Taxes in Lithuania

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Taxes in Lithuania

Lithuanian companies, as a rule, are used for trading in Europe, as well as for international cargo transportation. Their popularity is associated with low costs for accounting and administration, low taxes and convenient geographical location. Lithuania’s well-developed infrastructure and its strategically advantageous location enable ever-growing links between EU and CIS states. Two international transport corridors pass through Lithuania: North-South and East-West. With four transborder airports, a railway linking Europe with the Scandinavian countries, and an ice-free seaport, Lithuania has become a hub for transborder cargo transportation. Tax system in Lithuania covers enterprises established in state territory, regardless of place of supervision and control.

Taxes in Lithuania are based on calculation of worldwide incomes minus profits of an enterprise, provided that the representative office is set within EEA or locally. Profits from the activities of such representative offices are taxed in the state where they’re established.

What taxes are paid by Lithuanian companies?

Income ratio is 15%. Income tax is levied on the global profit of a company, which includes incomes obtained from commercial operations, passive income, capital gains and company’s active incomes. In addition, when determining tax rate, expenses associated with firm’s activities will be deducted.

Lithuania has a special tax regime for small businesses – they get the opportunity to pay income tax at 5%. Thus, how much tax do you pay in Lithuania? Firms need to meet next-mentioned points:

  • company employs 10 workers;
  • company’s every-year turnover doesn’t exceed 1 million litas (approximately €290,000);
  • one shareholder owns whole firm and max 50% of the shares in another organization, either alone or jointly framed by the same group.

Income taxes in Lithuania are 15%. Legislation provides for preferential conditions for holding structures. Dividends of a Lithuanian firm can be paid without tax if next-mentioned rule is observed: enterprise possesses 10% of subsidiary shares for one year. This exemption of taxation in Lithuania doesn’t apply if enterprises distributing dividends haven’t paid income taxes at 15%.

Free zones

There’re 2 free economic zones in Lithuania: in Klaipeda and Kaunas. In Klaipeda, the size of the zone is 200 ha, in Kaunas – 500 ha. To obtain the right to work in the Lithuanian free economic zone, investments in the Lithuanian economy are required at least 100,000 euros (this means that the capitalization of the business needs to be at least 100 thousand euros). The second mandatory condition for approval in FEZ is creation of 20 jobs for local citizens. There’s tax return of a resident of Lithuania – investor enterprise is exempt from paying taxes in first 6 years of existence, and land tax will be 50%. In free zones, following types of commercial activities are encouraged: the supply of gas, water and electricity; construction; retail and wholesale trade; hotel, restaurant business; logistics; real estate business; education, health care; publishing activity; service business structure; production of tobacco products.

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