Corporate income tax

Tax: Corporate income tax

Basic act: Republic of Lithuania Law on Corporate Income Tax

Taxpayers: 

  • Lithuanian entities;
  • Foreign entities.

Subject to tax:

All income of a Lithuanian entity sourced inside and outside of the Republic of Lithuania:

  • earned in the Republic of Lithuania;
  • earned in foreign states.

Income from economic activities carried out by a Lithuanian entity through permanent establishments located in a State of the European Economic Area (EEA) or in a State with which Lithuania has concluded and brought into force a treaty for the avoidance of double taxation (TADT) is not subject to tax in cases where in accordance with the prescribed procedure, income from economic activities carried out through these permanent establishments is subject to corporate income tax or equivalent thereto in those states.

Taxable income of a foreign entity:

  • income from economic activities carried out by a foreign entity through permanent establishments located in the territory of the Republic of Lithuania,
  • income from international telecommunications earned through permanent establishments in the Republic of Lithuania as well as 50 percent of income from transport operations which begin in the territory of the Republic of Lithuania and end in foreign states, or which begin in foreign states and end in the territory of the Republic of Lithuania,
  • income earned in foreign states attributable to the economic activities carried out by a foreign entity through permanent establishments located in the territory of the Republic of Lithuania,
  • income sourced in the Republic of Lithuania and received by a foreign entity otherwise than through permanent establishments located in the territory of the Republic of Lithuania (pursuant to Article 4(4) of Law on Corporate Income Tax).

Taxable profit is calculated by deducting the non-taxable income, allowable deductions and limited allowable deductions from the total income. The procedure for deductions in respect to costs incurred for the purpose of earning income through permanent establishments was laid down in Resolutions No 321 of the Government of the Republic of Lithuania on 5 March 2002.

Corporate income tax base is calculated in accordance with the provisions of Article 382 of Law on Corporate Income Tax, taking into account the fixed daily amount for each 100 units of net tonnage of a seagoing vessel and multiplying the received amount by the number of days in the taxable period of the shipping entity.

Tax rates: 

Tax rate of 15% applies to the following:

  • taxable profits of Lithuanian entities and permanent establishments;
  • income from distributed profits;
  • profits (or part thereof) distributed to natural persons proportionately attributed to the tax-exempt profits;
  • sponsorship received and used for purposes other than specified in Law of the Republic of Lithuania on Charity and Sponsorship (without deductions);
  • part of sponsorship received in cash from a single donor during the tax period exceeding the amount of 250 minimum living standards (without deductions);
  • fixed corporate income tax base of shipping entities (without deductions).

Tax rate of 5% is applied to profits generated from the commercialization of R&D inventions (i.e. use, sale or other transfer).

Tax rate of 0% is applied to taxable profits of newly established entities for the first taxable period, then further taxed at a rate of 5% for the following tax periods, when certain requirements are fulfilled:

  • average number of employees does not exceed 10;
  • income during the tax period does not exceed EUR 300,000;
  • shareholders of the entity are only natural persons;
  • economic activity of the entity is not suspended, the entity is not liquidated/reorganized, and the entity shares are not transferred to new shareholders for three consecutive tax periods, including the first tax period.

The above tax rate of 0% and 5% is not applied to small entities in the following cases:

  • entities where individual enterprise members or family members thereof are members of other individual enterprises, or control over 50 percent of shares (interest, member shares) in other entities on the last day of the tax period, as well as entities in which individual enterprise members and/or their family members control over 50 percent of the shares (interest, member shares) on the last day of the tax period;
  • entities where the same member controls over 50 percent of the shares (interest, member shares) on the last day of the tax period.
  • entities where the same members jointly control over 50 percent of the shares (interest, member shares) on the last day of the tax period.

Tax rate of 5% is applied to entities with more than 50 percent of income sourced from agricultural activities during the tax period, including cooperative societies (cooperatives) income sourced from the sales of agricultural products acquired from or produced by their own members.

Part of taxable profits of non-profit entities whose income sourced from economic and commercial activity during the tax period amounts to EUR 7,250 and does not exceed EUR 300,000 is taxed at a rate of 0%, and the remaining part of the taxable profits is taxed at a rate of 15%.

Income directly allocated for financing public interest oriented activities is not attributable to income sourced from economic and commercial activities of non-profit entities.

Income sourced in the Republic of Lithuania and received by foreign entities otherwise than through permanent establishments located in the territory of the Republic of Lithuania is taxed as follows:

  • royalties including those specified in paragraph Article 4(5) of Law on Corporate Income Tax, and compensation for infringement of copyright or related rights are taxed at a rate of 10% (without deductions) (except where such income is exempt from tax under Article 371 of Law on Corporate Income Tax);
  • income from the sale, other transfer of ownership or lease of immovable property located in the territory of the Republic of Lithuania; income from performing activities and sporting activities carried out in the Republic of Lithuania; income from distributions and payments to the members of the management board and supervisory board are taxed at a rate of 15% (tax recalculation may be made in accordance with the procedure prescribed in Article 54 of Law on Corporate Income Tax in cases where a foreign entity pays corporate income tax on income sourced from performing activities and sporting activities carried out in the Republic of Lithuania, and income sourced from the sale, other transfer of ownership of immovable property located in the territory of the Republic of Lithuania);
  • interest of foreign entities which are registered or otherwise organized in a State of the European Economic Area (EEA) or in a State with which Lithuania has concluded and brought into force a treaty for the avoidance of double taxation (TADT) is not subject to tax;
  • interest of foreign entities which are not registered or otherwise organized in a State of the European Economic Area (EEA) or in a State with which Lithuania has concluded and brought into force a treaty for the avoidance of double taxation (TADT), with the exception of interest on government securities, interest accrued and paid on deposits and interest on subordinated loans which meet the criteria laid down in the legal acts of the Bank of Lithuania is taxed at a rate of 10% (without deductions).

Taxable period: The taxable period is a fiscal year, coinciding with the calendar year. At the request of the taxpayer and taking into account the characteristics of the economic activity, a different tax period may be set for the taxpayer, provided that the tax period equals 12 months (pursuant to Article 6 of Law on Corporate Income Tax).

Tax relief: 

Until a separate decision is adopted by the Seimas of the Republic of Lithuania, taxable profits of the following entities may be subject to a lower corporate income tax rate:  

  • legal persons whose income from self-produced products accounts for more than 50 percent of the total income received and which employ persons with limited work capacity may reduce the calculated corporate income tax in accordance with the procedure prescribed in Article 58(16)(3) of Law on Corporate Income Tax (the amount of corporate income tax calculated may be reduced to 25%, 50%, 75% or 100% as applicable, taking into account the percentage of employees with limited work capacity in the total number of persons employed);
  • free economic zone enterprises where:
  1. Capital investments amount to at least EUR 1 million are not subject to corporate income tax for 10 taxable periods beginning with the tax period in which such amount was reached, and are subject to a 50 percent reduction in corporate income tax rate for 6 subsequent tax periods. The above tax relief is to be applied only when the free economic zone enterprise is in possession of an auditor’s report certifying the amount of capital investment required, i.e. EUR 1 million, and when not less than 75 percent of the free economic zone enterprise income for the relevant tax period is sourced from economic activities (with the exception of trading) carried out in the free economic zone, and only to the extent that the tax relief is considered compatible with the Commission Regulation (EEC) Provisions No 651/2014.
  2. Capital investments amount to at least EUR 100,000 and the average number of employees does not exceed 20, and not less than 75 percent of the free economic zone enterprise income for the relevant tax period is sourced from service activities carried out in the zone, tax relief may be applied to the extent that it is considered compatible with the Commission Regulation (EEC) Provisions No 651/2014.
  • An entity carrying out an investment project (investments in fixed assets for the production of new or additional products or services, or for increasing production (or service) capacity, or for introducing a new production (service) process, or for substantially changing the existing process (or part thereof), or for introducing technology protected by international invention patents) may reduce the taxable profits by the amount of the actual expenditure incurred to acquire the assets. Taxable profits calculated for the respective tax period may be reduced up to 100%. Taxable profits may be reduced only by expenditure incurred during the tax periods of 2009 to 2023. 
  • When calculating corporate income tax, costs of scientific research and experimental development, with the exception of depreciation or amortization costs of fixed assets, may be deducted three times from income in the tax period during which the costs incurred, and if such scientific research and/or experimental development works were linked to the usual or intended activities of the entity, and generated or will generate income or other economic benefit.
  • When calculating corporate income tax, entities which during the period from 1 January 2014 to 31 December 2018 gratuitously allocated funds to a film producer of Lithuania for production of a film or any part thereof meeting the requirements of Law on Corporate Income Tax, may deduct 75 percent of the gratuitously allocated funds from their income. Furthermore, entities may reduce the corporate income tax by the total amount of funds in accordance with the procedure prescribed in Law on Corporate Income Tax, however, the taxable profit calculated for the tax period may not be reduced by more than 75 percent. Tax relief applies to financing films which meet the criteria for cultural content and production. Entities may apply the corporate income tax relief upon obtaining an investment certificate (i.e. certificate stating that the use of the funds gratuitously allocated to the film producer complies with the requirements set forth in Law on Corporate Income Tax)

Tax return and payment:  

Annual corporate income tax return:

  • Form PLN204 (to be submitted by legal persons with limited civil liability);
  • Form PLN204A (to be submitted by legal persons with unlimited civil liability);
  • For PLN204N (to be submitted by non-profit entities);
  • Form PLN204U (to be submitted by foreign entities carrying out economic activities in Lithuania through permanent establishments).

Annual Corporate Income Tax Return Form and rules for completion thereof were approved by Order No VA-2 of the Head of the State Tax Inspectorate under the Ministry of Finance on 15 January 2007 (Order No VA-76 on 12 September 2014).

Annual Fixed Corporate Income Tax Return Form PLN205 (to be submitted by shipping entities opting for a fixed corporate tax rate) and rules for completion thereof were approved by Order No VA-70 on 9 November 2007.

Annual corporate income tax return and/or fixed corporate income tax return must be submitted no later than the 15th day of the sixth month of the next tax period (by 15 June of the following year if the tax period coincides with a calendar year), and no later than 30 days after the end of economic activities for the last period.

Corporate income tax and/or fixed corporate income tax must be paid no later than the due date for the submission of the annual corporate income tax return and/or annual fixed corporate income tax return.

Advance Corporate Income Tax Return Form FR0430 and rules for completion thereof were approved by Order No 289 of the Head of the State Tax Inspectorate of the Ministry of Finance on 8 October 2002 (Order No VA-103 on 15 July 2016). Form FR0430 must be submitted:

  • For the first six months of the tax period, no later than the 15th day of the third month of the tax period (by 15 March if the tax period coincides with a calendar year) and for the following six months of the tax period, no later than the 15th day of the ninth month of the tax period (by 15 September if the tax period coincides with a calendar year) if the advance corporate income tax is calculated on the basis of economic activity results of the previous year;
  • no later than the 15th day of the third month of the tax period (by 15 March if the tax period coincides with a calendar year) if the advance corporate income tax is calculated on the basis of the expected amount of corporation tax for the tax period.

Advance corporate income tax must be paid no later than the 15th day of the last month of each quarter of the tax period.

Tax return of income (amounts thereof) paid to foreign taxable units and the corporate income tax calculated in respect of such income (amounts thereof), i.e. Form FR0313 and rules thereof approved by Order No 40 of the Head of the State Tax Inspectorate of the Ministry of Finance on 8 February 2002 (Order No VA-187 on 15 December 2014), must be submitted no later than within 15 days after the end of the month during which the income (amounts thereof) were paid out.

The tax must be paid no later than the due date for the submission of the tax return.

Dividend Corporate Income Tax Return Form FR0640 and rules for completion thereof were approved by Order No VA-101 of the Head of the State Tax Inspectorate under the Ministry of Finance on 20 May 2004 Order (Order No VA-8 on 26 January 2017). Form FR0640 must be submitted by the 15th day of the month following the month during which the dividends were paid out.

The tax must be paid no later than the due date for the submission of the tax return.

Details for payments to the State Tax Inspectorate: