The standard CIT rate is 15%. However, small companies and agricultural companies can apply a reduced CIT rate of 0% or 5% if certain conditions are met. A new amendment to the Law on CIT will enter into force on 1 July 2022, which will ensure that an increased CIT rate of 20% is applied on taxable profits of credit institutions exceeding the threshold of EUR 2 million for an indefinite period (previously it was applicable only for a limited time period - starting from 1 January 2020 and ending with 2022). Special rules for calculation of taxable profit apply.
Generally, CIT is applied on taxable income received by a Lithuanian tax resident from its local and worldwide activities. Taxable income is calculated by reducing general income of a certain tax period with deductible expenses and non-taxable income.
Income of a tax resident company is not subject to taxation in Lithuania if it was received from activities through a PE in a foreign country that is in the European Economic Area (EEA) or that has a double tax treaty (DTT) with Lithuania and if the income was subject to taxation there.
Furthermore, CIT may be reduced or even not applied if foreign-sourced income received not through a PE is taxed with a withholding tax (WHT) in a foreign country and this country has a DTT with Lithuania.
Non-resident companies are generally taxed on Lithuania-sourced income received through a local PE and reduced by deductible expenses or on income subject to WHT in Lithuania.
From January 1, 2023 the new amendments to the Law on Corporate income tax relating to anti-hybrid rules will 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 its foreign shareholder(s) of Lithuanian hybrid entity) that is not otherwise subject to corporate income tax or an equivalent tax in accordance with the legislation of the Lithuanian Law on Corporate income tax 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 this or next year). The provision will not, however, apply to collective investment vehicles meeting certain criteria.
Reduced CIT rate for small companies
Entities with fewer than ten employees and less than EUR 300,000 in gross annual revenues can benefit from a reduced CIT rate of 0% for the first year of operations and 5% for the following periods if certain conditions are met.
CIT regime for certain maritime activities
The rate of CIT on certain maritime activities is 15%, with the base set by reference to the functional capacity of the ship. This fixed CIT may be applied to maritime entities that fulfil certain conditions indicated in the law. An election must be made to the tax authorities to apply this regime.
Local income taxes
There is no local or municipal CIT in Lithuania.