Corporate Tax 2010 - BMR Advisors

Juridicon Law Firm
Lithuania
VAT), input/import VAT may be entered for deduction if the goods
or services purchased are used for the taxable supply. With some
exceptions, input/import VAT that is directly or proportionally
attributed to the supply exempted from VAT cannot accordingly (in
whole or proportionally) be deducted. Under the Law on VAT, in
some cases input/import VAT on the acquisition of entertainment
and representation goods and services, motor vehicles, passenger
transport services and also VAT paid on behalf of another person
cannot be deducted, or its deduction is limited.
VAT paid in Lithuania is recoverable; still, a few circumstances
exist which should be noted. According to the laws, the difference
between input and output VAT will firstly be included to cover the
tax arrears of the same taxpayer, the overdue state loans to the
taxpayer or the overdue loans, warranted by the state. The
remaining part of excess of VAT may be returned only to the
taxpayer which has paid into the budget and funds all the taxes,
default interest, penalties and interest for overdue tax; which
submitted all the requisite tax returns or accounts; and which was
not penalised for the malignant breach of tax laws, or if more than
three years has passed since such a breach. Moreover, the VAT will
be refunded only if there are no open tax disputes in respect of the
requested refund.
The Law restricts the maximum recoverable VAT sum to the sum of
conditional or calculated VAT on taxable amounts of particular
categories goods and services prescribed by the Law on VAT, such
as goods and services in respect of which the 0% VAT rate was
applied, acquired capital assets, etc.
As regards a foreign person’s right to recover VAT, under the Law
on VAT, a taxable foreign person that: (i) is established in another
EU Member State; (ii) is established in a third country and
registered as a VAT-payer in an EU Member State for the electronic
supply of services; or (iii) is established in a third country where the
VAT paid (or any equivalent tax) is refundable to taxable persons of
Lithuania, has a right to recover the VAT paid in Lithuania. With
some exceptions, the foreign taxable person may apply for recovery
of VAT only when he had no subdivision or place of residence and
did not engage in commercial activity in Lithuania during the
period in which he paid the VAT which he is asking to be refunded.
2.5 Are there any other transaction taxes
No, there are no other transaction taxes.
2.6 Are there any other indirect taxes of which we should be
aware
According to the EU Customs Code and related legal acts, custom
duties on particular goods imported into the EU within the territory
of Lithuania are levied.
Excise duties are charged on ethyl alcohol and alcoholic beverages,
manufactured tobacco, energy products (fuel, oil, gas, coal, etc.)
and electricity.
Environment pollution tax is levied on subjects that in the course of
their economic activity emit pollution, or manufacture or import
into the Lithuanian market goods and/or packing that are potential
sources of pollution (tyres, accumulators, batteries, oil and air
filters, oil buffers, glass, plastic, metallic and other packing).
Taxpayers that implement anti-pollution or treatment of waste
standards may be exempt from corresponding taxation.
3 Cross-border Payments
ICLG TO: CORPORATE TAX 2010
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3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
From 1 January 2010, dividends paid by the Lithuanian entity to the
non-resident entity in general are subject to 20% withholding tax on
corporate income.
Dividends paid by the Lithuanian entity to a foreign entity, that
incessantly for at least 12 months controls not less than 10% of
voting shares/member shares in the Lithuanian entity, shall not be
subject to taxation, except for cases where the foreign entity
receiving the dividends is registered or otherwise organised in
target (“tax haven”) territories. However, in case the profit of the
Lithuanian entity paying the dividends is taxed by 0% rate tax on
profit (except free economic zone entities), or the profit (a part of
it) is not subject to taxation because of particular exemptions
provided for in the Law of the Republic of Lithuania on Corporate
Income Tax (the Law on Corporate Income Tax) (e.g., in case the
entity applies the investment project exemption), the dividends paid
by the Lithuanian entity to a foreign entity shall be taxed
proportionally to the non-taxed profit of the Lithuanian entity,
applying the standard tax rate of 20%.
These provisions shall also be applicable when the treaty on
avoidance of double taxation provides a less favourable regime. In
case the treaty on avoidance of double taxation provides a more
favourable regime, provisions of this treaty should be followed.
Dividends paid to the natural person, who is treated as non-resident
in Lithuania for taxation purposes, are taxable by tax on income at the
rate of 20%. Dividends paid to the natural person, who is treated as
a resident in Lithuania for taxation purposes, are additionally taxed
by contributions on health insurance at the rate of 6%.
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
In general, under the Law on Corporate Income Tax, all the
royalties (for use or transfer of copyright and related rights, rights
to use franchise, industrial ownership - patents, trade marks,
models, know-how) paid by a Lithuanian company to a nonresident
company having no permanent establishment in Lithuania
are subject to 10% withholding tax (without any deductions).
Since 1 July 2011, the royalties, paid by a Lithuanian company to a
related EU company (the beneficial owner of royalties), both
corresponding to the criteria established by the Law on Corporate
Income Tax, are going to be exempt from withholding tax in
Lithuania.
The Lithuanian company, while paying a royalty to a foreign natural
person that is not engaging in any related commercial activity in
Lithuania, must deduct 15% tax on income.
However, the applicability of the Lithuanian tax rate on royalties
may be mitigated by the Lithuanian treaties on the avoidance of
double taxation in force.
3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
In general, interest paid by a Lithuanian company to non-residents
(both natural and legal persons) is taxable at the same general rates
as indicated in question 3.2.
From 1 July 2009 to 31 December 2009 interest paid by a local
company to a related EU company (the beneficial owner), both
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