment in Lithuania if there are criteria of continuity of activity.
Taxation of a foreign affiliate
A branch of a foreign enterprise is subject to limited taxation in Lithuania. This means that the entity pays income tax of legal entities (CIT) in Lithuania only from income received in its territory. Tax optimization is possible. Providing a report on the payment of a branch income tax to the head office of a foreign company, a credit will be made on the profit tax of the parent company.
The tax paid by the Lithuanian branch is a tax on profits received in the territory of Lithuania.
Profit tax is 15%, for small enterprises 5%
The tax on dividends is 15%.
The VAT rate is 21%. When performing export operations, it is possible to refund paid VAT. Each month the payment of VAT must be reported, and the tax transferred to the budget.
Social insurance when paying employees salaries (up to 40% of the salary).
Agreement on avoidance of double taxation
If, on the basis of the provisions of the Double Taxation Agreement between a foreign company and Lithuania, it is considered that a foreign organization carries out its activities in Lithuania through a permanent establishment, but all or part of the profit of a foreign entity through this permanent institution is exempt from liability, such a permanent institution must maintain accounts, make declarations and reports and pay taxes. The obligations of the franchise, like any other permanent establishment, do not pay income tax per se or pay only for that part of the profit which may be taxed in Lithuania in accordance with the provisions of the agreement on avoidance of double taxation.
Accounting and audit of a subsidiary/subsidiary in Lithuania
The Mission is required to maintain accounting records and to report in accordance with the laws of the country in which it operates.
The branch of the foreign company in Lithuania must provide the financial statements prepared in accordance with the preparation of the financial statements of Lithuania. If the annual financial statements of a foreign company are prepared in accordance with requirements other than those of the European Union (Section 9 of the Law on Companies of the Republic of Lithuania)a branch of such foreign company shall prepare and submit annual financial statements to the Register of Legal Entities.
Audit of branch in Lithuania
The branch has no obligation to provide audit reports. In accordance with the article on «Regulations on the Register of Legal Entities» the audit report together with the annual financial report and a set of reports are provided, If the audit has been carried out or is to be carried out in accordance with the law, or if it must be done in accordance with the charter of the company.
Employment in a branch of a foreign company in Lithuania
For employment in Lithuania of third-country citizens, it is necessary to obtain documents granting a citizen of a foreign state the right to work and reside in Lithuania.
For authorized persons of a branch of a foreign company, there is the following method of obtaining a temporary residence permit in Lithuania. Obligatory condition – the authorized person had to work for the parent company for at least the last 6 months. A document on the professional (higher) education of the authorized person is also required.
Within one company, you can be transferred as a manager and get a temporary residence permit. In this case, temporary residence will be granted for a period of time for which you will be transferred to work in the host company established in the Republic of Lithuania, but not for more than 3 (three) years.
The foreigner must be a permanent employee of a foreign company. Therefore, the contract of employment must be permanent.
If you already have a valid temporary residence permit as a person who is transferred to another job in one company issued by another EU Member State and you intend to arrive at the host company established in the Republic of Lithuania, For more than 90 (ninety) days during the 180-day period, you can also get a temporary residence permit.
In this case, you are relieved of the obligation to obtain a work permit in the Republic of Lithuania.
Contact Company in Lithuania UAB for detailed information on the steps to be taken to establish a branch/subsidiary of your company in Lithuania.