Accounting Outsourcing and
Tax compliance in Lithuania

Lithuania – Accounting Outsourcing and Tax Compliance

Global Expansion Plus provides accounting outsourcing and tax compliance in Lithuania. We provide services with support of our local accountants and tax specialists. We will perform bookkeeping, accounting and filling tax return on your behalf bearing all associated compliance risks. The central role of a government is to take care of its people socially, politically, and economically., funds will be required to cater for this, and that is where taxes come in. Lithuania has come of age when it comes to tax collection. It has set aside systems that hold every citizen, entity, or establishment accountable.

Lithuania in facts

  • Location: Baltic State
  • Territory: 65,300 square kilometers
  • Capital: Vilnius
  • Official language: Lithuanian
  • Currency: Euro (EUR)
  • Population: 2,79 million

Corporate income tax (CIT) in Lithuania

Lithuania has a wide range of CIT rates based on the type and size of the business. The standard rate is 15%. Small and medium companies with lower revenues are subject to a lower rate of either 0% or 5%. A good example is those enterprises in the agricultural sector.
For countries that hold a double taxation treaty with Lithuania, foreign companies operating in the country are not subject to CIT. However, this is the case only if they are taxed in their mother country.
Taxation for small businesses is different when compared to large companies. The state of Lithuania offers tax cushions to such entities to encourage growth and competition, which favors the economy. There are, however, two criteria to be met. The business should have at most ten employees and an annual revenue lower than EUR 300,000. If that is the case, then a 5% CIT applies, and 0% on its first year of operation.
The standard rate of 15% applies to businesses involved in maritime activities. As stipulated by the Lithuanian tax laws, companies in the marine business will be subject to the fixed-rate, but special conditions have to be met, as stated in the tax code.

Value-added Tax (VAT) in Lithuania

VAT is imposed on all supplies that involve goods and services. The standard rate in Lithuania is 21%. A VAT agent is liable to pay VAT at a certain rate, as long as they are involved in an economic activity that results in the generation of revenue.
The standard rate for VAT does not apply to all sectors. There are other rates, lower, applicable depending on the economic activity a person or business is involved.
9% VAT relates to:
  • Nonperiodic publications and books;
  • Users of firewood in households;
  • Transport services in the public sector;
  • Supply of heating equipment to households for household use;
  • Services offered for accommodation purposes – this will expire on 1st January 2023.
5% VAT relates to:
  • Prescription drugs not compensated;
  • Periodic publications of information;
  • Support devices and services for the physically challenged;
  • Compensated medical devices and drugs;
0% VAT relates to:
  • Export of goods and services out of the European Union (EU);
  • Supply of linked and transportation services;
  • Supply of aircraft and vessel-related goods and services;
  • Supplies made to VAT agents in an EU member state;

Personal Income tax (PIT) in Lithuania

PIT, in Lithuania, comes with multiple variances depending on variant factors. Incomes are subject to PIT depending on the amount an individual earns, and the source of the gain in question. For annual incomes up to EUR 136,344, a 20% PIT rate applies. Above this threshold, incomes will be subject to a 27% rate.
Incomes from corporate profits, which are distributable, such as dividends, are subject to a 15% PIT rate. Personal incomes are subject to taxation using the criterion below:
  • 5% rate for annual incomes up to EUR 20,000;
  • Rental income over EUR 45,000, the excess is subject to 15% PIT;
  • Annual incomes over EUR 20,000 up to EUR 35,000 a range of 5% to15% rate applies;
  • A fixed-rate of 15% applies to incomes higher or equal to EUR 35,000;
For other incomes, not stated above, a fixed rate of 15% is applied for PIT.

Withholding Tax (WHT) in Lithuania

All incomes through variant sources in Lithuania have to be subject to WHT. For the non-resident entities, the following rates, depending on the sources, will apply:
  • Royalties, interest on assets, insurance compensation and premiums – 10%;
  • Dividends, bonuses, capital gains, leases, and incomes due to sporting activities – 15%;
  • Payments made to the members of the board – 15%;
0% WHT applies to:
  • Royalties where recipients meet the requirements as stipulated by the European Commission (EC) Interest and Royalty Directive;
  • Interest incomes to parties of a foreign country, where a double taxation treaty exists with Lithuania;
  • Interest paid is from government securities;
Where a resident corporate issues dividends to another resident entity, the distributing entity must withhold 15% of the gross amount.

Payroll-Related Taxation in Lithuania

It works similarly to the PIT and WHT. For the latter, the employer, on behalf of the employee, is required by the Lithuanian tax laws to withhold 20% of the employee’s salary. Such a requirement is enshrined in the Lithuanian tax code. For the PIT comparison, any annual salary exceeding EUR 136,344 should attract a higher rate of 27%. Nonetheless, since the employer will have withheld 20% of the annual gross salary, the employee has to file the unaccounted 7% as PIT.
Contribution to the social security fund is also applicable to employees. At the start of 2019, there were changes where the obligation of the employers to contribute to the fund switched to the side of the employees. Due to this, there was a requirement for the employers to multiply the gross salaries of employees by a co-efficient of 1.289.
The rate for contribution to the social security fund by employers is from 1.45% to 2.71%, and 19.5% by employees up to an annual salary of EUR 136,344. Over this, 6.98% will apply.
Although the social security contributions are a must, there are exemptions to this:
  • Earnings from the old-age pension;
  • Pays from persons with a physical disability;
  • Incomes due to paternity, maternity, or child support benefits;
  • Earnings from an individual of age, 24 years or less;
Apart from social security contribution, guarantee and long-term employment funds are also part of the employer’s contribution. A 0.16% rate, as a guarantee fund, is payable by employers of the gross payable amount to employees. It offers insurance cover to employees in case the employer goes bankrupt.
The long-term employment fund at a rate of 0.16% is designed to protect the employee in case the contract of employment is terminated without their fault. Nonetheless, certain conditions are applicable for this to be actionable.

Import/ Export related taxation in Lithuania

Custom duty

Lithuania, a member of the European Union (EU), abides by the trade laws that govern its member states. As such, all trades among member states, including Lithuania, are custom-free. Free movement of goods and services calls for certain provisions, which govern the entire process.
Nevertheless, free trade agreements between EU members and non-EU members will hold for Lithuania. If otherwise, then custom charges will be subject to imports from the non-EU countries.

Excise taxes

Most of the products, either manufactured locally or imported, will be subject to excise duty. A class of harmful products such as alcohol and tobacco-related products will attract excise duty. Apart from those oil and petroleum products, and electricity will be subject to the same. The excise duty will depend on the value, nature, or value of the product.
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