The Lithuanian tax year runs from 1 January to 31 December. However, a corporation may apply to adopt a substitute year of reporting (e.g. 1 July to 30 June).
According to Lithuanian legislation, all the tax returns (except annual PIT returns for a Lithuanian resident) are submitted electronically, excluding cases when it is not possible to submit tax returns by electronic means due to objective reasons or the submission of a return by electronic means would cause disproportionate administrative burden.
CIT returns must be submitted by the 15th day of the sixth month of the following tax period (15 June for companies using the calendar year).
Advance CIT returns due based on activity results for the previous year should be calculated and declared as follows:
- The advance CIT due for the first six months of the tax period should be calculated based on results of the tax period before the last tax period (e.g. the advance CIT for the first six months of 2023 would be calculated based on the appropriate portion of the actual amount of CIT for 2021).
- The advance CIT return for the first six months of the tax period should be submitted by the 15th day of the third month of the tax period (usually 15 March).
- The advance CIT due for the remaining six months of the tax period should be calculated based on results of the last tax period (e.g. the advance CIT for the last six months of 2023 would be based on the appropriate portion of the actual amount of CIT for 2022).
- The advance CIT return for the remaining six months should be submitted by the 15th day of the ninth month (usually 15 September) of the tax period.
The taxpayer may choose to pay the advance amount based on the projected amount of CIT calculated for the current year. The advance amount of CIT calculated on the basis of the projected amount of CIT for the tax period shall account for not less than 80% of the actual amount of the annual CIT; otherwise, late payment interest shall be calculated in respect of each amount of advance CIT that was not paid for the quarter.
If the taxpayer had chosen to pay the advance amount based on the projected amount of CIT for the current year, the return must have been submitted by the 15th day of the third month of the tax period (15 March for companies using the calendar year).
A tax-withholding entity must submit to the tax authorities a special form of a return reporting the amounts of payments paid and taxes withheld during the calendar month no later than 15 days after the end of the month in which the amounts were paid. When a Lithuanian entity pays dividends to the foreign entity and these dividends are not taxed, these paid amounts are declared in the annual CIT return.
Payment of tax
The final payment deadline for CIT is aligned with the annual CIT return submission deadline, i.e. the 15th day of the sixth month of the following tax period.
The advance CIT must be paid no later than the 15th day of the last month of the respective quarter.
If the amount of tax indicated in the annual CIT return exceeds the amount actually paid during the tax period (i.e. the advance CIT), the taxpayer is obligated to transfer the additional amount no later than the annual CIT return submission deadline (i.e. by the 15th day of the sixth month of the following tax period). Overpaid tax can be offset with other tax dues or refunded in accordance with the law on tax administration.
WHT on payments to foreign companies is to be calculated, withheld, and remitted by a Lithuanian company or a PE of a foreign company in Lithuania within 15 calendar days after the end of the month when the payment was made (i.e. no later than the return submission deadline).
Tax audit process
The Lithuanian tax system for companies is based on self-assessment; however, the tax authorities undertake ongoing compliance activity to ensure corporations are meeting their tax obligations. The tax authorities take a risk-based and materiality approach to compliance and audit activities, with efforts generally focused on taxpayers with a higher likelihood of non-compliance and/or material consequences of non-compliance. Compliance activities take various forms, including general risk reviews, questionnaires, reviews of specific issues, and tax audits.
Files and data reported to the tax authorities
Accounting data reporting: Standard Audit File for Taxes (SAF-T)
Full accounting data reporting in xml format (SAF-T) was implemented in Lithuania as of 1 January 2017.
Entities are obligated to be ready to submit accounting data upon request of the tax authorities as follows:
- If net sales revenue for the 2015 financial year exceeded EUR 8 million, then an entity has to be ready to submit the file for periods starting from 1 January 2017.
- If net sales revenue for the 2016 financial year exceeded EUR 700,000, then an entity has to be ready to submit the file for periods starting from 1 January 2018.
- If net sales revenue for the 2017 financial year exceeded EUR 300,000, then an entity has to be ready to submit the file for periods starting from 1 January 2019.
The requirement to be ready to submit the file does not apply to certain entities (e.g. foreign entities registered for VAT purposes in Lithuania, branches, representative offices, PEs).
Invoice data reporting (i.SAF)
All VAT-registered taxable persons are required to report monthly data on invoices issued and received to the tax authorities' i.SAF subsystem.
Transport data reporting (i.VAZ)
The transport document data for the dispatch of goods to other entities within the territory of Lithuania (local dispatches) has to be reported to the tax authorities' i.VAZ subsystem (certain exceptions apply) before the dispatch occurs.
The EU Directive on the mandatory disclosure and exchange of reportable cross-border tax arrangements (referred to as DAC6 or the Directive) has been introduced into Lithuanian law. Under DAC6, taxpayers and intermediaries are required to report cross-border reportable arrangements from 1 January 2021.
Cross-border reportable arrangement is an arrangement that meets at least one or more hallmarks, the presence of which indicates a potential risk of tax evasion. It includes all taxes, except VAT, customs duty, excise duty and mandatory social security contributions.
Interested taxpayers must provide information on the reportable cross-border agreement for each year, when they use or have used it, after the end of the calendar year, until June 15 of the following calendar year, by filling out the special form (PRC914).
Statute of limitations
As of 1 January 2020, the tax authorities may investigate the current and three previous tax periods. However, in some cases, a longer period may be applied.
The statute of limitations of the current tax period and five previous tax periods will be applied:
- when (re)calculating PIT (with the exception of PIT paid by an individual on income from an individual activity)
- when the tax administrator is (re)calculating taxes of a taxpayer who does not meet the minimum criteria for reliable taxpayer
- when the tax administrator is (re)calculating taxes on the basis of information received from the automatic exchange of information
- when the tax administrator is (re)calculating taxes in accordance with transfer pricing regulations as well as when (re)calculation is related to patent box relief and investment project relief application
- when proving bad debts and efforts to recover these bad debts
- when (re)calculating taxes of the taxpayer who has been announced bankrupt and bankruptcy fraud was recognised by the court, and
- when an entity applies VAT deduction on fixed assets, other than immovable property.
The limit of ten previous tax periods will be applied when an entity applies VAT deduction on immovable property, when the mutual agreement procedure (MAP) is being carried out, or when damage to the state in a penal case has to be calculated.
Minimum criteria for reliable taxpayers
As of 1 January 2019, new minimum criteria for reliable taxpayers have been introduced. A taxpayer meets minimum criteria for reliable taxpayers if:
- within three years, it has not received any fines or penalties for tax-related violations resulting in unreported taxes exceeding EUR 15,000; and
- within three years, it (or other responsible person) was not convicted for illegal work; and
- within three years, it (or/and its director) was not convicted of fraud, unjust enrichment, criminal economic or business activities, or a criminal activity in the financial system; and
- within one year, its director or other responsible person was not subject to administrative liability for particular offences leading to a penalty of not less than EUR 1,500 or for repeated particular administrative offences.
The list of taxpayers that do not meet the minimum reliability criteria for taxpayers is announced publicly on the website of the Lithuanian tax authorities. Additionally, such taxpayers are not allowed to participate in public procurements or receive support, and will also be subject to extended statute of limitations.
Topics of focus for tax authorities
The Lithuanian tax authorities are focusing on the following areas of corporate taxpayers’ compliance:
- Topics driven by OECD movement on BEPS (e.g. economic substance of companies, business reasons of transactions).
- Obligation to register PE in Lithuania (investigations of foreign companies that perform activities in Lithuania without registering as local taxpayers).
- Compliance with transfer pricing rules and thin capitalisation rules.
- Applications of tax reliefs (e.g. investment project incentive, relief for R&D).
- Proper recognition of costs for non-business related assets and expenses.
- Social security contributions' optimisation schemes.