Download WITHHOLDING TAX TARIFFS

TAX GUIDE LITHUANIA 2012
The information below is based under the legal
acts effective on 15 May 2012
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CORPORATE PROFIT TAX
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CORPORATE PROFIT TAX TARIFFS
Standard corporate profit tax (CPT) rate is 15 %.
Reduced CPT rate - 0 % and 5 % remains.
Withholding tax tariffs - 10 % and 15 % unless subject to tax
incentive.
(if otherwise is not stated in the double tax avoidance treaty)
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WITHHOLDING TAX TARIFFS (1)
10 % withholding tax rate shall apply to the following income
of foreign entities:
- interests*;
- royalties*;
- compensations for breach of authorship or neighbouring
rights*.
* Tax free if established criteria is met
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WITHHOLDING TAX TARIFFS (2)
15 % withholding tax rate shall apply to the following income
of foreign entities:
- dividends;
- income for the sold or leased real estate situated in
Lithuania;
- income for activity of artists and sportsmen performed in
Lithuania;
- annual bonus for the activity of the members of the
Supervisory Council.
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WITHHOLDING TAX ON INTERESTS
Interests are tax free if:
- paid to European Economic Area (EEA) or entity
registered in country where tax treaty is in effect.
Royalties are tax free if:
- paid to EU entity holding not less than 25% of shares for at
least 2 years.
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DIVIDENDS DUE TO THE LEGAL ENTITIES
• CPT rate on dividends - 15 %.
(unless otherwise provided by the double tax avoidance treaties)
• Participation exemption rule shall remain.
(dividends are tax free if not less than 10 % of shares are hold for
continuing period of 12 months)
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DIVIDENDS DUE TO THE INDIVIDUALS
However
Dividends (or their respective part) are subject to 15 % CPT
rate* (excluding personal income tax) if a company paying
the dividends:
- applied 0 % CPT rate on taxable profit;
- applied tax incentive on investment project;
- obtained non taxable income from the sale of shares;
- other.
* Not applicable, if dividends paid by the Free Economic Zone company.
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DIVIDENDS DUE TO LITHUANIAN COMPANIES
FROM ABROAD
• CPT rate - 15 %.
●
Tax free if received from the companies registered in
EEA*.
(irrespective of voting rights possessed and time of possession)
●
Tax free if received from the companies registered outside
EEA provided meet the criteria of participation exemption*.
* Subject to additional requirements.
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OFFSET OF CPT
• If dividends received from the Lithuanian registered entity
where CPT on dividends was deducted, CPT amount is
offset against CPT payable by company, recipient of
dividends*.
• If CPT amount subject to offset exceeding the CPT
amount payable for the appropriate tax period, difference
shall be refunded (offset) to the company, recipient of
dividends.
* Subject to additional requirements.
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CPT INCENTIVE ON INVESTMENT PROJECTS (1)
50 % of the taxable profit
may be reduced by the factual expenses spent on the
investment project.
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CPT INCENTIVE ON INVESTMENT PROJECTS (2)
Investment project means investment into fixed assets for
the purpose:
●
Production of new or additional products (provision of
services), increase of production (provision of services)
volumes;
●
Implementation of the new production (services) process;
●
Essential changes of the existing process (or part of it);
●
Implementation of new technologies protected by the
international invention patents.
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CPT INCENTIVE ON INVESTMENT PROJECTS (3)
Tax incentive shall apply to the following groups of the fixed
assets:
- machinery and equipment;
- devices (constructions, borings, etc.);
- computer based technique and communication
devices;
- software;
- acquired rights;
if
the fixed assets above should be unused and not older
(produced) than 2 years.
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CPT INCENTIVE ON INVESTMENT PROJECTS (4)
●
Taxable profit may be reduced maximum 50 %.
●
The fixed assets have to be used in economic activity not
less than 3 years.
●
Expenses may be carried forward 4 years.
●
Taxable profit may be reduced by expenses incurred in the
years 2009 - 2013 only.
●
Upon the commencement of the investment project the
local tax authorities have to be informed.
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R&D
• Expenses incurred in connection to scientific research and
experimental development may be 3 times deducted from
the income for CIT purposes
• If scientific research and experimental development works
are acquired from the third legal entities or individuals the
expenses incurred may also be 3 times deducted from the
income for the CIT purposes if such works were made in
the EEA countries or countries where tax treaties are in
place
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NON TAXABLE INCOME (the most notable)
●
Capital gain on sale of shares if shares of the company
registered in European Economic Area or country with
which double tax avoidance treaty is concluded are sold
and more than 25 % of shares were hold for not less than 2
years;
●
Income of bankrupt enterprise upon the sale of its property;
●
Investment income of the investment companies
(excluding dividends and other profit subject to distribution)
●
Fines and default interests
(except received from the offshore countries)
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LOSSES
●
Losses may be carried forward but not back;
●
Losses incurred in the course of securities transactions may
be carried forward up to five years and they may reduce profit
from sale of the securities transactions;
●
Other losses may be carried forward for unlimited period of
time until the activity they have raised from is performed.
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TAX CONSOLIDATION WITHIN THE GROUP
• Starting 2010 – when not less than 2/3 of shares are held
by the group member, tax losses can be consolidated
between group members if losses transferred between
group members which are or suppose to be at least for 2
years in the group
* Subject to additional requirements.
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VALUE ADDED TAX (VAT)
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VAT
Standard VAT rate – 21 %.
Preferential VAT rates applied:
• 5%
to medicine and medical aid devices which are subject to
compensation (until 31 December 2012)
• 9%
- to books and non periodical informational publications
- to heating energy for residential premises and water
heating (until 31 December 2012)
0 % rate of VAT in certain cases.
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MANDATORY HEALTH INSURANCE
CONTRIBUTIONS (HIC)
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HIC
• Two taxable basis are established based on those
HIC are calculated:
- minimum monthly salary;
- income/profit.
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INSURED PERSONS
• Persons who are paying themselves or HIC paid on their
behalf:
- recipients of work remuneration;
- recipients of authorship remuneration;
- owners of the individual enterprises;
- persons performing individual activity;
- recipients of other kinds of income;
- persons insuring independently;
- etc.
• Standard rates:
to insured person – 6 % or 9 %;
to insurer – 3 %.
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SOCIAL SECURITY CONTRIBUTIONS (SSC)
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SSC
• Payers:
- Insurer;
SSC rate depends on kind of income: standard rate - 27,98 %
- Insured person.
SSC rate depends on kind of income (standard rate - 3 % also
could be 9 % or other)
• Extended list of insured persons.
• For certain groups of insured persons transitional period is
established.
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PERSONAL INCOME TAX (PIT)
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PIT
• All kinds of income (save for dividends) – 15 %.
work remuneration, authorship fee, honorariums, artists remuneration,
capital gain, income of lease of property, annual bonus, profit of individual
activity, income of owner of individual enterprise, etc.
• Dividends – 20 %.
including income received by the shareholders when distributing profit of
the company or decreasing authorized capital or property received.
• Fixed PIT.
applied to persons performing individual activity under the business
licence.
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DIVIDENDS DUE TO INDIVIDUAL
Permanent resident
Temporary resident
15 % CPT*
applied if a company (not registered in a free economic zone) paying
out the dividends applied 0 % CPT or CPT incentive for investment
project, received non taxable income from sale shares, etc.
+
20 % IIT
* Paid from the funds of the company.
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NON TAXABLE MINIMUM (NTM) (1)
• Maximum monthly NTM – LTL 470 (ca EUR 136).
applied if gross work remuneration is not exceeding LTL 800 (ca EUR
232)
•
Upon increase of work remuneration NTM decreasing:
NTM = 470 – 0,2 x (work remuneration – 800)
If gross work remuneration is LTL 3,150 (ca EUR 912) or more, then
NTM=0.
•
During the calendar year NTM applies to permanent
residents only. Temporary residents may apply NTM upon
the end of the calendar year.
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NON TAXABLE MINIMUM (2)
• Annual NTM is recalculated based on annual taxable income
Maximum annual NTM – LTL 5,640 (ca EUR 1,633), if annual taxable
income is not exceeding LTL 9,600 (ca EUR 2,780).
If annual taxable income is LTL 37,800 (ca EUR 10,948) or more, annual
NTM=0.
• Permanent residents having children may benefit from
additional NTM:
for the first child – LTL 100 (ca EUR 29);
for each subsequent – LTL 200 (ca EUR 58).
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NON TAXABLE MINIMUM (3)
Monthly NTM of LTL 800 (ca EUR 232) is applied to*:
- Permanent residents having working capacity of 0 - 25 %;
- Retired persons having considerable demand of special
needs;
- Permanent disabled residents (serious level).
• Monthly NTM of LTL 600 (ca EUR 174) is applied to*:
- Permanent residents having working capacity of 30-55%;
- Retired persons having small or medium demand of
special needs;
- Permanent disabled residents (small or medium level).
*Annual NTM is calculated accordingly.
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BENEFITS IN KIND (1)
Benefits in kind are not considered all the below listed
kinds of income:
1) Gifts and prizes received from the entities or persons other
than employer if their value is not exceeding LTL 320 (ca
EUR 93);
2) Benefit received when other person paying directly to
educational institutions for the education of person, who will
obtain higher education and/or qualification upon graduating
the educational institution;
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BENEFITS IN KIND (2)
3) Benefit received when employer pays to the individual for
the medical services when it is required by the legislation;
4) Personal income tax (PIT) paid by other person on behalf of
the tax payer;
5) Work clothes, shoes, tools, equipment and other property
provided by the employer for the performance of the work
functions only as well as benefit when the employer pays
expenses related to use of this property.
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BENEFITS IN KIND (3)
• All the other kinds of income shall be considered as
benefits in kind and taxed accordingly.
For example:
- use of the employer’s car for the personal needs;
- property or services received instead of monetary work
remuneration;
- indemnification of accommodation expenses;
- loyalty programs to employees;
- non interest bearing loans or loans concluded not on an
arms’ length basis;
- shares acquired under the stock option plan for less
than market price.
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TAX INCENTIVES TO INDIVIDUALS (1)
Tax exempt income of individuals:
• Interests for the loan granted if the loan will start to be
repaid not earlier than 366 days after it was provided;
• Gift income from spouses, children, parents, brothers,
sisters, grandchild and grandparents;
• Capital gain which is not exceeding LTL 8,000 Lt (ca EUR
2,316) per fiscal year;
(not applicable to real estate and movable property subject to
registration in Lithuania)
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TAX INCENTIVES TO INDIVIDUALS (2)
Tax exempt income of individuals:
• Capital gain from sale of shares, which were acquired after 1
January 1991 and if title to them was held for more than 366
days and individual persons 3 years was not an owner of
more 10 % of the shares*.
* Tax incentive is not applicable if shares were obtained free of charge
when increasing authorized capital of the company from the profit or
reserves of the company.
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TAX BURDEN (1)
Work remuneration
IIT
HIC
SSC
Employee
15 %
Deducted by
employer
6%
Deducted by
employer
3%
Deducted by
employer
Employer
-
3%
27,98 %
Individual
15 %
Deducted by
company
6%
Deducted by
company
3%
Deducted by
company
Company
-
3%
27,98 % or
26,7 %
Fixed
9%
50 % of basic
pension
Paid himself
Paid himself
Authorship
remuneration
Business licence
Individual
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Paid himself
TAX BURDEN (2)
Dividends
IIT
HIC
SSC
-
-
(permanent resident,
temporary resident)
Individual
20 %
Deducted by
company
Individual activity
Individual
5 % or 15 %
Paid himself
9%
Paid himself
28,5 %
Paid himself
Other income
If income of
class A
15 %
Deducted by
enterprise
-
-
If income of
class B
15 %
Paid himself
-
-
(property sale&lease,
interests, annual bonus,
etc.)
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LUXURY TAX
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LUXURY TAX
• Starting 2012 individuals (including non residents) are liable
to 1% real estate tax on real estate situated in Lithuanian
and owned by the family taxable value of which is exceeding
LTL 1 million (EUR 289,620);
• Luxury tax is paid from the value exceeding LTL 1 million
(EUR 289,620);
• The below real estate is not subject to luxury tax:
– Real estate of commercial nature,
– Real estate transferred for use to legal entities;
– Land.
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AGREEMENTS WITH THE TAX AUTHORITIES
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AGREEMENTS WITH THE TAX AUTHORITIES
Starting 2012 the following instruments are available:
• Binding Rulings
• Advanced Pricing Agreements.
The tax authorities have to take decision in 90 days.
Agreements may be concluded for up to 5 years.
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