Taxes in Lithuania

Taxes in Lithuania

The tax legislation in Lithuania is favourable for international business and the tax system is adapted to the legislation of the European Union.

It is very important before starting business in another jurisdiction, to get acquainted with the tax system and the local rules, to avoid any inconvenience in the future. By opening a company in Lithuania, we will be happy to provide you with an individual consultation regarding taxes and rules regarding doing business in Lithuania. Also, you will be able to get brief information regarding the tax systems below.

Lithuania has eight types of taxes:

Direct taxes

Indirect taxes

Other taxes and contributions to the State budget:

  • Social insurance contributions
  • A tax on public natural resources
  • A tax on oil and natural gas
  • A tax on environmental pollution
  • Consular fees
  • Stamp duty
  • Sales tax

Taxes in Lithuania

Advantages

  • Lithuanian corporate income tax from 5%
  • Opportunity to obtain tax exemptions and availability of free economic zone
  • Entrepreneurship incentive: possibility to defer income tax
  • Taxable income can be reduced by the amount of expenses

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:

Ethyl alcohol, denatured alcohol and alcoholic beverages, including beer.

Smoking of tobacco and tobacco.

Coffee, chocolate and products containing cocoa.

Jewellery, gold and silver, with the exception of jewellery and coins.

Motor fuel, excluding aviation fuel, and diesel fuel.

Luxury Class Cars.

Publications of an erotic or violent nature.

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 passenger transport on regular routes

On books and non-recurrent information publications

For certain accommodation services (until 31 December 2022)

Provision of thermal energy and hot water for residential use

Wood and wood products for domestic energy heating

The rate of 5 per cent is applied to:

Medicines and medical aids

Equipment for the technical support of persons with disabilities and its repair

Periodicals

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.

Taxation in Lithuania 2023

Declaration form Value Added Tax Declaration (VAT) of taxpayers registered as users and/or intermediaries of special DDN schemes
Tax period 2022
Payment code 1001 – Declared taxes administered by GNI, and fines for administrative offences, imposed since 01.07.2015, shall be paid by a uniform payment code
Value added tax is payable.

The amount of VAT calculated in the annual declaration of VAT (form FR0516) is paid up to the 1st day of each month of the calendar year following the reporting calendar year.

Amount of VAT payable (form FR0600) paid to the budget:

  • until the 25th of the following month, if the tax period of a natural or legal person is a calendar month;
  • until the 25th day of the first month of the next quarter, if the tax period of the legal entity is a calendar quarter;
  • until the 25th day of the first month of the next half year, if the tax period of an individual is a calendar half year.

Payment Code 1001 – declared taxes administered by the State Tax Inspectorate are paid with one payment code.

 

In the submitted VAT account of a person not registered as a VAT payer (form FR0608), taxable and non-taxable persons not registered as VAT payers, in accordance with the provisions of articles 92 and 95 of the Law on Value Added Tax calculate and until the 25th of the next month. pays VAT on the goods and services provided, as well as goods and services purchased from foreign persons.

Payment Code 3631 – Value Added Tax Fee for

Unregistered value added taxpayers paid without filing a value added tax declaration.

Until the last day of the month following the tax period, the participants of the special scheme pay VAT to a special account of the State Tax Inspectorate under the Ministry of Finance, and in the payment order must indicate a unique identifier, assigned the corresponding OSS declaration in the OSS system. Details of the special account:

Recipient – State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania;

The name of the bank is Šiaulių Bankas;

BIC code of the bank – CBSBLT26;

The bank account number is LT7971800000141065.

Income tax
Declaration form Monthly Income Tax Declaration (GPM313)
Tax period 2022
Payment code 1311 – NPFL on income of a Class A resident related to employment or related to its substance

1330 – VATFL from class B payments to residents with withholding and (or) payable income tax at the expense of a person who has paid tax credits for tax periods since 01.01.2018

1411 – Class A NPFL payments to non-residents or related relationships

Personal income tax is paid.

If the withholding person pays the income of the tax period of the relevant month related to the employment relationship or relationship, in instalments and pays the full amount of the benefit during that month, the withholding person, is obliged to pay the withheld income tax to the budget in the order of the 15th of this month, if the last part of the benefit was paid before the 15th of this month If the last part of the benefit is paid after the 15th of this month, the withholding person, must pay the withheld income tax to the budget until the last day of this month.

Value Added Tax Declaration (VAT) of taxpayers registered as users and/or intermediaries of special DDN schemes
Value added tax
Tax period 2022
Participants in a special scheme (telecommunications, radio and television broadcasting or electronic services, remote trade in goods or other services within the EU) must complete the monthly OSS VAT declaration through the OSS system and submit it before the last day of the month after the tax period. Participants must complete the quarterly OSS VAT declaration through the OSS system and submit it before the last day of the month following the tax period.
Excise tax
Declaration of Excise (FR0630)

Personal Excise Declaration (FR0630A)

Excise payers are obliged to calculate excise duty on goods subject to payment to the budget (reimbursement from the budget) after the tax period, specified in Articles 10, 14, 15, 16, 50, 56, 60, 67 and 68 of this Federal Law.  Excise Act.
Income tax
Preliminary additional declaration on the income tax of the credit institution (PLN211)

Preliminary Income Tax Declaration (FR0430)

The income tax has been paid.
Monthly Income Tax Declaration (GPM313)
Income tax
The Monthly Tax Declaration Form GPM313 is submitted in due course.
Declaration of Real Estate of a Natural Person (Family) (KIT715)
Property tax
KIT715 declaration form is submitted correctly.
Declaration of Excise (FR0630)

Personal Excise Declaration (FR0630A)

Excise tax
Excise payers are obliged to calculate excise duty on goods subject to payment to the budget (reimbursement from the budget) after the tax period, specified in Articles 10, 14, 15, 16, 50, 56, 60, 67 and 68 of this Federal Law.
Excise Act. This amount, in accordance with the Excise Act and the Regulations, shall be calculated in the completed FR0630 declaration form or in the FR0630A declaration form and their respective annexes.
Declaration of income (sums) paid to foreign tax subjects and their calculated income tax (FR0313)
Income tax
A properly completed FR0313 declaration form shall be submitted.
Income tax
Declaration on income tax on dividends (FR0640)  Declaration on income (amounts) paid by foreign taxable entities, and the income tax on them (FR0313)
Income tax
Monthly Income Tax Declaration (GPM313)
Personal income tax is paid.
Declaration of income tax on dividends (FR0640)
Income tax
The FR0640 declaration form and its annex shall be submitted correctly.
Mandatory contributions from timber and stumpage revenues
Declaration on Mandatory Deductions from the Sale of Unprocessed Wood and Unprocessed Forest (FR0463)
Mandatory fees are payable on proceeds from the sale of unprocessed timber and unprocessed forest.
Property tax
Declaration of Real Estate of a Natural Person (Family)  (KIT715)
Advance property tax is paid
Declaration on Mandatory Royalties from Unprocessed Wood and Uncovered Forest (FR0463)
Mandatory contributions from timber and stumpage revenues
A duly completed FR0463 declaration form shall be submitted.

FREQUENTLY ASKED QUESTIONS

  • How do you define "resident of Lithuania"?
    The following conditions must be met for someone to be considered a resident:
    • The permanent place of residence in Lithuania is the place where a natural person is registered.
    • A person who spends 183 days or more in Lithuania during the tax period.
    • A Lithuanian diplomat in the service is also a Lithuanian resident.
    Residents of Lithuania are subject to different tax requirements depending on their residency status. In corporate taxation, the tax status is determined by the country in which the turnover is generated, where the profits are distributed, and where taxable residents are based.
  • Taxes on e-residents in Lithuania?
    In Lithuania, e-Residency does not automatically entail tax residency, but only provides access to electronic services offered by the state.
  • Is dividend taxation a problem in Lithuania?
    Lithuania taxes dividends at 15% (exceptionally 0%). 0% applies to recipients residing in the EU or other countries with which we have tax conventions. Over 55 double taxation agreements have been concluded between Lithuania and EU countries, India, Georgia, and Ukraine as of 2021.
  • For a Lithuanian company, what are the advantages of taxation?
    Among the most beneficial taxes in the European Union is the taxation of Lithuanian companies. It is primarily advantageous to tax retained profits at 15% or 5%. During the reporting period, 5% is applied to companies that meet 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.
    In all other cases, the 15 percent rate applies.
  • Can you tell me about Lithuania's direct taxes?
    Taxes paid directly include:
    • Income tax for corporations
    • Organizations and enterprises are taxed on their property
    • Tax on real estate
    • Taxes on individual income
    • The taxation of gifts and income
    • /ul>
  • How do Lithuanians pay indirect taxes?
    There are several types of indirect taxes:
    • Value Added Tax
    • Duties on excise
    • Lotteries and gambling taxes
  • Besides taxes and contributions to the state budget, what are other types of taxes and contributions in Lithuania?
    The State budget is also funded by other taxes and contributions:
    • Contributions to social security
    • Natural resource taxes
    • Natural gas and oil taxes
    • Taxing pollution to reduce it
    • Fees for consultations
    • Taxes on stamps
    • In addition to sales tax
  • How does Lithuania tax its employees' payrolls?
    Lithuanian laws require that Lithuanian companies employ directors. A company's director and owner may be the same person as well as a citizen of another country. The payroll tax must, however, be paid at the place where the employee is taxable in the case of a non-Lithuanian director. The tax rates for resident-individuals in Lithuania are: 20% income tax, 19.5% Social Insurance Tax for Employee, 1.79% Social Insurance Tax for Employer, and 2% Pension fund.
  • Who is responsible for paying personal income tax in Lithuania?
    Individuals living in Lithuania are subject to income tax. Employers withhold and pay a monthly personal income tax on behalf of their employees from their total wages. Permanent residents are subject to income tax at a rate of 20% when their annual earnings are up to EUR 81,162 gross, and at a rate of 32% when their earnings exceed EUR 81,162.
  • Can Lithuanians deduct their income from taxes?
    A Lithuanian's taxable income is as follows:
    • Working under a Lithuanian contract or employment agreement brings in income,
    • A Lithuanian business's income,
    • Amounts received from Lithuania as interest income,
    • In addition to the profits distributed to the Board and Supervisory Board, the Board and Supervisory Board members also receive annual bonuses.
    • Expenses associated with the rental of Lithuanian property,
    • Lithuanian assets sold for a profit,
    • Amounts earned from sports activities,
    • Performing activities generates income,
    • Under Lithuanian law, income from the sale of movable property or other transfer of ownership is taxable.
    • Royalties,
    • Compensation for infringement of copyright or related rights.
  • Does Lithuania have a labor tax?
    In fact, yes. Employees are taxed 19.5% on social insurance and 6.98% on health insurance. The employer pays 1.79% of social insurance tax, which includes 0.32% for the Guarantee Fund and Long-term Unemployment Fund.
  • Do foreign employees outside Lithuania have to pay taxes?
    No. In cases where the company has employees who are not Lithuanian tax residents, their salaries are not taxed in Lithuania and tax returns are not filed for them. An employee of a Lithuanian company must declare his income to the government of the country where he is taxable on behalf of the company.
  • Tax residency can be affected by the permanent establishment (place of business) of a company?
    Permanent establishments may also change the country of taxation in which a company is taxed if they are located in a country other than the country of registration, management, and business activity of the company. There is a risk of changing the permanent establishment from Lithuania to the country in which the company actually operates when doing business permanently in another country (for example, having warehouses, selling goods, providing services). Not Lithuania, but the country where the business is located will determine how taxation will be handled in this situation. A change of tax residence resulting in tax liabilities shall be reported to the inspection authorities of the foreign country. As a result, your company is no longer subject to the general Lithuanian tax rules. So, at the end of the financial year, the payment of company taxes will take place in accordance with the laws of a foreign country. We strongly recommend that your company seek international tax advice to reduce the risk of unexpected tax liabilities.
  • When a business expects a turnover exceeding 45,000 EUR in the near future, what should it do?
    TPrior to reaching the 45,000 EUR threshold, companies can register for VAT in Lithuania in advance.
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