• Service: Tax, Global Indirect Tax, Mergers & Acquisitions, Global Mobility Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 2/12/2014

Lithuania - Loss carryforward limitations; extended incentives; reduced VAT rates 

February 12:  Beginning in 2014, the ability of corporations to carry forward tax losses, for corporate income tax purposes, is limited in Lithuania.

In calculating their corporate income tax for 2014 and subsequent tax periods, entities may carry forward tax losses, but not exceeding 70% percent of the taxable profit for a tax period.

The limitations on loss carryforwards also apply to the losses of financial institutions related to disposals of securities and/or derivatives, and with respect to loss carryforwards relating to reorganizations, merger and acquisition (M&As), and restructuring of entities.

The procedure for carrying forward losses of non-financial institutions relating to the disposal of securities and derivatives is not changed—i.e., the five-year tax loss carryforward rule still applies.

Extended incentives

As of 2014, the period and the applicability of the tax incentive for investment has been extended.

The period of investment incentive for certain groups of fixed assets was extended (applicable 2009-2018). Companies may reduce their taxable profits up to 50% by the amount of expenses incurred for investment in certain fixed assets (machinery and equipment), computer hardware and software, communication equipment, and acquired rights.

As of 2014 the tax incentive also applies for acquisitions of trucks, trailers, and semitrailers.

The investment assets must be new and produced not more than two years prior to the date for the start of the use of the asset. Part of the acquisition costs of fixed assets, which has not been used during the tax year, may be carried forward, but not more than four years.

Also, the tax authorities must be notified that the company is engaged in an investment project.

VAT rates

The value added tax rates in Lithuania are reduced for certain goods and services, effective 1 January 2014:

  • A reduced VAT rate of 5% applies for indefinite period to medicine and medical aid equipment for expenses reimbursed by health insurance
  • A reduced VAT rate of 9% applies until 31 December 2014 for thermal energy supplied to heat residential premises (including the thermal energy supplied through the hot water supply system), hot water supplied to residential premises or cold water used for preparation of hot water and thermal energy consumed for heating this water

Reduced rates of individual income tax on dividends, interest

The rate of individual (personal) income tax on dividends and other amounts distributed from profits to individuals is subject to a reduced rate of individual income tax of 15%. Before 2014, the rate of individual income tax on dividends and profit distributions was 20%.

Also beginning 2014, the rate of individual income tax on payments of interest on loans (without regard to when the loans were granted) is 15%.

Read a January 2014 report prepared by the KPMG member firm in Lithuania: Tax, Legal, and Accounting Newsletter

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