Lithuania

Amendments to the tax laws from 2025

The following amendment to the Law on Corporate income tax (CIT) will enter into force as of 2025.

Car purchase and rental costs

From 1 January 2025, the part of the purchase price of a passenger car that is considered as an asset of a unit can be deducted from income, not exceeding: 

• 75,000 euros (EUR) when purchasing a passenger car with carbon dioxide (CO2) emissions equal to 0 g/km.
• EUR 50,000 when purchasing a passenger car with CO2 emissions not exceeding 130 g/km. 
• EUR 25,000 when purchasing a passenger car with CO2 emissions exceeding 130 g/km but not exceeding 200 g/km.
• EUR 10,000 when purchasing a passenger car with CO2 emissions exceeding 200 g/km. 

The monthly rental costs of a passenger car that is not considered as an asset of a unit are deducted from income within (i) the limit set above and (ii) the applicable depreciation normative ratio (in years) divided by 12 of the fixed asset group to which the leased passenger car should be assigned if it were considered as an asset of a unit. This shall not apply to leases with a total period of no longer than 30 days during the tax period.

Amendments to the tax laws from 2023/24

The following amendments to the laws on CIT, personal income tax (PIT), and social security contributions (SSC) entered into force as of 2023/24.

Corporate income tax (CIT)

From 1 January 2023, the new amendments to the Law on CIT relating to anti-hybrid rules have come into force.

With the new amendments, it is aimed to prevent non-taxation of income achieved by the foreign shareholders of Lithuanian hybrid entities, i.e. to prevent situations when the income is neither taxed as being that of a Lithuanian hybrid entity nor as being that of foreign shareholders.

The tax base of a Lithuanian hybrid entity shall include the part of income (attributable to the foreign shareholder[s] of the Lithuanian hybrid entity) that is not otherwise subject to CIT or an equivalent tax in accordance with the legislation of the Lithuanian Law on CIT or any other country whose resident is a participant of the Lithuanian hybrid entity for tax purposes.

More detailed information explaining the application of this rule is currently not available (should be provided by the tax authorities later). However, the provision does not apply to collective investment vehicles meeting certain criteria.

Payroll taxes

Starting from 1 January 2024, the threshold when the higher PIT rate is applicable increased for employment related income from EUR 101,094 per calendar year to EUR 114,162. A 32% PIT rate for the income exceeding this threshold is applied.

Social security contributions (SSC)

Starting from 1 January 2024, the ceiling for SSC withholding increased from EUR 101,094 to EUR 114,162 per calendar year. The ceilings are not applicable to the health insurance contributions and employer's contributions.

Other significant amendments

Implementation of Pillar I and Pillar II

From 1 July 2024, the Lithuanian Law of ensuring the minimum level of taxation of groups of entities entered into force, which partially transfers and implements the 14 December 2022 Provisions of the Council Directive EU 2022/2523 on ensuring the universal minimum level of taxation of international corporate groups and large groups of local entities in the Union (hereinafter referred to as the Directive). 

The changes are related to the comprehensive international tax reform plan and its implementation, based on two pillars:

• Pillar I gives the right to tax the profits of large international corporate groups not only to the country where the units and permanent establishments (PEs) of such corporate groups are located but also to the countries where consumers are located.
• Pillar II includes agreements on the minimum level of taxation worldwide, thus ensuring that the profits of large multinational corporate groups are taxed at an effective tax rate of at least 15% (minimum level of taxation). 

The law applies to international groups of entities and groups of Lithuanian entities, whose location is in Lithuania, and whose annual consolidated income is at EUR 750 million or higher for least two out of four financial years, if the minimum effective rate for such groups of entities in any jurisdiction is less than 15% (minimum level of taxation). According to the general rule, the effective tax rate is calculated at the level of the jurisdictional territory, i.e. by summing up the profit earned (loss incurred) by the taxable entities located in that jurisdiction and the profit tax paid or payable from it. The special cases of calculation of the income limit of EUR 750 million when groups of entities are merged or divided are also included in the law. 

With the exception of the initial stage of activity, the additional tax that should be calculated and paid by the main parent entity of an international group of entities located in Lithuania on the profits earned by such group in Lithuania, as well as the additional tax that would be assigned to international entities located in the territories of third countries for taxable entities of the group, whose location is in Lithuania, is reduced to zero in each financial year in which such group implements the initial stage of activity, but not longer than five financial years. The additional tax, which would be calculated for the group of Lithuanian entities, is reduced to zero for the entire transition period, i.e. also for five financial years. 

The law does not apply to entities deemed to be exempt entities, i.e. public interest entities (e.g. government entities, international organisations, non-profit organisations), tax-neutral investment entities (e.g. mutual funds and real estate investment entities when they are part of a chain of ownership of a group of entities above, as well as pension funds), and certain entities controlled by excluded entities that substantially complement the activities of those excluded entities or are established for the purpose of managing their assets. 

The law, however, transposes the Directive only partially, taking into account the fact that Lithuania has chosen to apply the exception set out in Article 50 of the Directive (postponing mandatory taxation rules for no more than six years), the application of the income inclusion rule, and the rule of undertaxed profit. This means that the law transposes and implements the provisions of the Directive governing its scope, the procedure for determining the location of a unit, and the procedure for providing the information necessary to ensure the minimum level of taxation of profits earned by large groups of units in each jurisdiction. Until the Directive is fully transposed, when applying wording of an evaluative nature, the Commentary and Explanations (Examples) of the Model Rules prepared by the Organisation for Economic Co-operation and Development (OECD) should be used as a source of examples and interpretations.

Temporary solidarity contribution

From 16 May 2023, the Law on Temporary Solidarity Contribution came into force. 

According to the provisions of the Law on Temporary Solidarity Contribution, this contribution is paid by banks established in the Republic of Lithuania in accordance with the Law on Banks, branches of banks licensed in the member states of the European Union (EU) and member states of the European Economic Area (EEA) and foreign banks, and financial groups of central credit unions operating in accordance with the Law on Central Credit Unions. 

The base of this contribution consists of net interest income, calculated by applying the principles established by the Law on Temporary Solidarity Contribution. The contribution payment period used for calculating the contribution for the year 2023 is the period from 16 May 2023 (Enforcement of the Law on Temporary Solidarity Contribution) until 31 December 2023, and the payment period used to calculate the contribution for the year 2024 is the calendar year ending on 31 December 2024 and for the year 2025 is the calendar year ending on 31 December 2025.

The contribution must be declared (using form KIT713) and paid (only the calculated difference of the amount of the contribution stated in the annual contribution return and the paid amount of advance contributions for that payment period, if any) after the end of the payment period until 15 June of the following year.

The Law on Temporary Solidarity Contribution also stipulates an advance contribution. The advance contribution return must be submitted and the advance contribution is paid after the end of the quarter of the payment period, until the last day of the second month of the next quarter.

The Law on Temporary Solidarity Contribution is valid until 16 June 2026.

The Law on Implementation of Regulation 2022/1854

From 1 January 2023, the Law of the Republic of Lithuania on the Implementation of Regulation 2022/1854 No. XIV-1680 came into force as a limited measure to mitigate the effects of high energy prices.

The obligation to pay solidarity contribution is established for entities and PEs of the European Union defined in point 17 of Article 2 of Regulation (EU) 2022/1854 performing activities in the crude oil, natural gas, coal, and oil refinery sectors. 

The base for calculating the solidarity contribution and the solidarity contribution are calculated for the tax year starting in 2023. The calculation of the excess profit of the entities subject to solidarity contribution and/or the amount of their solidarity contribution to be paid is guided by the provisions of the Law on CIT. 

The application of Article 6(1) of Regulation (EU) 2022/1854 shall be ensured by collecting excess revenue from the market revenues of electricity generators producing electricity from resources referred to in Article 7(1) of Regulation (EU) 2022/1854. The excess revenue is collected from the market revenues received in relation to the electricity produced and actually delivered during the period referred to in Article 22(2)(c) of Regulation (EU) 2022/1854 (i.e. 1 December 2022 - 30 June 2023), exclusive of those referred to in paragraph 6 of this Article.

Provision of information about the activities carried out on online platforms

From 1 January 2023, online platform operators are required to collect and, once a year, submit information on sellers using the platforms (name, address, current accounts, country of residence, income received, etc.) for the previous calendar year to the tax authorities (with some exceptions). The requirement applies to all operators of online platforms (including mobile apps).

Information must be provided if income is received from one of the following activities:

• Rent of real estate.
• Personal services.
• Sale of goods.
• Rent of vehicle.

For the first time, platform operators will have to submit data for the previous calendar year until 31 January 2024. Standardised information collection requirements will be applied throughout the EU internal market, and a common EU register will be created. Tax administrators of all EU member states will participate in this system and exchange information about the platforms.

If the platform operator (except for the foreign platform operator) does not fulfil the obligation to provide information, there is a possibility for the tax authorities to cancel access to the platform operator's website until the platform operator eliminates the violation.

Provision of data on international payment transactions

From 1 January 2024, in accordance with Council Directive (EU) 2020/284, payment service providers will have to store and provide to the tax authorities data on international payments made through them every calendar quarter.

Data will have to be provided by the following payment service providers specified in the Law on Payments of the Republic of Lithuania:

• Credit institutions.
• Electronic money institutions.
• Payment institutions.
• Postal money transfer system institutions, which have the right to provide payment services in accordance with the law.

Payment service providers will have to provide information only on international payments when:

• The payment service provider performs more than 25 international payment transactions for the same recipient during a calendar quarter.
• The payment is received from another member state of the European Union or the payment is made to a third territory or a third country.

Payment service providers must submit the collected information for the calendar quarter no later than the end of the month following the end of the calendar quarter. When the tax authorities receive information from payment service providers, it will submit this data to the Central Electronic System of Payment information (CESOP). Payment service providers will be required to store data for at least three calendar years from the end of the calendar year in which the payment transaction was completed, and the data will be able to be revised/adjusted for the same period (three calendar years).

CIT information report

From 22 June 2023, the requirement for companies to prepare the CIT information report, to submit it to the manager of the Register of Legal Entities, and to publish it on the company's website entered into force.

The CIT information report contains all the information related to the company's activities (company name, list of corporate groups, number of employees, brief information on activities, income, profit, etc.). These reports would be prepared for reporting periods starting on 22 June 2024 and later (the template of this report is set by the European Commission).

The requirements will apply to:

• Groups of companies (including when the parent company is established outside the European Union), their companies or individual companies, whose annual consolidated or annual revenue in each of the last two consecutive financial years has exceeded EUR 750 million, and which are established or have a permanent place of business in more than one tax jurisdiction.
• Branches (opened in Lithuania by legal entities established outside the European Union) whose net sales revenue in each of the last two consecutive financial years exceeds EUR 8 million.

Fines and penalties

From 1 May 2023, if the tax administrator determines during the tax inspection that the taxpayer did not calculate the undeclared tax (including the tax calculated in the customs declarations) or did not declare the declared tax or illegally applied a lower tax rate and for these reasons illegally reduced the tax payable, in addition to the amount of tax payable, a fine from 20% to 100% (up till then, 10% to 50%) of the unpaid taxes may be imposed, unless the relevant tax law provides otherwise.

Late payment interest applied from 1 May 2023 to 31 October 2023 is 0.029%, from 1 November 2023 to 30 April 2024 is 0.03%, and from 1 May 2024 is 0.029% per day.