Taxation in Lithuania
Lithuania’s taxation framework is an intricate system that forms a fundamental part of the country’s economic strategy, striking a balance between generating revenue and fostering growth and investment. This framework includes various taxes, each regulated by a detailed array of rules and rates. For businesses, investors, and individuals, having a thorough grasp of this landscape is crucial for effective financial management and ensuring compliance.
Taxation system
Lithuania’s taxation system aims to conform to local fiscal policies and international commitments, providing a well-organized but flexible method of taxing. It may include a mixture of flat rates, progressive tax scales, and specific exemptions, showcasing the nation’s economic goals and social aims. Grasping the complexities of these tax structures is crucial for enhancing financial results, maintaining compliance, and taking advantage of opportunities within the legal parameters.
Capital gains tax
In Lithuania, capital gains are taxed at progressive rates based on the gain amount. The general rate is 15%, but gains above a certain limit face a 20% tax. This taxation applies to profits from selling real estate, securities, and other capital assets. The tax regulations permit the deduction of specific expenses associated with the purchase and sale of the asset, potentially lowering the taxable gain. The country’s tax regulations aim to maintain a reasonable tax burden while ensuring adherence and generating revenue.
Corporate taxation
In Lithuania, Corporate Income Tax (CIT) is imposed on Lithuanian entities based on their global income. Foreign entities are subject to taxation on income derived from sources within Lithuania or through permanent establishments situated in the country. The standard CIT rate is typically 15%. Nevertheless, small entities and cooperatives can take advantage of a lowered CIT rate of 0% for their initial tax period and 5% for later periods if they meet certain criteria. There are also additional tax rates of 5% that apply to specific research and development commercialization activities, and a 20% rate applies to taxable profits that exceed established thresholds for credit institutions.
Personal income taxation
In Lithuania, Personal Income Tax (PIT) operates on a progressive scale with rates of 15%, 20%, and 32%. For employment earnings and specific other income types, such as supervisory or management board roles, a tax rate of 20% is imposed if the annual income does not surpass EUR 101,094. For income exceeding this limit, a tax rate of 32% is charged. A standard rate of 15% is applied to dividends, individual activities, and certain types of benefits. Depending on the taxpayer’s circumstances, such as the kind of income and any relevant tax allowances, various deductions and tax-exempt thresholds may be applicable.
Dividend taxation
In Lithuania, the typical tax rate on dividends is 15%. However, dividends distributed to a company owning at least 10% of the voting shares continuously for a minimum of 12 months qualify for tax exemption. Dividends from Lithuanian companies to non-residents are also subject to a 15% tax, unless a Double Taxation Treaty (DTT) allows for a reduction. Specific conditions govern the applicability of participation exemption rules.
Property tax
In Lithuania, property tax rates vary between 0.5% and 3% of the property’s taxable value. Local municipalities decide the specific rate depending on the property’s type and use. Typically, commercial real estate owned by individuals and legal entities is taxed at higher rates, whereas residential properties may be taxed at lower rates. Municipalities can establish different rates within the permitted range.
Inheritance taxation
In Lithuania, inheritance tax is imposed at progressive rates ranging from 5% to 10% on inherited assets, with the specific rate determined by the value of the inheritance. There are exemptions for immediate family members and specific property categories. Non-residents inheriting property in Lithuania face the same tax rates as residents. Inheritance tax returns are required to be filed, and payments must be completed within a designated timeframe, typically within six months of obtaining the inheritance. There are penalties for failure to comply.
International taxation
Lithuania’s international tax framework encompasses taxes on income generated by Lithuanian residents from overseas sources and taxes on income derived from Lithuania by non-residents. The country operates under a territorial tax system, which implies that residents are subject to taxation on their global income, whereas non-residents are taxed solely on income from Lithuanian sources. Tax rates differ based on the nature of the income and relevant treaties.
Cryptocurrency taxation
In Lithuania, cryptocurrency taxation is governed by corporate income tax regulations for businesses, with rates between 5% and 15% based on the size and income of the company. For individuals, profits from cryptocurrency transactions are considered capital gains and taxed at a rate of 15%. Mining operations are not subject to tax until the cryptocurrency is sold. Payments made with cryptocurrency for goods and services are taxed in the same manner as transactions involving traditional currency. VAT typically applies to cryptocurrency-related services unless a financial transaction exemption is applicable.
VAT system
In Lithuania, the standard VAT rate is set at 21%. There are reduced rates of 9% and 5% for particular goods and services, including books, newspapers, hotel accommodations, and pharmaceuticals. A 0% rate is designated for exports, international transport services, and specific supplies for ships and aircraft. Companies that go over the VAT registration limit are required to register and collect VAT.
Our taxation solutions
In a tax landscape that is constantly changing, having expert guidance is essential. Our company provides a range of specialized tax solutions specifically designed to address the varied requirements of individuals, corporations, and investors in Lithuania. We aim to help clients maneuver through the intricacies of the tax code, reduce liabilities, and guarantee complete compliance with regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation can be challenging, and seeking professional advice can greatly impact your success. Reach out to us today to arrange a meeting with our tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to Lithuania’s regulatory framework.
Disclaimer
Tax laws and regulations are always evolving and can differ depending on personal situations. The information presented here serves as general guidance and may not incorporate the latest changes. It is strongly advised to seek the help of a qualified tax professional for specific, accurate, and current advice tailored to your circumstances.