Foreign tax credit
A company may reduce tax payable on certain foreign-sourced income in Lithuania by taxes paid on that income in a foreign country if that Lithuanian company has received appropriate notice from that foreign country. The tax credit may not exceed the CIT rate payable in Lithuania.
Investment project incentive
Entities involved in an investment project can reduce their taxable profits by up to 100% of the actually incurred acquisition costs of long-term assets meeting certain requirements. Please note that depreciation (amortisation) expenses of such assets shall be deducted in a common manner.
Taxable profits can be reduced by such costs incurred from 2009 to 2023.
This relief is applied to the following categories of fixed assets:
- Machinery and equipment.
- Computer and communication equipment.
- Software and acquired intellectual property (IP) rights.
- Lorries, trailers, and semi-trailers (relief for these investments is capped at EUR 300,000 per year).
The costs exceeding the above-mentioned 100% limit can be carried forward for four years.
There are certain criteria defining what could be considered an investment project. The project should be precisely described to meet the criteria allowing a company to use the tax relief.
Tax relief for research and development (R&D)
Expenses, except for fixed assets’ depreciation (amortisation) expenses, incurred for R&D purposes can be deducted three times in the tax period when they are incurred, provided that R&D works performed are related to ordinary business activities.
A company applying tax relief for R&D has to prepare R&D documentation. This documentation has to cover the performed project, substantiate conformity with certain tax requirements, and specify the amount of expenses for R&D activities.
As of 1 January 2018, a new tax incentive for companies investing into R&D was introduced. Such companies have the possibility to not only deduct the expenses incurred for R&D works from the taxable income three times, but they are also entitled to apply the reduced 5% CIT rate on the profit deriving from the commercial exploitation of patented inventions (it is similar to 'patent box' regimes available in other countries).
A company can apply the reduced CIT rate of 5% if:
- the income from the use of the property, sale of it, or other transfer of ownership is obtained only by the Lithuanian unit or PE that created the property and only they incur all expenses due to the income generation, and
- the property is a copyright-protected computer programme or meets a patentability criterion (new, complies to the level of invention, and is industrially applicable) that is protected by patents or supplementary certificates of protection issued by the European Patent Office or in the member state of the EEA or in a country with which a DTT has been concluded.
Funds granted for producing a film or a part of a film
Funds granted for producing a film or a part of a film can be deducted from taxable income and from CIT payable due during the period from 2019 to 2023 if the following conditions are met:
- The film meets the criteria of cultural substance and evaluation of the production.
- Not less than 80% of the film production expenses are incurred in Lithuania, and the amount exceeds EUR 43,000.
- Total amount of funds granted by all companies may not exceed 30% of total expenses of the film production.
Not more than 75% of funds granted free of charge for production of film or of a part thereof in Lithuania can be deducted from taxable income.
Certain restrictions for reduction of taxable income and tax due apply.
Free economic zones (FEZs)
Entities that invest in Lithuanian FEZs are entitled to partial or complete CIT relief (depending on the investment amount), relief of tax on real estate, and 50% relief of land lease tax. There are seven FEZs in Lithuania: in Kaunas, Klaipėda, Akmenė, Kėdainiai, Marijampolė, Panevėžys, and Šiauliai.