Corporate Tax 2010 - BMR Advisors

Juridicon Law Firm
Lithuania
6 Branch or Subsidiary
7 Anti-avoidance
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
No taxes are imposed, except for State and notary fees.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
No, there are no other such significant taxes.
6.3 How would the taxable profits of a local branch be
determined
The taxable profits of a local branch cover all the income
attributable to the activities of the branch and sourced both in
Lithuania and in foreign countries, after allowable deduction of the
expenses incurred for the purposes of the branch.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
Income earned by the foreign company through the branch
registered in Lithuania shall be subject to Lithuanian corporate
income tax at the standard rate of 20%.
6.5 Would a branch benefit from tax treaty provisions, or some
of them
No, usually a branch would not benefit from tax treaty provisions.
6.6 Would any withholding tax or other tax be imposed as the
result of a remittance of profits by the branch
Remittance of profits by the branch is not subject to any
withholding or other tax (except bank fees).
7.1 How does Lithuania address the issue of preventing tax
avoidance For example, is there a general anti-avoidance
rule or a disclosure rule imposing a requirement to
disclose avoidance schemes in advance of the company’s
tax return being submitted
Starting from 2002 the issue of preventing tax avoidance is resolved
by a combination of general and specific anti-avoidance rules
established in Lithuanian tax laws.
The main principle and general rule established in the Law on Tax
Administration indicates that in respect of taxes, the content of the
activities carried on by the participants of legal relations shall take
precedence over their form. It means that where a taxpayer’s
transaction, economic operation or any combination is concluded
with a view to gaining a tax benefit (i.e. to defer the deadline for the
payment of tax, to reduce or fully avoid the payable amount of tax,
to increase the tax overpayment/difference to be refunded/credited
or to shorten the time limit for refunding the tax overpayment/
difference) the tax administrator shall apply the content-over-form
principle for the purpose of calculating the tax. In this case the tax
administrator shall not take into account the formal expression of
the taxpayer’s activity and shall recreate the distorted or hidden
circumstances associated with taxation as provided for in tax laws
and calculate the tax pursuant to the relevant provisions of the said
tax laws.
Complementing the above said principle, particular tax laws
establish the specific anti-avoidance rules, such as the right of the
tax administrator to re-evaluate the transactions between associated
persons (see question 3.8), “thin capitalisation” rules relating to the
interest paid to controlling persons (see question 3.4), treating
payments made to foreign entities in target (“tax haven”) territories
as non-allowable deductions (see question 4.3), not allowing the
cross-border use of income or losses (see question 4.5), obligation
to include into the taxable profits the positive income of the
controlled foreign entity (see questions 4.3 and 4.5), not allowing to
decrease the taxable profits by losses of financial activities, etc.
Lithuania
ICLG TO: CORPORATE TAX 2010
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