Welcome to the presentation of corporate taxation in Lithuania.
Lithuanian and foreign taxable entities registered in Lithuania must pay taxes in Lithuania on profits and capital gains earned both in Lithuania and abroad. A corporation is considered to be a resident of Lithuania if it was incorporated and registered in Lithuania.
Corporate income tax (CIT) or profit tax – general rate is 15 %. Imposed on a company’s profits (business income, passive income, capital gains and positive income (or part of it) of a Lithuanian entity’s controlled foreign entity. Small companies with annual income not exceeding 300 000 EUR and the number of employees not exceeding 10 are subject to 0% CIT rate for the first tax year and 5% CIT rate for further periods.
Taxation of dividends – 15% tax is applied to dividends received both from Lithuanian and foreign companies. Participation exemption rule – dividends received from Lithuanian and foreign companies shall not be taxed if a parent company holds at least 10% of the shares of the subsidiary for at least 12 months.
Capital gains – taxed at a rate of 15% as a general corporate income tax. Some exemptions may apply on the disposition of shares.
Losses – operating losses may be carried forward indefinitely if the company continues the activity that resulted in losses. Losses carried forward cannot offset more than 70% of taxable income of the company in any tax period. Other conditions apply for losses incurred on the sale of shares.
Withholding tax – 15% tax for non-residents on dividends, income from distributed profit, income from the sales, income from performing/sport activities, annual payments to supervisory board members. 10% withholding tax on interest, royalties and compensations for violations copyrights.
Real property tax – 0.3% to 3% tax depending on the municipality. Imposed on real property owned by a company or real property used by a company under an instalment sale or lease contract or financial lease providing for the transfer of ownership. Also, real property owned by an individual and transferred to a company for an indefinite period or a period exceeding 1 month is subject to real property tax.
Social security – an employer on behalf of an employee must contribute a 3% pension social insurance and a 6% health insurance. Also, an employer contributes to social insurance at a rate between 31.18 % and 32.8% of the employees gross salary, depending on the risk group.
Salary calculation example in Lithuania (as of 2019)
If employee’s gross salary (before taxes) is 1000 EUR.
- Social security payment – 17,70 EUR
Total workplace cost for employer: 1017,70 EUR.
- Personal income tax of 20% – 138 EUR
- Mandatory health insurance (PSD) 6,98% – 69,80 EUR
- Social security tax 12,52% – 125,20 EUR
- Tier II pension – optional
Total employee salary after taxes: 651,65 EUR.
This calculation example is not applicable for other amount of gross salaries because non-taxable income amount may vary. Technically, employer pays total taxes on behalf of employee.
Business entities available in Lithuania
- Public or private limited liability company;
- Individual (personal) enterprise;
- Partnership (general or limited);
- Micro company;
- Agricultural company;
- Co-operative company;
- Public legal entity.
Find out more about establishing a company in Lithuania here.