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Taxes in Lithuania from 1st January 2009

Some major changes in tax laws effective from 1st January 2009.

Companies:

• Profit tax 20 %; Starting from 2010 - 15%
• 20 % personal income tax on dividends, 0 % tax for the companys received dividends.
  

Domestic withholding tax rate is 20 % on the following types of income:

• Distributed profit income (dividends) unless the participation exemption applies.
• Income paid to foreign companies for disposal or lease of immovable property located in Lithuania.
• Income paid to foreign companies for entertainment and sports activities performed in Lithuania.
• Annual bonuses (tantieme) paid to members of supervisory council of a company.

New tax incentives:

• The new profit tax incentives is introduced providing for up to 50 % reduction of taxable profit in the tax period by the amount of expenses actually incurred in investing into certain groups of fixed assets, computer hardware and software, communication equipment, machinery and equipment. Replacement of existing fixed assets with analogous new assets does not qualify for incentives.

Personal income tax.

Employment income:

• Tax on employment income is 21 % (15% income tax and 6 % compulsory health insurance contribution.
• Non-taxable allowance. When the monthly employment income is less than 800 litas the nontaxable allowance is 470 litas. When employment income is more than 800 litas, the allowance is calculated to be less than 470 litas, if salary is more than 3.150 litas tax allowance is not granted. Except for additional non-taxable allowance in respect of children.

Private pensions:

• Employees may choose to allocate a part of their employers social security contributions to private funds or life insurance companies. The pension premium is 3 %.

The information above is not full. When taking decisions the law has to be considered more deeply.