Finance and taxes

Republic of Lithuania is realizing the tax policy that favorable for business and the total tax system of Republic of Lithuania has been developed following the provisions of legal norms of the European Union. After the restoration of Independence of Republic of Lithuania, the tax system of Republic of Lithuania was changed in course of time, i.e. the tax system was transformed in such a way that could ensure the maximum extent of foreign investments and support for them as well as increasing development of the labour market.

The key legal norm where the principles of tax regulation are described is the Law of Republic of Lithuania on Tax Administration; in addition to the rights and duties of the tax administrator and a tax payer, the said Law regulates the procedure of tax computing as well.

In Republic of Lithuania, total seven types of key taxes may be singled out. They include: the Corporate Tax; the Income Tax; the Real Estate Tax; the Value-Added Tax; the Land Tax; the Inheritance Tax; excise duties and national social insurance contributions. In addition to the above-listed taxes, a consular fee, the gambling tax, compulsory health insurance and so on may be collected.

The Income Tax is payable by any resident of Lithuania on any income received and (or) earned in Republic of Lithuania. A resident of Republic of Lithuania is considered any physical person whose place of permanent residence is situated in Republic of Lithuania, or a person whose center of economic and social interest is in Lithuania, also any physical persons that stay in Republic of Lithuania at least 183 days (in turn or with breaks) per year. The Income Tax is computed on income of a resident from a source situated in Republic of Lithuania or abroad. The rate of the Income Tax is 15 %and it is payable to the State Tax Inspectorate.

The Corporate Tax in Republic of Lithuania is applicable both to legal entities of Republic of Lithuania and those of foreign states whose source of profit is situated in Lithuania. The rate of the Corporate Tax is 15 %. Subjects exempted from payment of the Corporate Tax in Lithuania include budgetary authorities, the state and municipalities, state and municipal institutions, organizations and agencies, as well as the Bank of Lithuania and the European Economic Interest Grouping.

The Value-Added Tax is a task payable for supply of commodities and services by the persons registered in the Register of Value-Added Tax (VAT) Payers. The said compulsory registration is performed according to the procedure provided in legal norms of Republic of Lithuania; however, it may be voluntary as well. Taxable subjects may be physical persons and legal entities of Republic of Lithuania or foreign states. A taxable person from Republic of Lithuania shall register itself as a VAT Payer in Republic of Lithuania, if the income of the person from the sold commodities or provided services within the last year was over 45’000 EUR or the person acquires in Republic of Lithuania commodities from other European Union Member States for the amount over 14’000 EUR per year. A taxable person from a foreign state shall register itself as a VAT Payer in Republic of Lithuania, if such a person is involved in selling commodities or provision of services from the beginning of its economic activities in Republic of Lithuania, or in a case when a person supplies commodities from Republic of Lithuania to other European Union Member States or third countries or is involved in remote (distance) trade in Republic of Lithuania and the value of the supplied commodities is over 35”000 EUR per year and when the person acquires in Republic of Lithuania commodities from other European Union Member States for the amount over 14’000 EUR per year.

It is notable that legal norms of Republic of Lithuania for regulation the issues related to the tax system provide certain exceptions and additional conditions or concessions, so they should be focused in any particular case.