Corporate Tax 2010 - BMR Advisors

Chapter 30
Lithuania
Laimonas Marcinkevicius
Juridicon Law Firm
Ingrida Steponaviciene
1 General: Treaties
2 Transaction Taxes
1.1 How many income tax treaties are currently in force in
Lithuania
Lithuania currently has forty-five treaties on the avoidance of
double taxation of income and capital in force.
2.1 Are there any documentary taxes in Lithuania
Stamp duties and State fees of exactly established amounts are
applied only for the precisely defined formal services of State
institutions, e.g. review of the application, issue of the document, etc.
1.2 Do they generally follow the OECD or another model
The treaties follow the Lithuanian Model Tax Treaty that is based
both on OECD and United Nations Model Tax Conventions, taking
into consideration the remarks of OECD experts.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
These treaties are applied directly and do not have to be
incorporated into domestic laws. The treaties come into force after
they have been signed and ratified by the Lithuanian Parliament.
The treaties themselves may also indicate a later moment of coming
into force.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
Lithuanian treaties on avoidance of double taxation usually do not
incorporate special anti-treaty shopping rules, with minor
exceptions (e.g. the treaties with the USA, UK, etc.). Nevertheless,
most of them contain beneficial ownership requirements in the
articles regulating taxation of dividends, interest and royalties and
an arm’s length requirement applicable to the transactions between
related parties.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
International treaties have supremacy over domestic laws in
Lithuania. As the treaty comes into force, it overrides the domestic
laws of the same field, unless it is stated otherwise in the treaty
itself or if the national law provides a more favourable regime.
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
Lithuania has value added tax which is harmonised with the EU
acquis. From 1 September 2009 the standard VAT rate was
increased by 2% and now is equal to 21% (instead of the previous
rate of 19%).
Some transitional periods, during which reduced VAT rates shall be
applied, have been established for 2010:
partly or wholly compensated pharmaceuticals shall be taxed
with 5% VAT until 31 December 2010;
heat energy for heating of the residential premises and hot
water supplied to these premises shall be taxed with 9% VAT
until 31 August 2010; and
books and non-periodic publications shall be taxed with 9%
VAT until 31 December 2010.
0% rate VAT is charged mainly on goods exported from the EU and
certain related services of transportation, insurance, as well as on
the certain supply of goods to another EU Member State; 0% VAT
is also charged on a few other occasions prescribed by law.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
In general, VAT is charged on every supply of goods or services,
when the supply is effected by a taxable person in the performance
of his economic activities, if the supply is for consideration and
effected within the territory of Lithuania. Still, certain supplies of
goods and services (such as of a healthcare, social, education,
culture and sport nature; certain mail services, radio, television,
insurance, financial services, rent or sale of some real property,
betting, gambling and lottery services, special marks), as well as
some intra-community acquisitions, stay exempt from VAT.
2.4 Is it always fully recoverable by all businesses If not,
what are the relevant restrictions
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Under the Law on VAT of the Republic of Lithuania (the Law on
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