Lithuania

Domestic legislation

Generally, income of a foreign entity in Lithuania not derived through a PE is deemed to be Lithuanian-source income and is subject to WHT at the following rates:

• Interest on any type of debt obligations, including securities: 10%.
• Proceeds from the sale, transfer (with title), or lease of immovable property located in Lithuania: 15%.
• Income derived from sports activities or performers’ activities: 15%.
• Income from distributed profits: 15%.
• Royalties: 10%.
• Annual payments (tantiems) to the members of the board or supervisory board: 15%.
• Indemnities received for the infringement of copyrights or neighbouring rights: 10%.

0% WHT is applied on royalties paid to related parties meeting requirements of the European Commission (EC) Interest and Royalty Directive.

Lithuanian WHT on interest paid to entities established in the European Economic Area or DTT countries is 0%.

WHT is not applied on government securities issued on international financial markets, interest accumulated and paid on deposits, and interest on subordinated loans that meet the criteria established by legal acts adopted by the Bank of Lithuania.

Dividends distributed by a resident company to another resident company are subject to a 15% CIT, which is withheld by a distributing company.

The dividends distributed by a resident company are exempt from WHT if the recipient company has held not less than 10% of the voting shares in the distributing company for at least a 12-month period without interruption. However, this relief is not applied if the foreign entity (recipient) is registered or otherwise organised in blacklisted territories (see Blacklisted territories in the Deductions section), as specified by the Ministry of Finance. Please note that the requirement of the 12-month holding period does not necessarily have to be fulfilled on the day of dividend distribution.

Dividends paid out to foreign companies or received from foreign companies are not subject to tax exemption in cases where tax benefit is the main or one of the main objectives of a particular structure of companies. Dividends received from foreign companies are also not subject for tax exemption if they were deducted from taxable profit at the distributing company level.

The receiving company may reduce its CIT payable for that period when dividends were received by the amount of CIT withheld from the received dividends. Any excess credit may be offset with other taxes payable.

Dividends distributed by a foreign entity are generally subject to a 15% CIT that is to be paid by the receiving Lithuanian entity.

Dividends distributed by a foreign company to a Lithuanian company are exempt from CIT if the distributing foreign entity is established in the European Economic Area and related profit is properly taxed in the domiciled country.

The dividends are also exempt from WHT if the recipient company has held not less than 10% of the voting shares in the distributing company for at least a 12-month period without interruption and the profit of a distributing entity is subject to CIT or similar tax. This participation exemption satisfies the requirements of the EC Parent-Subsidiary Directive. The exemption also applies to dividends paid by non-EU foreign companies, except those registered or organised in blacklisted territories.

According to the changed provisions of the CIT Law, the payments received by a foreign entity for the activities of the members of the supervisory board in Lithuania are recognised as income of the foreign company in Lithuania, regardless of the frequency of such payments and whether they are paid as tantiemes or as other types of payments. These payments are subject to 15% WHT, which should be withheld by the paying company in Lithuania. The tax is applicable only if the member of the supervisory board is a foreign company (not an individual).

Tax treaties

Where a treaty for the avoidance of double taxation and prevention of fiscal infringement with the country in question contradicts the local regulations, the treaty provisions prevail. Lithuania now has 58 DTTs in force with foreign countries.

The following WHT rates apply to dividends, interest, and royalties paid to a recipient or beneficial owner resident in a tax treaty country. The lower of the domestic or the treaty rate is given.

Notes

1. Dividends are exempt from WHT if the recipient company has held not less than 10% of the voting shares in the distributing company for at least a 12-month period without interruption. However, this relief is not applied if the foreign entity (recipient) is registered or otherwise organised in blacklisted territories (see Blacklisted territories in the Deductions section), as specified by the Ministry of Finance. If participation exemption criteria are not met, the standard WHT rate of 15% should be applied. However, some of the DTTs allow applying WHT at a reduced rate of 5% or 10%.
2. Under the domestic law, the rate is nil if interest is paid to a company established in a country that has a DTT with Lithuania or is a member of a European Economic Area. In other cases, еxcept for Cyprus, Latvia, and the United Arab Emirates where 0% WHT is established in the DTT, a 10% WHT rate should be applied.
3. Under the domestic law, 0% WHT is applied on royalties paid to related parties meeting requirements of the EC Interest and Royalty Directive.
4. Royalties for the use of industrial, commercial, or scientific equipment: 5%; other royalties: 10%. 
5. Based on the most-favoured nation principle established in the DTTs or their Protocols with indicated countries, and as a result of Lithuania signing the DTT with Japan, royalties paid to these countries are not subject to WHT in Lithuania (DAS-1 form should be completed by the recipient).

Reduction of, or exemption from, WHT under a DTT may be obtained if a special residence certificate (Form DAS-1) is completed and approved by the tax authorities before a taxable payment is transferred. If a payment that would have been subject to a tax treaty has already been made and WHT at the local rate was withheld, it is possible to obtain an appropriate refund (reduction) by completing a special claim for a refund of the Lithuanian tax withheld at source (Form DAS-2) and obtaining the approval of the tax authorities.

In addition, the tax authorities may require completion of a special certificate giving information about income received and taxes paid in Lithuania (Form DAS-3).