Branch/subsidiary taxation
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 Lithuanian branch of a foreign company may constitute a permanent establishment for Corporate Income Tax purposes. Where a taxable permanent establishment exists, Lithuania generally taxes the profits attributable to that establishment under Lithuanian tax legislation and the applicable double taxation treaty. Profit attribution depends on the functions performed, assets used and risks assumed by the permanent establishment, rather than solely on the geographic source of receipts. Relief from double taxation in the foreign company’s country of residence depends on the applicable domestic legislation and tax treaty. A foreign tax credit is not automatically granted merely because the branch submits a report to its head office.
The tax paid by the Lithuanian branch is a tax on profits received in the territory of Lithuania.
From 1 January 2026, Lithuania’s standard Corporate Income Tax rate is 17%. A reduced rate of 7% may apply to qualifying small entities with annual revenue not exceeding EUR 300,000, subject to statutory eligibility conditions. Eligible newly established entities may qualify for a 0% rate during their first two tax periods. The availability of preferential rates to a Lithuanian permanent establishment of a foreign company must be assessed separately under the applicable legislation.
The Lithuanian tax treatment of profit distributions depends on whether the business operates through a subsidiary or a branch. Dividends paid by a Lithuanian subsidiary to non-resident individuals are generally subject to 15% Personal Income Tax, while dividends paid to foreign corporate shareholders are generally subject to 17% Corporate Income Tax withholding in 2026, unless a statutory exemption or applicable double taxation treaty provides relief. A Lithuanian branch is not a separate legal entity and does not distribute dividends to its foreign head office. Transfers of branch profits to the head office must therefore be distinguished from dividend distributions by a subsidiary.
Lithuania’s standard VAT rate is 21%. A Lithuanian subsidiary or branch must assess its VAT registration and reporting obligations according to its activities, taxable turnover, cross-border transactions and applicable exemptions. VAT returns are generally submitted monthly by legal entities under the ordinary VAT regime, although different reporting periods may apply in certain circumstances. Qualifying exports outside the EU may be zero-rated, while input VAT may be deducted or refunded only where the statutory conditions are satisfied. Export activity does not automatically entitle a business to a refund of all VAT paid.
Employment income in Lithuania is subject to applicable Personal Income Tax and social insurance contributions. In 2026, standard employee social insurance contributions generally amount to 19.5% of gross salary, with an additional 3% pension accumulation contribution where applicable. Employer contributions for a standard indefinite-term employment contract generally start at 1.77%, subject to the applicable occupational risk category and statutory conditions. Personal Income Tax is calculated separately under the applicable progressive rates. The total payroll tax burden should not be described as a universal social insurance contribution of up to 40%.
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.
Under Article 76 of the Lithuanian Law on Companies, a Lithuanian branch of a foreign company must generally submit the foreign parent company’s annual financial statements and applicable accompanying reports to the Register of Legal Entities (JAR). These documents must be prepared, audited and disclosed in accordance with the law of the country where the foreign company is established. Where a qualifying foreign company’s financial statements are prepared under requirements different from those applicable in the EU, the Lithuanian branch may instead be required to prepare and submit its own annual financial statements in accordance with Lithuanian financial accounting and reporting legislation. The precise requirements depend on the foreign company’s jurisdiction and legal form.
Audit of branch in Lithuania
A Lithuanian branch of a foreign company must comply with the annual financial reporting and audit disclosure requirements applicable under Article 76 of the Lithuanian Law on Companies. Where the foreign parent company’s annual financial statements are subject to a statutory audit under the law of its country of establishment, the relevant auditor’s report must generally accompany the financial statements submitted to the Lithuanian Register of Legal Entities. Where the branch is required to prepare separate financial statements under Lithuanian law, any applicable audit requirements must be assessed separately. A branch should not be described as universally exempt from submitting audit reports.
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.
An eligible third-country national transferred from a company established outside the EU to its Lithuanian branch or another qualifying group entity may apply for an intra-corporate transferee (ICT) residence permit under the applicable Lithuanian immigration legislation and Directive 2014/66/EU. Managers and specialists must generally have worked for the relevant undertaking or group for at least six uninterrupted months immediately before the transfer, while trainee employees are generally subject to a three-month requirement. The applicant must provide evidence of the qualifying employment relationship, transfer arrangements and relevant professional qualifications or experience. A university degree is not a universal requirement for every ICT manager or specialist.
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.
An applicant for an intra-corporate transferee (ICT) residence permit must demonstrate an existing employment relationship with the undertaking established outside the EU or the relevant corporate group, together with the required period of prior employment and a qualifying temporary transfer to Lithuania. The employment agreement and assignment documentation must satisfy the applicable statutory requirements. An indefinite-term employment contract is not a universal prerequisite for every ICT application. The assessment depends on the applicant’s position, employment history and the contractual arrangements governing the transfer.
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.
A branch of a foreign company in Lithuania has the right to conduct commercial activities in Lithuania, to receive profits, pay taxes, receive VAT number, hire personnel, do customs operations, but at the same time it is not a separate legal entity. The activities of a Lithuanian branch of a foreign company are managed by an authorised branch representative acting within the powers granted by the foreign company. The branch must be registered in the Lithuanian Register of Legal Entities (JAR). A branch is not a separate legal entity, and the foreign company remains responsible for obligations arising from the branch’s activities. By contrast, a Lithuanian subsidiary is a separate legal entity, and its shareholder is generally not liable for the subsidiary’s obligations, subject to applicable statutory exceptions.
