Lithuania

Find legal, tax and practice information for Lithuania, and search for branches, firms and members in the jurisdiction. If you have any comments on the report please contact [email protected]

*Updated March 2020*

Editorial Board

Richard Wernick TEP, SRC-Time, Lithuania

Important new developments

The highest earners in Lithuania will now pay a top rate of 32 per cent, up from 27 per cent.
Stock options will benefit from a more favourable tax regime.

Legal system

Lithuania is a civil-law jurisdiction with French and German influences historically predominating. The civil law and commercial law is codified in a single legal act: the Civil Code of the Republic of Lithuania (Lietuvos Respublikos civilinis kodeksas, the Civil Code), which came into force on 1 July 2001.

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Inheritance and succession

Succession

In common with other civil-law jurisdictions, Lithuania has forced heirship rules. The relevant legislation is contained in Book V of the Civil Code. Lithuanian law contains deemed heirship provisions that apply in the absence of a will or in the case of an incomplete will. There are also special provisions relating to agricultural land and businesses (arts.5.71–5.73).

Family law and defined inheritance rules

Family law is also contained in the Civil Code. The forced heirship rules define a narrow group of beneficiaries: spouse, children and parents. The law entitles them to receive a minimum of 50 per cent of the amount they would have been entitled to by law, in the absence of a will.

Probate process

NOT APPLICABLE

Mental capacity

This is defined in the Civil Code. Article 2.10 of the Civil Code states that a person who, as a result of mental illness or ‘imbecility’, is unable to understand the meaning of their actions or control them may be declared incapable and placed under guardianship. Once under guardianship, the guardian may act on their behalf according to rights and duties of the guardian that have been specified by law. The declaration of incapacity can be requested by the spouse, parents or adult children of the person with presumed incapacity or by a care institution or public prosecutor. This can be done by filing a request or applying to court.

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Estate planning

Use of trusts in estate planning

Lithuania does not recognise trusts.

Use of foundations in estate planning

A non-profit organisation can be established in order to pursue charitable activities and it will not be taxed on donations and gifts.

Types of entities

Non-profit organisations must register as legal persons in the Register of Legal Persons (the Register). The registration is done in two stages: by a notary certifying the legal foundation of the organisation and the actual registration in the Register. In Lithuania, not-for-profit organisations must comply with general rules of administration of legal persons.

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Taxation

Income tax system

Individuals: the basic legislation is contained in Law on Personal Income Tax of 2 July 2002 as further amended. A person who has their domicile in Lithuania (nuolatiné gyvenamoji vieta mokestiniu laikotarpiu) or exceeds 183 days in a calendar year in Lithuania is subject to tax on their worldwide income, while a person who does not is subject to tax only on Lithuanian-source income (limited tax liability). Residence determination provisions of DTAs apply when two countries seek to simultaneously tax an individual.
Companies: the regulations are set out in Law on Corporate Income Tax of 20 December 2001 as further amended. Companies incorporated in Lithuania or foreign companies with a permanent establishment in Lithuania are subject to tax on worldwide income and capital gains. Non-resident companies are subject to tax only on Lithuanian-source income and capital gains.

Personal income tax rates

Flat rate of 15 per cent on most income, other than employment income, which is subject to a progressive tax of 20 per cent and 32 per cent. Dividends and other profit participations are also taxed at a flat rate of 15 per cent. Self-employment is taxed at a flat rate of 5 per cent if the net annual income is below EUR20,000. From 1 February 2020, the value of shares vested under stock options not earlier than three years after date of grant is tax-exempt.

Corporate income tax rates

Flat rate of 15 per cent. Dividends received from domestic or EU companies are exempt from tax.

Capital gains tax

Corporate capital gains are subject to corporate income tax. However, capital gains made by a Lithuanian company on the sale of shares in another Lithuanian company, an EU-resident company or a company resident in a Member State with which Lithuania has a DTA are exempt from tax if the Lithuanian company has held at a minimum 10 per cent shareholding for at least two years.

Individual capital gains are subject to personal income tax although there are certain exemptions for the disposal of residential property and small shareholdings.

Non-residents taxable on

Lithuanian-source income only.

Withholding tax rate (non-treaty)

A typical rate of withholding tax on dividends is 10 per cent and on interest and royalties it is also 10 per cent. There is no withholding tax on interest paid to European Economic Area (EEA) resident companies.

There is no withholding tax on interest paid to EEA-resident companies.

Withholding tax rate (treaty)

A typical rate of withholding tax on dividends is 10 per cent and on interest and royalties it is also 10 per cent.

Taxation at death

The provisions are contained in Law on Inheritance Tax of 10 December 2002 as further amended. Inheritance tax (IHT) is levied on the beneficiary. Residents of Lithuania are subject to IHT on all inherited property, immovable and movable property, money, securities etc. Non-residents are subject to IHT only in respect of inherited immovable property located in Lithuania and movable property, which is subject to legal registration.

The rate of IHT depends on the value of the inherited property; property where the value does not exceed EUR150,000 is subject to a 5 per cent rate, and property with a value in excess of EUR150,000 is subject to a 10 per cent rate. The taxable base is 70 per cent of the market value of the inherited asset.

Exemptions from IHT apply when the value of the inherited property does not exceed EUR3,000 and when the property is inherited from a spouse, parents (including adoptive parents), grandparents, children (including adopted children), grandchildren, or siblings.

Other taxes

There is no gift tax or wealth tax. Gifts are subject to personal income tax. Income received as gift from a spouse, children (including adopted children), parents (including adoptive parents) and grandparents, as well as the sum of gifts received from other individuals during the calendar year, which does not exceed EUR2,500, are not taxable.

Tax treaties

There are over 50 DTAs in force. Several others have been signed or are being negotiated.

Tax information exchange agreements

An agreement has been signed with Guernsey and negotiations with Jersey are advanced. Lithuania began exchanging information under the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information in September 2017.

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Residence and domicile

Special rules on becoming resident

NOT APPLICABLE

Special rules on ceasing residence

NOT APPLICABLE

Domicile concept for gifts and inheritance

Follows residence rules for income tax.

Taxation of holdings by non-residents on death and of gifts

Gifts: income tax rules apply.
Death: IHT rules apply.

Reporting/auditing requirements

Personal income tax is reported on an annual tax return filed by 1 May of the following year and the tax is paid with it.

Corporate income tax is reported on an annual tax return filed by 1 June of the following year and the tax must be paid by 1 October, large companies are subject to a pre-payment system.

An individual who inherits property in Lithuania pays the tax prior to issuance of the inheritance certificate. Inherited property is not subject to tax returns.

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Other relevant information

Asset protection laws

No.

Foreign currency restrictions

No.

Foreign ownership restrictions

No.

AML/due diligence and other requirements and regulatory procedures for advisors

For incorporation, there are no mandated rules, but advisors should maintain copies of ultimate beneficial owner’s (UBO’s) identity documents and proof of residential address as a minimum.
To open a bank account, banks will require UBO identity documents, proof of residential address, bank reference translated into Lithuanian and possibly other documentation to satisfy the legal requirements set out in the Law on the Prevention of Money Laundering and Terrorist Financing of 17 January 2008.

Other points of interest

Lithuanian anti-money laundering rules are set out above. The Bank of Lithuania and the Financial Crime Investigation Service are the lead agencies for enforcement. Financial institutions are required to register transactions, either singly or linked, exceeding EUR15,000 and to identify their clients.

Lithuania adopted the EU Fourth Anti-Money Laundering Directive (EU 2015/849) in June 2017.

Key resources for further information

Ministry of Finance: www.finmin.lt
Ministry of Foreign Affairs: www.urm.lt 
Invest Lithuania: www.investlithuania.com 
Financial Crime Investigation Service: www.fntt.lt

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