Worldwide transfer pricing reference guide 2014

Lithuania
Taxing authority and tax law
Taxing authority: Ministry of Finance of the Republic of Lithuania and the State Tax Inspectorate.
Tax law: The arm’s length principle is established in the Law on Corporate Income Tax of Lithuania and its implementation rules
introduced in 2004
Relevant regulations and rulings
• Article 40 of the Law on Corporate Income Tax of Lithuania
• Order of the Minister of Finance No 1K–123 as of 9 April 2004 on transfer pricing evaluation and documentation rules
• Order of the Head of the State Tax Inspectorate No VA–27 as of 22 March 2005, on the associated party transaction disclosure in the
annual corporate income tax return
OECD Guidelines treatment
The use of the OECD Guidelines is explicitly advocated in the regulations and rulings applicable in Lithuania. Other OECD papers, such
as those regarding business restructurings and profit allocation to permanent establishments, are not explicitly implemented in the
Lithuanian legislation.
Priorities/pricing methods
The CUP method is preferred over other pricing methods. In cases where the CUP method cannot be reliably applied, other transaction
based methods such as Resale Price or Cost Plus shall be used. Taxpayers are encouraged to use profit-based methods only if
transaction-based methods are not sufficient. Taxpayers are not required to use more than one method; however, a combination of
methods may be used in all cases, provided there is adequate support for the decision to apply any particular method.
Transfer pricing penalties
There are no specific transfer pricing penalties. General tax penalties of 10% to 50% of the additional tax are applicable in the case of
taxable income adjustments. Moreover, penalty interest will apply.
There are no special penalties related to the non-provision of transfer pricing documentation at the request of the tax authorities.
Penalty relief
Transfer pricing penalties are subject to general penalty relief rules.
Documentation requirements
The transfer pricing documentation requirements are binding for resident and non-resident legal entities registered as corporate income
taxpayers in Lithuania, whose revenues in Lithuania in the year before the transactions were conducted exceeded EUR2.9 million.
In addition, transfer pricing documentation requirements are applicable to credit institutions, such as banks and entities providing
financial services (e.g., insurance companies), irrespective of their revenue size.
The transfer pricing documentation has to contain:
• Details of the transactions
• Terms and conditions of the transactions
• Participants in the transactions, including their legal and organizational structure
• Functions performed, property used or contributed and the risks assumed by the parties
• Data and methods considered and the analyses performed to determine the transfer prices
• All relevant assumptions, strategies and policies that influenced the determination of the methods applied
In general, the principles in the OECD Guidelines are to be followed.
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