Lithuania: Business Environment

Company Tax

15%

Tax Rate For Foreign Companies

Lithuanian entities are subject to tax on their worldwide income, non-resident companies are subject to corporate income tax on Lithuania-source income and on income received by a permanent establishment in the country.

Capital Gains Taxation

Capital gains of resident and non-resident companies are taxed as general taxable income at a rate of 15%. Capital gains from the sale of shares of a company that is resident in Lithuania or in another EU/European Economic Area member state may be exempted if the investor (Lithuanian firm or permanent establishment of a foreign company) maintains uninterrupted participation of more than 10% for at least two years (three years in the case of a reorganization).

Main Allowable Deductions and Tax Credits

Depreciation of tangible and intangible assets is tax-deductible at rates ranging from 5% (residential buildings) to 33.3% (computer, software). Goodwill is also deductible over 15 years.
Start-up expenses, interest charges and bad debts are generally deductible whereas provisions for doubtful debts are not deductible.
Donations to charitable organisations give rise to a 200% tax deduction, capped at 40% of taxable income (before the deduction of donations and the carryforward of tax losses).
Fines and penalties are not deductible. Taxes are deductible except for VAT and corporation tax.
Entertainment fees are deductible up to 50% and their deduction is capped at 2% of the company's income. Travel expenses related to the business are generally deductible, the same as contributions and expenses for the benefit of employees.
Tax losses can be carried forward indefinitely, yet for each year, they can only be offset by 70% of taxable income. The rest of the losses can be offset against income from previous years. Losses from the sale of shares may be carried forward for up to five years and may only be offset against income from the sale of shares. The carryback of losses is not permitted.

Other Corporate Taxes

The land tax varies between 0.01% and 4% (the rate is determined by the municipalities), the same as for the tax on land lease. The property tax varies between 0.5% and 3% (the rate is determined by municipal councils - properties with a value of up to EUR 150,000 are exempt).
There are no stamp duties in Lithuania. On the other hand, a small fee is payable for the issuance of certain documents by public services.
Social security contributions payable by the employer vary between 1.45% and 2.71% for income up to EUR 81,162 per year (employees' contributions are lower for incomes above this threshold). Employers withhold 0.16% of the gross salary for the Guarantee Fund (which provides financial assistance to employees in case their employers go bankrupt). They also pay a contribution equal to 0.16% of the gross salary for the Long-Term Employment Fund.
An environmental tax is levied on pollutants released into the environment, and a separate tax is payable on the value of extracted natural resources.

Other Domestic Resources

Consult the Doing Business Website, to obtain a summary of taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

The following items among others are allowed for income tax deductions (cumulatively capped at 25% of the taxable income):
- Repair (except for building renovation), car repair, childcare (up to EUR 2,000 per year)
- Pension contributions, life insurance premiums
- Expenses for vocational studies and training.

A monthly tax-exempt amount (TEA) applies to employment-related income of Lithuanian tax residents, equal to EUR 400/month for incomes up to EUR 642 (minimum monthly salary for 2021) or reduced progressively for incomes above that amount, up to an income limit of EUR 2,864.22.
Allowances are given for each child (EUR 70, EUR 111 for children with disabilities, large or low-income families).
Business expenses of self-employed individuals are deductible (taxpayers can opt for a lump-sum deduction of 30% or for itemized deductions supported by the relevant documentation).

Special Expatriate Tax Regime

Residents are taxed on their worldwide income whereas non-residents are only taxed on Lithuania-source income and on income derived from activities through a fixed base in the country.