Personal income tax (PIT)
The tax-exempt amount (TEA) and additional tax exempt amount (ATEA) will increase.
As of 1 January 2014, the tax-exempt amount and additional tax-exempt amount applicable for those having children will be increased.
The monthly TEA will be increased from Litas 470 to 570, while the annual TEA - from Litas 5,640 to 6,840. These amounts shall apply if employment monthly income of an individual does not exceed Litas 1,000 and the annual income does not exceed Litas 12,000.
If the monthly remuneration exceeds Litas 1,000, the applicable monthly TEA shall be calculated according to the formula TEA = 570 – 0.26 x (monthly remuneration – Litas 1,000). The annual TEA shall be calculated according to the formula ATEA = 6,480 – 0.26 x (annual income – Litas 12,000).
Currently, the applicable ATEA is Litas 100 for the first child and Litas 200 for each subsequent child. As of the beginning of 2014, the ATEA of Litas 200 shall be applied for the first child as well.
Taxation of dividends goes down.
Dividends and other income from the distributed profit paid as of 2014 shall be subject to a 15 percent PIT rate. Currently, the PIT applied is 20 percent, except for the income of a member of an unlimited civil liability entity received from this entity which is subject to a 15 percent PIT rate.
Non-residents of Lithuania shall pay PIT not only on the annual payments to board members (tantiemes).
The payments received by a non-resident of Lithuania for being a member of a supervisory board as of 2014 shall be subject to a 15 percent PIT rate. Currently, only the annual payments shall be subject to taxation.
Gain received from sale of securities exceeding Litas 10 thousand shall be subject to taxation as of 2014.
According to the provisions of the Law on PIT, income from sale or other transfer of financial instruments as well as income from sales of derivative financial instruments shall be subject to taxation irrespective of the date of their acquisition and duration of their holding under the ownership right.
Gain from sale of financial instruments exceeding Litas 10 thousand shall be subject to a 15 percent tax rate. The taxable income shall be calculated by deducting the acquisition price of financial instruments and other expenses specified in Article 19 of the Law on PIT from the income received.
If the financial instruments are issued by the entities established in tax haven territories, income from their sale shall be subject to taxation from the first Litas. The income from sale of financial instruments shall also be subject to taxation from the first Litas when a shareholder sells or otherwise transfers these shares to the ownership of the issuer of the shares.
Interest shall be subject to taxation as of 2014.
Interest received in 2014 and later periods for the loans granted (notwithstanding when the loans have been granted) shall be subject to 15 percent PIT rate. The interest on loans shall be subject to taxation notwithstanding when the loan repayment starts and irrespective of the annual income received.
However, total amount of interest (including interest of all types specified below) received for:
• non-equity securities, i.e. debt securities,
• non-equity securities of local bodies of the governments of Lithuania and foreign states as well as their political and territorial administrative divisions,
• deposits held in banks and other credit institutions of Lithuania and foreign states,
which does not exceed Litas 10,000, shall not be subject to taxation, if the non-equity securities were acquired or contracts regarding deposits were signed after 1 January 2014.
If securities of local bodies of the government of the states of the European Economic Area, state political and territorial administrative divisions were acquired or deposit contracts in the states of European Economic Area were concluded before 31 December 2013, then the interest received after 1 January 2014 shall not be subject to PIT as well, irrespective of the amount of income received.
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Corporate income tax (CIT)
The basis of income of foreign entities in Lithuania was extended.
As of 1 January 2014, new provisions of the Law on CIT, according to which income of foreign entities received from a Lithuanian entity is considered to include not only annual payments (bonuses) for activities of members of the supervisory board but also any benefits from Lithuanian entities for the activities of the previously mentioned members, shall come into effect.
Income from the transfer of shares due to the requirements of legal acts shall not be subject to taxation.
The Law on CIT (Par. 15, Art. 12) sets forth that non-taxable income includes capital gain from sale of shares of an entity, provided that the entity transferring the shares has held more than 25 percent of voting shares in that entity for an uninterrupted period of at least two years or, where the shares were transferred in the course of reorganisation, at least three years.
For the purpose of calculation of CIT for 2014 and subsequent tax periods, the capital gain from shares shall be deemed to be non-taxable income also in the cases when the shares have been held for less than the fixed term due to the requirements of legal acts to transfer the shares.
The tax relief term related to an investment project is extended and the list of non-current assets to be used in the project is supplemented.
The term of an investment project being implemented has been extended for five years and entities will be able to decrease the taxable profit by the costs related to the investment project, which are incurred in the period from 2009 to 2018.
Furthermore, the list of non-current assets, which may be deemed to be investment project assets, was supplemented by trucks, trailers and semi-trailers. However, with regards to the acquisition of this non-current asset, the amount of expenses related to the acquisition of this asset to be deducted from the taxable profit may not exceed Litas 1 million during the taxable period.
CIT shall be paid earlier.
CIT for 2013 and subsequent tax periods shall be not only declared but also paid by the first day of the sixth month of a following tax period.
Funds for film production reduce not only taxable income but also corporate income tax.
As of 1 January 2014, the provisions of the Law on CIT specifying that a Lithuanian entity or a permanent establishment in Lithuania which provided funds for free for the production of a film or its part during the period from 2014 to 2018, may reduce the taxable profit and the payable CIT in the manner prescribed. In this case a certificate of an authorised institution of the Government, confirming that the use of the funds granted for free is in compliance with the requirements of Art. 172 of the Law on CIT, shall be obtained.
The taxable income and CIT may be reduced in the tax period when the certificate was obtained.
In accordance with the provisions of Art. 172 of the Law on CIT not more than 75 percent of the funds provided for the production of a film or its part in Lithuania may be deducted from taxable income.
Furthermore, the amount of the funds provided may be deducted from the payable CIT for the tax period but not exceeding 75 percent. If the amount of funds is higher than 75 percent of CIT of a respective tax period, the remaining part of the funds may be deducted from payable CIT of the other two subsequent tax periods, however, the amount of CIT for each taxable period may not be reduced by more than 75 percent.
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Excise duties for tobacco products and alcohol have been increased.
Amendments to the Law on Excise Duties, specifying increase in excise duties for beer, wine and other fermented beverages, intermediate products, ethyl alcohol, cigarettes, cigars and cigarillos, were adopted. Higher excise duties for tobacco products will come into effect as of 1 March 2014 and for alcohol – as of 1 April 2014.
Supply of goods, which are subject to excise duties, after the accession of Croatia to the EU.
After the accession to the European Union on 1 July 2013, Croatia was included in the Excise Movement Control System (the EMCS).
Consequently, since the accession, the movement of goods, which are taxable by excise duties, to and from Croatia shall be subject to the same regulations and requirements as other movements to/from member states.
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Contributions to the Guarantee Fund
The state tax authorities have prepared an explanation regarding the procedure of payment to the Guarantee Fund.
Taking into account the need and enquiries, the state tax authorities have prepared an explanation regarding the procedure of calculation and payment of contributions to the Guarantee Fund as of 1 January 2013.
The explanation provides practical examples how contributions to the Guarantee Fund should be paid when a Lithuanian company performs activities in another member state or a third country. Furthermore, it should be noted that contributions to the Guarantee Fund are paid on the remuneration calculated which includes the main remuneration and all fringe benefits. The contributions shall not be calculated on benefit in kind and the income received under authorship agreements.
The explanation could be found here.
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The amendments related to the registration of individuals with the Taxpayers Register.
New regulations of registration of individuals with/deregistration from the Taxpayers Register and new Form REG812 for application of an individual for registration with the Taxpayers Register were approved.
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Laws on shale gas were adopted.
Laws, regulating shale gas exploration and excavation, were adopted. The laws specify that before the exploration of shale gas, an official assessment of the impact on environment shall be carried out and all permits of local community and local authorities for exploration in the area, where such activities are planned to be performed, shall be obtained.
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The newsletter has been prepared in accordance with legislation effective as at 16 July 2013 which is subject to change retroactively or prospectively and any such change might affect the contents of the newsletter. We accept no obligation to update you should law or understanding change the contents of the newsletter in the future.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.