Republic of Lithuania
Law
on Income Tax of individuals
2 July 2002 No IX-1007
Vilnius
CHAPTER I
GENERAL PROVISIONS
Article 1. Purpose of the Law
Article 2. Definitions
For the purposes of this Law:
1. Territory of the Republic of Lithuania (hereinafter referred to as Lithuania) shall mean the territory of the Republic of Lithuania and the area adjacent to the territorial waters of the Republic of Lithuania where, under the laws of the Republic of Lithuania and international law, the Republic of Lithuania has the right to explore and exploit the seabed and underground natural resources.
3. Resident of Lithuania shall mean a natural person who is considered a resident of Lithuania under the provisions of Article 4 of this Law.
4. Non-resident of Lithuania shall mean a natural person who is not considered a resident of Lithuania under the provisions of Article 4 of this Law.
5. Royalties shall mean remuneration for the right to use a work granted under a copyright licensing agreement, remuneration for the neighbouring rights granted, as well as remuneration for the right to use an object of industrial property or franchise granted under a licensing agreement, remuneration for the information provided on industrial, merchant or scientific know-how, also compensation for the infringement of copyright or neighbouring rights.
6. Deposit shall mean a depositor’s sum of money in a commercial bank, branch, credit union or any other credit institution under deposit and/or account contracts, with the exception of other monetary means, with respect to which a depositor has claims arising from financial transactions with deposits conducted by a credit institution or from the investment services provided.
7. Individual activity shall mean any independent activity in pursuit whereof an individual aims at deriving income or any other economic benefit over a continuous period:
1) independent commercial or industrial activities of any nature, including those conducted under a business certificate;
2) independent creative, professional activities and other similar independent activities, including those conducted under a business certificate;
8. Sports activities shall mean activities of a sportsman (an individual exercising a certain physical or mental activity based on certain rules and organised in a particular form specifically established for such an activity) involving preparation for and participation in competitions.
9. Performing activities shall mean activities of a performing artist (actor, singer, musician, conductor, dancer or another individual acting, singing, reading, reciting or otherwise performing literary, artistic, folklore performances or circus shows) involving preparation for and participation in a public appearance. Performing artists shall not include individuals who are involved in the creation of a work or in preparation for a public appearance, but do not participate in the public performance of that work or public appearance.
10. Creative activities shall mean the creation of works that may be protected by copyright, as well as the transfer of property rights in those created works.
11. Derivative financial instrument shall mean a financial instrument (future contract, forward contract, etc.) the value or price whereof is linked to the value or price of the goods on which the instrument is based, as well as a financial instrument (future contract, forward contract, etc.) the value or price whereof is linked to the price of securities, exchange rate, interest rate, stock exchange index, determination of creditworthiness or any other variable.
12. Permanent establishment shall mean the expression of activities of a foreign entity in Lithuania. A foreign entity is deemed to carry on its activities through its permanent establishment in Lithuania, provided it: permanently carries on its activities in Lithuania; or carries on its permanent activities in Lithuania through its dependent representative (agent); or uses in Lithuania a construction site, a construction, assembly or equipment facility; or makes continuous use in Lithuania of equipment or structures for prospecting or extraction of natural resources, including the wells or vessels used for that purpose.
13. Fixed base shall mean the expression of independent activities of a non-resident of Lithuania, with the exception of sports and performing activities (hereinafter in this paragraph referred to as the activities), in Lithuania. A non-resident of Lithuania is deemed to carry out his activities through his fixed base in Lithuania, provided he: permanently carries out his activities in Lithuania; or carries out his permanent activities in Lithuania through his dependent representative (agent). The definition of the permanency of activities of a non-resident of Lithuania, as well as the criteria of dependence or independence of a representative (agent) of a non-resident of Lithuania shall be established by the Government of the Republic of Lithuania or an institution authorised by it.
14. Income shall mean positive income, as well as remuneration received for the work done, services provided, rights transferred or granted, property or means sold or otherwise transferred and invested and/or any other benefit in cash and/or in kind, with the exception of:
1) shares issued to shareholders free of charge, in proportion to the number of their shares, or the sum whereby the par value of the shares issued earlier has been increased as a result of the increase of the authorised capital, as well as the amount by which the value of member shares or interests has been increased as a result of the increase of the authorised capital for holders of member shares or interests, in proportion to the value of their member shares or interests;
2) real property recovered under the Law of the Republic of Lithuania on the Restoration of the Rights of Ownership of Citizens to the Existing Real Property, as well as savings restored under the Law of the Republic of Lithuania on the Restoration of Savings of the Population;
3) working clothing, footwear, tools, equipment and other devices that are given to an individual for use free of charge (without transferring ownership) by a person connected to the individual concerned through employment relations or corresponding relations, provided those working clothing, footwear, tools, equipment and other devices are used to perform work duties;
4) the sum of output value added tax calculated on the supplies of goods and services by an individual registered as a payer of value added tax;
5) amounts (except for the expenses of an individual compensated by a person connected to the individual concerned through employment relations or corresponding relations) allocated to cover expenses related to accommodation, catering, participation registration or travel, provided those expenses are related to the duties of work, including voluntary work that is organised in accordance with the procedure established by the Government of the Republic of Lithuania, or individual activities of an individual;
6) benefits derived by individuals during a promotion event or action or a representation event of an entity, where it is impossible to determine the individual benefit derived by a separate participant of that promotion event or action or representation event. An event or action of an entity is considered promotional if it is designated to disseminate information related to the activities of the entity and promoting the purchase of goods or services, in any form and by any means, as well as to inform current or potential customers. A representation event of an entity is an action organised by the entity at its own expense in order to establish new business relations or to improve the existing ones with other entities or individuals, with the exception of the employees of the entity organising such a representation event, as well as members of that entity, controlled or controlling entities or controlling individuals;
7) owing to the transfer of property and rights between Lithuanian entities, the taxable profit whereof is subject to profit tax at the 15 or 13% rate, and entities of foreign countries being European Union Member States, the forms of business organisation whereof are listed in Appendix 2 to the Law of the Republic of Lithuania on Profit Tax (hereinafter referred to as the Law on Profit Tax) and which are payers of the taxes specified in that Appendix, where that transfer is a result of the transactions referred to in Article 41 of the Law on Profit Tax, shares (interests, member shares) of the acquiring entity received, during reorganisation and under reorganisation conditions, by a member of the entity being acquired in exchange for the shares (interests, member shares) held in the entity being acquired, when both the said entities are parties to the reorganisation and the difference in the prices of the shares paid for in cash (if any) does not exceed 10% of the par value of the shares of the acquiring entity, or, failing this, of the calculated fair market value of the shares;
8) owing to the transfer of property and rights between Lithuanian entities, the taxable profit whereof is subject to profit tax at the 15 or 13% rate, where that transfer is a result of the transactions referred to in Article 41 of the Law on Profit Tax, shares (interests, member shares) of the acquiring entity received, during reorganisation and under reorganisation conditions, by a member of the entity being acquired in exchange for the shares (interests, member shares) held in the entity being acquired, when both the said entities are parties to the reorganisation and there is no payment in cash for the difference in the prices of the shares;
15. Income in kind shall mean any property received into ownership or beneficial use, or services received gratuitously, in exchange or at a favourable price (at less than the fair market value set for a particular individual due to the influence of certain interests or transactions), as well as any other benefit (if a benefit giver had a purpose of giving benefit to a particular person), when the equivalent of the property, services or other benefit received in monetary terms would be included in income under the provisions of this Law.
16. Income sourced in Lithuania shall mean:
1) income derived by a resident of Lithuania from other residents of Lithuania, Lithuanian entities, foreign entities through their permanent establishments and non-residents of Lithuania through their fixed bases;
2) royalties, interest, income from distributed profit, and income from the lease of property immovable by nature located in Lithuania, which are received by a non-resident of Lithuania from residents of Lithuania, Lithuanian entities, foreign entities through their permanent establishments and non-residents of Lithuania through their fixed bases;
17. Income sourced outside Lithuania shall mean all the income except for the income listed in paragraph 16 of this Article.
18. Positive income shall mean all the income or part thereof derived by the controlled entity, registered or otherwise organised in the countries or zones specified in Article 39 (4) of the Law on Profit Tax, which is included in the income of a resident of Lithuania – controlling person, in proportion to the number of the shares (interests, member shares), votes or rights to the profit of the controlled entity held by that resident of Lithuania.
19. Related persons shall be deemed related, provided they on any day of the current tax period or the tax period preceding the current tax period are one of he following:
3) an individual whose spouse, fiancé or cohabitant is a member of the managing bodies of an entity and that entity, or
4) an individual and his spouse, fiancé, cohabitant, as well as an individual and persons connected to him by blood relationship (up to the fourth degree) or by marriage (a natural person and the relatives of his spouse (up to the fourth degree)), also an individual and the relatives (up to the second degree) of the spouses of his relatives (up to the second degree), as well as an individual and his testamentary heirs, or
5) two individuals who are members of the same entity and each of whom directly or indirectly controls over 25% of shares (interests, member shares) in that entity, or
6) two individuals who are members of the same entity and each of whom, together with other persons (spouses, fiancés, cohabitants, persons connected to him by blood relationship (up to the fourth degree) or by marriage (a natural person and the relatives of his spouse (up to the fourth degree), also the relatives (up to the second degree) of the spouses of his relatives (up to the second degree), his testamentary heirs), directly or indirectly controls over 25% of shares (interests, member shares) in that entity, or
20. Fair market value shall mean the amount for which an asset may be exchanged or a mutual liability settled between willing independent buyers or sellers in an arm’s length transaction.
21. Target territory shall mean a foreign country or zone that is included on the List of Target Territories established by the Minister of Finance and satisfies at least two of the criteria set in this paragraph:
1) the rate of profit or equivalent tax in that territory is below 75% of the rate set in Article 5 (1) (1) of the Law on Profit Tax;
2) different rules for imposing profit or equivalent tax are applied in that territory, taking into account the country where the controlling person is registered or otherwise organised;
3) different rules for imposing profit or equivalent tax are applied in that territory, taking into account the country where activities are carried on;
4) the controlled entity has entered into an agreement with the tax administrator of that country on the tax rate or tax basis;
22. Business certificate shall mean a document issued in accordance with the procedure prescribed by this Law and implementing legal acts, which confirms the payment of the required fixed amount of income tax for carrying on independent activities included in the list of activities that is established by the Government of the Republic of Lithuania.
24. Member of the entity shall mean any person who has the right of ownership to the assets of the entity or any person who fails to secure his right of ownership to the assets of the entity but acquires rights and/or duties arising from obligations and related to the entity.
25. Lithuanian entity shall mean any legal entity established in accordance with the procedure prescribed by legal acts of the Republic of Lithuania, as well as a branch or representative office of any foreign entity established in accordance with the procedure prescribed by laws of the Republic of Lithuania that does not constitute a permanent establishment of that foreign entity.
26. Foreign entity shall mean any foreign legal entity or organisation having its registered office in a foreign country and established or otherwise organised under legal acts of that foreign country, as well as any other entity established, incorporated or otherwise organised in a foreign country.
27. Controlled entity shall mean any entity deemed to be under the control of a resident of Lithuania (hereinafter referred to as the controlling person), provided:
2) the controlling person directly or indirectly holds over 50% of shares (interests, member shares) in that controlled entity or other rights to a share of distributable profit or pre-emptive rights to the acquisition thereof, or
3) the controlling person, together with the related persons, holds over 50% of shares (interests, member shares) in that controlled entity or other rights to a share of distributable profit or pre-emptive rights to the acquisition thereof, and the share under the control of the controlling person constitutes at least 10% of shares (interests, member shares) or other rights to a share of distributable profit or pre-emptive rights to the acquisition thereof.
28. Property shall mean any movable and immovable property, securities and derivative financial instruments, as well as other intangible property.
29. Property related to individual activities shall mean any property used by an individual solely for his individual activities, with the exception of individual activities conducted under a business certificate, individual sports and performing activities.
30. Permanent place of residence shall mean any place where a natural person has a possibility to reside and which is established, maintained and used by him.
31. Employment relations or corresponding relations shall mean relations when work is carried out under employment contracts, as well as any other activity performed on the basis of legal ties corresponding (by agreement as regards remuneration for work, workplace and duties, work discipline, etc.) to relations between an employer and employee created under the employment contract.
32. Other concepts used in this Law shall be interpreted as they are defined in the Law of the Republic of Lithuania on Tax Administration (hereinafter referred to as the Law on Tax Administration) and the Civil Code of the Republic of Lithuania (hereinafter referred to as the Civil Code) to the extent they are in conformity with this Law (with the exception of cases explicitly stated in the Civil Code).
Article 4. Resident of Lithuania
1. A resident of Lithuania shall mean:
2) any natural person whose place of personal, social or economic interests during the tax period is in Lithuania rather than in a foreign country, or
3) any natural person who is present in Lithuania continuously or intermittently for 183 days or more during the tax period. Rules for calculating the period of 183 days shall be established by the Government of the Republic of Lithuania or an institution authorised by it, or
4) any natural person who is present in Lithuania continuously or intermittently for 280 days or more during successive tax periods and stayed in Lithuania continuously or intermittently for 90 days or more during one of those tax periods, unless otherwise provided by paragraph 3 of this Article. Rules for calculating the periods of 90 and 280 days shall be established by the Government of the Republic of Lithuania or an institution authorised by it, or
5) any natural person who is a citizen of the Republic of Lithuania and does not satisfy the criteria set forth in subparagraphs 3 and 4 of this paragraph; however, remuneration under the employment contract or corresponding contracts is paid to such a natural person, or his costs of living in another country are covered, from the state or municipal budgets of Lithuania.
2. A natural person, although satisfying the provisions laid down in subparagraphs 3, 4 and 5 of paragraph 1 of this Article, shall not be considered a resident of Lithuania, provided he is:
1) a foreign state diplomat, a member of administrative-technical or support staff of a diplomatic mission, consular institution or international organisation, who is not a citizen of the Republic of Lithuania (except for stateless persons, whose permanent place of residence or place of personal, social or economic interests during the tax period is in Lithuania), or
2) not a citizen of the Republic of Lithuania who receives income connected only with employment relations or corresponding relations for work in Lithuania from a foreign country, its political or territorial administrative unit or local authorities, or
3. If a natural person who is considered a resident of Lithuania for not less that three successive tax periods departs from Lithuania permanently in the tax period immediately following the aforesaid periods and during the tax period of his departure stays in Lithuania for less than 183 days, he shall be considered a resident of Lithuania until the day of his departure. Criteria for the permanent departure from Lithuania shall be established by the Government of the Republic of Lithuania or an institution authorised by it.
4. If a natural person who is considered a resident of Lithuania for not less that three successive tax periods departs from Lithuania permanently for a target territory in the tax period immediately following the aforesaid periods, the provisions laid down in paragraph 3 of this Article shall not apply to him where that natural person is related to Lithuania by significant commercial interests. Such a natural person shall be considered a resident of Lithuania for the entire tax period of departure and two subsequent tax periods. Significant commercial interests shall be in place where:
1) a natural person is the owner of an individual (personal) enterprise in Lithuania and/or controls over 25% of the shares (interests, member shares) of a Lithuanian entity, or
5. A natural person who is not considered a resident of Lithuania under the provisions of paragraph 1 of this Article may, under the procedure prescribed by the Government of the Republic of Lithuania, apply to the tax administrator for recognition as a resident of Lithuania, provided his income sourced in Lithuania (with the exception of the income taxed during that tax period by applying income tax reliefs provided under double taxation treaties of the Republic of Lithuania) during the tax period accounts for not less than 90% of gross income derived during the tax period, with the exception of the income referred to in Article 17 of this Law.
Article 5. Scope of Income Tax
2. The scope of income tax of a resident of Lithuania shall be income sourced in and outside Lithuania, with the exception of the case specified in paragraph 3 of this Article.
3. The scope of income tax of a resident of Lithuania shall be income sourced in Lithuania, provided that individual:
1) is considered a resident of Lithuania under Article 4 (1) (3) or Article 4 (1) (4) or Article 4 (3) of this Law, and
3) during the same tax period, for the purposes of income tax or equivalent tax, is considered a resident of the foreign country, which is a party to, and under the application of a double taxation treaty, and the tax administrator is informed of that fact by the competent person of that other country.
4. The scope of income tax of a non-resident of Lithuania shall be:
1) income from individual activities carried out through the fixed base, as well as the income derived in foreign countries, which is attributed to that fixed base in Lithuania where that income is related to the activities of a non-resident of Lithuania through his fixed base in Lithuania;
5. Income sourced in Lithuania and derived by a non-resident of Lithuania otherwise than through the fixed base shall include:
6) income from sports activities, including income directly or indirectly related to those activities, irrespective of whether it is paid directly to a sportsman or any third party acting on behalf of that sportsman;
7) income from performing activities, including income directly or indirectly related to those activities, irrespective of whether it is paid directly to a performing artist or any third party acting on behalf of that performing artist;
6. In the case of the transfer of software, the provisions laid down in subparagraph 4 of paragraph 5 of this Article shall apply, where the transfer concerns not a copyright object, and the following rights are granted in software:
1) the right to reproduce that software in copies with the purpose of distributing them in public or otherwise transferring into ownership, renting or lending, or
Article 6. Rates of Income Tax
2. The 15% rate of income tax shall be applied to the following income:
1) income from distributed profit, provided it is derived from a Lithuanian entity or from entities registered or otherwise organised in foreign countries or zones included on the list approved by the Minister of Finance under the provisions of Article 39 of the Law on Profit Tax, as well as income from interest;
2) income received by mariners enlisted in the crew of a vessel flying the flag of a country other than Lithuania or a Member State of the European Union for work during a voyage as defined in Article 14 of this Law;
3) income derived by sportsmen from sports activities, including income directly or indirectly related to those activities, irrespective of whether it is paid directly to a sportsman or any third party acting on behalf of that sportsman;
4) income derived by performing artists from performing activities, including income directly or indirectly related to those activities, irrespective of whether it is paid directly to a performing artist or any third party acting on behalf of that performing artist;
6) income derived from creative activities under commission contracts (including income derived in exercising individual activities of that nature if, by the decision of an individual, no allowable deductions specified in Article 18 of this Law are made);
7) income derived from the rent of property (including income derived in exercising individual activities of such nature if, by the decision of an individual, no allowable deductions specified in Article 18 of this Law are made);
8) income derived from individual activities not covered by subparagraphs 3 –7 of this paragraph if, by the decision of an individual, no allowable deductions specified in Article 18 of this Law are made;
9) proceeds from the sale or other transfer into ownership of property other than that related to individual activities;
10) the portion of pensions received in any manner provided by the Law of the Republic of Lithuania on Pension Funds (hereinafter referred to as the Law on Pension Funds) where the said portion is equal to pension contributions paid into that fund, including those contributed from the funds of other persons, provided a member of a pension scheme has acquired the right to pensions under the Law on Pension Funds;
11) the portion of benefits under the life insurance contract which provides for an insurance benefit not only upon the occurrence of an insurance event, but also upon the expiry of that insurance contract, where the said portion is equal to the contributions paid under that contract, including those contributed from the funds of other persons, provided the term of the contract is not less than 10 years or an individual receiving a benefit has reached the pensionable age under the provisions of the Law on Pension Funds;
12) repaid life insurance contributions paid by an individual under the terminated life insurance contract which provides for an insurance benefit not only upon the occurrence of an insurance event, but also upon the expiry of the insurance contract, provided the contract is terminated not earlier than 10 years after the date of its conclusion or the contributions are repaid to an individual who has reached the pensionable age under the provisions of the Law on Pension Funds;
13) repaid pension contributions paid by an individual into a pension fund established under the Law of Pension Funds, when a person withdraws from the pension scheme and does not join another pension scheme, provided the withdrawal from the pension scheme occurs not earlier than 10 years after the date of the conclusion of the pension contract or the contributions are repaid to an individual who has reached the pensionable age under the provisions of the Law on Pension Funds.
3. Income not covered by paragraph 2 of this Article shall be subject to the 33% rate of income tax.
Article 7. Tax Period
Article 8. Recognition of Income
2. The moment of the receipt of income, except for positive income, shall be the moment when:
1) income in any form is actually received. If income is received in a foreign country, the total amount of income shall be considered as the income actually received, irrespective of the sum of income tax or equivalent tax withheld from that income and/or paid in that country, or
Article 9. Income in Kind
The procedure for the recognition and evaluation of income in kind shall be established by the Government of the Republic of Lithuania or an institution authorised by it.
Article 10. Income from Individual Activities
1. Income from individual activities shall include income derived from individual activities, including proceeds from the sale or other transfer into ownership of the property related to individual activities.
Article 11. Income Received in the Case of the Liquidation of an Entity
1. In the case of the liquidation of an entity an individual (member of an entity) shall be considered to sell his shares (interests, member shares).
2. Where in the case of the liquidation of an entity property is transferred to its member, income shall be the fair market value of the property, which is transferred to the member of that entity in the case of its liquidation, on the day of the transfer of the right of ownership to that property to the member of that entity.
Article 12. Income from Distributed Profit
Income from distributed profit shall mean:
1) dividends. Dividends shall also include the means received by a member of an entity as a result of the distribution of the profit thereof or the reduction of the authorised capital thereof, and/or the fair market value of the property transferred to a member of an entity on the day of the transfer of the right of ownership to that property to the member of the entity;
Article 13. Assessment of Positive Income
1. Positive income shall be calculated and included in the income of a resident of Lithuania under the same procedure as it is calculated and included in the income of the controlling Lithuanian entity under the provisions of the Law on Profit Tax.
Article 14. Assessment of Income Received by Mariners during a Voyage
Income received by mariners for work during a voyage shall be determined in accordance with the procedure prescribed by the Government of the Republic of Lithuania or an institution authorised by it.
Article 15. Adjustment of the Value of Transactions and Indirect Calculation of Income
1. Any income indirectly transferred to another individual or entity (payer of income/profit tax) by way of increasing or reducing the prices of the goods purchased and/or sold or transferred or in any other way shall be calculated by the tax administrator and considered the income of the individual for the tax period during which transactions specified in paragraph 2 of this Article were concluded between related persons.
2. The tax administrator shall have the right to adjust the prices indicated in a transaction or transactions of related persons where they do not correspond to the fair market value, taking into account the characteristics of the economic operation indicated in those transactions, or to re-qualify income or payments.
3. For the purpose of determining the fair market value, the tax administrator may apply transaction value adjustment methods. Those methods, the procedure for their application, as well as the procedure for identifying adjustable transactions and re-qualifying income or payments shall be established by the Government of the Republic of Lithuania or an institution authorised by it.
Article 16. Procedure for the Calculation of Taxable Income
1. Unless otherwise provided in this Article, for the purpose of calculating taxable income the following shall be deducted from income in accordance with the procedure prescribed by this Law:
3) allowable deductions related to the receipt of income from individual activities, in accordance with the procedure prescribed by Article 18 of this Law;
4) the acquisition price of property other than that related to individual activities that is sold or otherwise transferred into ownership during the tax period, as well as expenses related to the sale or other transfer into ownership of that property, in accordance with the procedure prescribed by Article 19 of this Law;
5) the tax-exempt amount of income and additional tax-exempt amount of income, for the purpose of calculating the monthly taxable income of the tax period, or the annual tax-exempt amount of income and annual additional tax-exempt amount of income, for the purpose of calculating taxable income for the tax period, or any part thereof (in the cases specified in Article 29 of this Law), in accordance with the procedure prescribed by Article 20 of this Law;
2. For the purpose of calculating the taxable income of a non-resident of Lithuania from individual activities through his fixed base, the following shall be deducted from gross income derived through his fixed base:
3. An individual shall have the right to decide not to make those allowable deductions and/or expenses referred to in subparagraph 3 and/or 4 of paragraph 1 of this Article. The individual’s decision whether or not to make the allowable deductions referred to in subparagraph 3 of paragraph 1 of this Article shall apply to his income derived from all types of individual activities.
Article 17. Tax-exempt Income
1. The following income shall be exempt from tax:
1) benefits paid on the death of an individual by a person who was connected with the individual through employment relations or corresponding relations to his spouse, children (adopted children) or parents (adoptive parents), as well as benefits paid by a person connected with the individual through employment relations or corresponding relations on the death of that individual’s spouse, children (adopted children), parents (adoptive parents);
2) benefits paid from the state and municipal budgets and the budget of the state social insurance fund, with the exception of sickness benefits, maternity and maternity/paternity allowances;
3) benefits by non-profit entities to their members paid out from the funds accumulated from membership fees, with the exception of benefits that are paid to individuals connected with those entities through employment relations or corresponding relations and that are not indicated in the other subparagraphs of this paragraph;
4) benefits paid in cases of natural disasters, provided they are paid out based on the decisions of state or municipal institutions;
5) compensations of the amounts set forth by laws and other legal acts of the Republic of Lithuania, as well as compensations the amounts whereof are not set forth, but the payment whereof is regulated by laws of the Republic of Lithuania and resolutions of the Government of the Republic of Lithuania, including compensations for the infringement of copyright or neighbouring rights, but excluding compensations paid to an individual when the employment contract or the corresponding contract is terminated on the will of the employer, and monetary compensations for unused holiday;
6) compensations paid for damages or losses incurred due to war actions or previous political persecution;
8) benefits under life insurance contracts the term whereof is not less than 10 years and which were concluded before 1 January 2003, as well as benefits under life insurance contracts which provide for an insurance benefit only upon the occurrence of an insurance event;
9) the portion of pensions received from a pension fund established in the Republic of Lithuania in excess of pension contributions paid into that fund, provided the term of the pension contract is not less than 10 years or a member of a pension scheme has acquired the right to pensions under the Law on Pension Funds;
10) the portion of life insurance benefits in excess of life insurance contributions paid under life insurance contracts which provide for an insurance benefit not only upon the occurrence of an insurance event, but also upon the expiry of the insurance contract, provided the term of the life insurance contract is not less than 10 years or a recipient of a benefit at the moment of the receipt of that benefit has reached the pensionable age under the provisions of the Law on Pension Funds;
11) pensions received from the state budget of the Republic of Lithuania, municipal budgets and the budget of the state social insurance fund, as well as from foreign state funds;
13) interest received on the loans granted (except for loans granted by a member of an entity to that entity or by an individual to a person connected with the individual through employment relations or corresponding relations if the entity or the person connected with the individual though employment relations or corresponding relations pays interest on those loans to the member of the entity or the individual which exceeds the fair market value), if the repayment of the loans commences not earlier than 366 days after the date of the granting of the loan;
14) interest on securities (except for securities issued by a person connected with an individual through employment relations or corresponding relations, if the person connected with the individual through employment relations or corresponding relations pays to the individual higher interest on those securities than to the other holders of the same securities), if the redemption of those securities commences not earlier than 366 days after the date of the issue of those securities;
15) interest paid to individuals participating in the saving program proposed by the Government of the Republic of Lithuania;
17) interest on deposits held in banking and other credit institutions licensed by the Bank of Lithuania;
18) income received as charity in accordance with the procedure prescribed by the Law of the Republic of Lithuania on Charity and Sponsorship (hereinafter referred to as the Law on Charity and Sponsorship);
19) income received by inheritance, which is subject to tax under legal acts of the Republic of Lithuania on estate tax; income received by gift from spouses, children (adopted children) and parents (adoptive parents); as well as the sum (value) of income received by gift from other individuals during the tax period, which shall not exceed 24 basic TEA;
20) income from the sale or other transfer into ownership of property other than that related to individual activities, which is derived from the sale or other transfer into ownership of property not indicated in subparagraphs 21 and 23 of this paragraph, and the difference between the acquisition price of that property and other expenses referred to in Article 19 of this Law, which are related to the sale or other transfer into ownership of that property, which shall not exceed 24 basic TEA during the tax period;
21) income from the sale or other transfer into ownership of property other than that related to individual activities, which is derived from the sale or other transfer into ownership of movable property that is legally registered in the Republic of Lithuania, or immovable property that is located in Lithuania, if the property was acquired more than three years prior to its sale or other transfer into ownership;
22) income from the sale or other transfer into ownership of securities acquired prior to 1 January 1999. The said relief shall not apply when securities are considered sold under Article 11 of this Law;
23) income from the sale or other transfer into ownership of securities acquired after 1 January 1999, if the securities are sold or otherwise transferred into ownership not earlier than 366 days after the date of their acquisition (in every case of selling a part of securities of the same type and class issued by the same issuer, the securities acquired first shall be considered to be first sold or otherwise transferred into ownership) and an individual was not the owner of more than 10% of the shares (interests, member shares) of the entity, the securities whereof are sold or otherwise transferred into ownership, for 3 years preceding the end of the tax period during which those securities were sold or otherwise transferred into ownership. The said relief shall not apply where the shareholder sells the shares or otherwise transfers them into ownership to the issuer of those shares, as well as where securities are considered sold under Article 11 of this Law;
24) proceeds from the sale of agricultural produce, which is produced, as well as produced and processed on the land owned, held on lease by an individual or granted to an individual in accordance with the procedure prescribed by legal acts of the Republic of Lithuania;
25) income derived by a farmer and members of the farm from agricultural activities carried out on the farmer’s farm registered in accordance with the procedure prescribed by the Law of the Republic of Lithuania on the Farmer’s Farm (hereinafter referred to as the Law on the Farmer’s Farm);
26) amounts awarded by court and recovered under executive documents as indemnity for material and moral damage, as well as reimbursement of expenses related to social, medical and professional rehabilitation under the provisions of the Law of the Republic of Lithuania on Safety and Health at Work;
28) scholarships and benefits to students and pupils of educational establishments financed from the funds of the state budget of the Republic of Lithuania and municipal budgets;
29) scholarships to students and pupils of educational establishments financed from the funds of non-profit entities established in accordance with the procedure prescribed by laws of the Republic of Lithuania and foreign countries, provided the payment of scholarships is provided in legal acts regulating activities of those entities and a recipient of a scholarship is not a member, employee of the entity paying the scholarship or a member of the family of a member or employee of that entity, as well as provided that scholarship is not related to the work carried out or intended to be carried out, or the services provided or intended to be provided for those entities by a recipient of that scholarship;
31) prizes awarded by competition from the state budget of the Republic of Lithuania or municipal budgets, from budgets of a foreign country, its political or territorial administrative unit or local authorities, as well as prizes awarded by decisions of the Government of the Republic of Lithuania or municipal councils, and prizes to winners of professional art competitions awarded by decisions of art creators’ organisations from the funds of those organisations;
32) prizes of sports competitions, if such prizes are established and awarded by Olympic (Paralympic) committees, international sports federations (unions, associations) or members of those federations (unions, associations), Lithuanian sports federations (unions, associations), as well as individual gifts granted in accordance with the procedure prescribed by laws of the Republic of Lithuanian;
33) lottery winnings, provided they are paid out by entities subject to lottery turnover tax in accordance with the procedure prescribed by laws of the Republic of Lithuania;
34) the amount of prizes received during the tax period from a person connected to an individual through employment relations or corresponding relations, which shall not exceed 2 basic TEA;
35) prizes of sports competitions, other prizes and winnings not specified in subparagraphs 32 and 33 of this paragraph that are not in excess of 2 basic TEA, provided they are received from the same person not more than 6 times during the tax period;
36) donations and gifts received during the political campaign and used for that campaign in accordance with the procedure prescribed by legal acts of the Republic of Lithuania;
37) funds for the maintenance of the clergy, attendants at religious ceremonies and support staff (except for persons carrying out construction, repair and restoration works) of religious communities, denominations and centres (higher church authorities);
38) interest on a commercial loan provided for by legal acts of the Republic of Lithuania on payments for agricultural produce;
39) income of a member of a non-limited civil liability entity derived from the taxable profit of that entity, which shall not exceed 12 basic TEA during the tax period;
40) income received by mariners enlisted in the crew of a vessel flying the flag of Lithuania or a Member State of the European Union for work during a voyage, as defined in Article 14 of this Law;
41) life insurance contributions and pension contributions to a personal account of pension schemes in a pension fund established in the Republic of Lithuania, which are paid by an employer for the benefit of an employee under the provisions of Article 26 of the Law on Profit Tax;
2. The reliefs laid down in subparagraphs 7, 8, 10, 11, 12, 13, 14, 20, 21, 22, 23, 24, 27, 29, 31, 34, 35, 37 and 39 of paragraph 1 of this Article, as well as the relief to income received by gift from persons other than a spouse, children (adopted children) and parents (adoptive parents) laid down in subparagraph 19 shall not apply if the respective income of an individual is received from foreign entities registered or otherwise organised in target territories, or from individuals whose permanent place of residence is in a target territory.
Article 18. Allowable Deductions Related to the Receipt of Income from Individual Activities
1. Unless otherwise provided by this Article, allowable deductions of a resident of Lithuania engaged in individual activities shall be the expenses incurred by such a resident of Lithuania in the normal course of business and related to the income from individual activities actually received during the tax period. Allowable deductions related to the receipt of income of a resident of Lithuania from individual activities and the procedure for the calculation thereof shall be established by the Government of the Republic of Lithuanian or an institution authorised by it.
2. Unless otherwise provided by this Article, allowable deductions of a non-resident of Lithuania engaged in individual activities through the fixed base shall be the expenses incurred by such a non-resident of Lithuania in the normal course of business and related to the income from individual activities actually received during the tax period. Allowable deductions related to the receipt of income of a non-resident of Lithuania from individual activities through the fixed base and the procedure for the calculation thereof shall be established by the Government of the Republic of Lithuanian or an institution authorised by it.
3. Where an individual is engaged in several obviously different types of individual activities, allowable deductions related to the receipt of income from such activities shall be made separately with respect to income from each type of individual activities in accordance with the procedure prescribed by this Law.
4. The amount of allowable deductions shall not exceed the income actually received from individual activities during that tax period.
5. Expenses shall be supported with documents bearing all the obligatory particulars of accounting documents required by the Law of the Republic of Lithuania on Accounting and other legal acts of the Republic of Lithuania, and satisfying the established requirements where appropriate requirements with respect to the forms of documents are established by the Government of the Republic of Lithuania. In addition to the said particulars, the documents supporting the expenses shall indicate:
1) name, surname and personal number of a supplier of goods or services (where a supplier of goods or services is a natural person);
6. In the case of the acquisition of goods and services from foreign entities or individuals, expenses may be supported with the documents issued by foreign entities or individuals where those documents allow identifying the contents of the economic transaction.
Article 19. Acquisition Price of Property other than that Related to Individual Activities that is Sold or Otherwise Transferred into Ownership, as well as the Related Expenses Incurred by the Sale or Other Transfer into Ownership of that Property
1. Upon the sale or other transfer into ownership of property other than that related to individual activities, the following may be deducted from the income received in accordance with the provisions of this Article:
2. The acquisition price of property shall include the expenses incurred in the acquisition of the property, including the commissions paid and taxes, dues related to the acquisition of that property, as well as the expenses on the renovation of the property conducted at own or spouse’s expense (including the repaid amount of the funds borrowed for that purpose). Where the property is manufactured by an individual himself, the acquisition price of the property shall comprise all the expenses on the manufacture and renovation of that property (including the repaid amount of the funds borrowed for that purpose).
3. Allowable deductions include only the amounts supported with documents bearing all the obligatory particulars of accounting documents required by the Law of the Republic of Lithuania on Accounting and other legal acts, and satisfying the established requirements where appropriate requirements with respect to the forms of documents are established by the Government of the Republic of Lithuania, and/or with valid transactions, and/or with documents issued by foreign entities and individuals where those documents allow identifying the contents of the economic transaction. The payment of taxes and dues must be supported with respective documents confirming the payment of those amounts.
4. In the case specified in Article 11 of this Law, the acquisition price of the sold shares (interests, member shares) shall be equal to:
1) the value of total contributions made by an individual to the capital of an entity for the shares (interests, member shares) sold in the case specified in Article 11 of this Law. The value of contributions shall be equal to their value at the moment of contribution, including the increase of the value of the property (where contributions were made in kind) as a result of the indexation or revaluation of the property, if the entity was obligated to conduct it by legal acts of the Republic of Lithuania, and/or
5. When an individual sells or otherwise transfers into ownership the shares (interests, member shares) received in the cases specified in Article 2 (14) (7) and (8) of this Law in exchange for the shares (interests, member shares) of the acquired entity, the acquisition price of the shares (interests, member shares) sold or otherwise transferred into ownership shall be equal to the acquisition price of the shares (interests, member shares) held in the acquired entity, immediately preceding the transfer of those shares (interests, member shares) by exchange.
Article 20. Tax-exempt Amount of Income and Additional Tax-exempt Amount of Income
1. The basic tax-exempt amount of income (hereinafter referred to as the basic TEA) shall be LTL 290 per month.
2. Individual tax-exempt amounts of income shall be applied to the following residents of Lithuania (where a resident satisfies more than one criteria set in subparagraphs 1 – 3, the highest individual TEA shall apply):
3. The basic TEA shall be indexed at the close of the tax period by applying the annual consumer price index, if the latter is higher than 1. The indexed basic TEA shall be applied to the income received from the first day of the third month of the current tax period. Information on the indexed basic TEA shall be released by the Minister of Finance.
4.The basic TEA shall be applied for calculating the taxable income of residents of Lithuania. When calculating the taxable income of non-residents of Lithuania, the basic TEA shall be applied only to the income connected with employment relations or corresponding relations, where such income is received from a source in Lithuania.
5. During the tax period TEA shall be applied when an individual submits a free-form request at one place of the receipt of the income connected with employment relations or corresponding relations.
6. The additional tax-exempt amount (hereinafter referred to as the ATEA), which is equal to 0.1 of the basic TEA, shall be applied to residents of Lithuania (parents or adoptive parents) raising one or two children (adopted children) under 18 years of age in respect of each child (adopted child).
7. During the tax period the ATEA shall be applied at the place of the receipt of the income connected with employment relations or corresponding relations, where the basic TEA is applied, by dividing the amount of the ATEA equally between the parents (adoptive parents). If an individual raises children (adopted children) alone, the whole ATEA shall be applied to such an individual.
8. Where the income connected with employment relations or corresponding relations is received for a period exceeding one month of the tax period, the income connected with employment relations or corresponding relations shall be calculated separately for each month of the tax period, for which that income was calculated to be paid, by applying the basic TEA effective in that month of the tax period and the ATEA calculated on the basis of that basic TEA.
9. When the right to individual TEA, ATEA or higher ATEA rises or expires, those amounts shall apply or cease to apply to the income received in the month following that during which the right arose or expired.
10. The annual tax-exempt amount of income (hereinafter – ANTEA) shall be established by summing up the amounts of the TEA in respective months of the tax period applicable to that individual under the provisions of this Article and the amounts of the basic TEA in respective months of the tax period applicable to his spouse under the provisions of this Article that have not been applied by calculating the taxable income of that spouse, and shall be jointly deducted from the total income for the tax period when calculating the taxable income for the tax period. In the cases specified in Article 29 of this Law, the part of the ANTEA calculated in accordance with the procedure prescribed by that Article shall be deducted from income.
11. The annual additional tax-exempt amount of income (hereinafter referred to as ANATEA) shall be established by summing up the amounts of the ATEA in respective months of the tax period applicable to the parents (adoptive parents) under the provisions of this Article and shall be jointly deducted from the total income of the parents (adoptive parents) for the taxable period when calculating the taxable income for the tax period. The ANATEA shall be applied to each of the parents (adoptive parents) according to the proportion chosen by them. In the cases specified in Article 29 of this Law, the part of the ANATEA calculated in accordance with the procedure prescribed by that Article shall be deducted from income.
Article 21. Deductible Expenses Incurred by an Individual
1. The following expenses incurred by a resident of Lithuania during the tax period may be deducted from his income:
1) life insurance contributions paid for his own benefit or for the benefit of his spouse or minor children (adopted children) under life insurance contracts which provide for an insurance benefit not only upon the occurrence of an insurance event, but also upon the expiry of the term of the insurance contract;
2) pension contributions paid for his own benefit or for the benefit of his spouse to pension funds established in the Republic of Lithuania;
3) interest paid on the loan taken out for the construction or acquisition of housing to banking and other credit institutions, or funds and state financial institutions of foreign countries entered into the list by the Minister of Finance, where over 50% of shares (interests, member shares) are held by governments of foreign countries, as well as interest paid to a financial institution on the financial lease (leasing) of housing;
4) payments for studies (when higher education and/or qualification is obtained upon graduation, as well as doctoral studies and art post-graduate studies) made by studying residents of Lithuania. If payments for studies are made with borrowed funds (a loan is taken out from a credit institution for that purpose), the repaid amount of the loan during the tax period may be deducted from income.
2. Where a studying resident of Lithuania under 26 years of age is not a payer of income tax or has no possibility to exercise his right to deduct payments for studies specified in subparagraph 4 of paragraph 1 of this Article from his income, those expenses may be deducted by one of his parents (adoptive parents) or guardians from their income under the provisions of the said paragraph.
3. The total amount of deducted expenses specified in paragraph 1 of this Article shall not exceed 25 percent of the amount calculated by deducting the sums specified in subparagraphs 1 – 5 of Article 16 (1) of this Law from the total income derived in the tax period.
4. Expenses shall be deducted only from income of a resident of Lithuania when calculating income tax for the tax period and filing an annual income tax return.
5. The provisions of paragraph 1 of this Article shall not apply if a resident of Lithuania makes respective payments to foreign entities registered or otherwise organised in target territories; to contributions paid by a resident of Lithuania to acquire pension annuities; as well as to residents of Lithuania referred to in Article 4 (3) of this Law.
Article 22. Classification of Income according to the Procedure for Tax Payment
1. According to the procedure for tax payment, income of an individual (including income that is exempt from tax under the provisions of this Law) shall be divided into two categories: A and B.
2. Income in category A shall include:
1) income derived from a Lithuanian entity, a foreign entity through its permanent establishment, as well as from a non-resident of Lithuania through his fixed base, with the exception of gambling and lottery winnings and income from individual activities not indicated in this subparagraph, as well as income from the sale or other transfer into ownership of property other than that related to individual activities not indicated in this subparagraph. Income from sports activities, performing activities derived from a Lithuanian entity, a foreign entity through its permanent establishment and a non-resident of Lithuania through his fixed base, as well as income from the sale or other transfer into ownership of property other than that related to individual activities, derived from the sale or other transfer into ownership of movable property if that type of property is subject to legal registration under legal acts of the Republic of Lithuania and is (or must be) registered in Lithuania, or immovable property located in Lithuania, shall also be attributed to income in category A, and
Article 23. Procedure for Calculation, Withholding and Payment of Income Tax Charged in Respect of Category A Income
1. In paying out amounts attributable to category A income of an individual under the procedure for tax payment, a resident of Lithuania, a Lithuanian entity, a permanent establishment or a non-resident of Lithuania engaged in individual activities through his fixed base, in the capacity of tax withholders, must calculate, withhold and pay into the budget income tax established by this Law, where those payments are not attributed to tax-exempt income under the provisions of this Law. If payments connected with employment relations or corresponding relations for the respective month of the tax period are paid out in instalments, income tax shall be withheld when the last instalment of payment is made (on the total amount of the instalments paid out for that month). If the last instalment of payment for the respective month of the tax period is not made within 10 days after the end of that month, income tax shall be calculated on the sum of the instalments paid out in that month.
2. When an individual files a free-form request with the tax withholder for the application of the basic TEA, the basic TEA applicable to him shall be deducted when calculating taxable income.
3. A resident of Lithuania, a Lithuanian entity, a permanent establishment or a non-resident of Lithuania engaged in individual activities through his fixed base, in the capacity of tax withholders, must pay into the budget the amount of income tax withheld from payments attributable to category A income of an individual under the procedure for tax payment not later than the following working day after the day when the said payments were made. If a tax withholder makes payments connected with employment relations or corresponding relations for the respective month of the tax period in instalments, he must pay the amount of income tax withheld in accordance with the procedure prescribed by paragraph 1 of this Article into the budget not later than the following working day after the day when the last instalment of payment was made. If the last instalment for the respective month of the tax period is not paid out within 10 days after the end of that month, income tax shall be considered to have been withheld and paid not later than the following working day after the day when the last instalment for that month was paid out.
Article 24. Returns of Income Tax Withheld from Category A Income
1. A tax withholder who during the tax period makes payments which under the procedure for tax payment are attributable to category A income of an individual must declare the payments made, as well as the amount of income tax withheld and paid by filing tax returns.
2. Returns of the income tax withheld from category A income shall be quarterly. A quarterly tax return that is used to declare the amount of the payments paid out to every individual in that calendar quarter, as we as the amount of income tax withheld and paid shall be filed for every quarter of the tax period by the 25th day of the first month of the following quarter.
Article 25. Procedure for Declaration, Calculation and Payment of Income Tax in Respect of Category B Income of a Resident of Lithuania
1. Income tax on income attributable to category B income under the procedure for tax payment shall be declared, calculated and paid by a resident of Lithuania himself or his authorised person in accordance with the procedure prescribed by this Law.
Article 26. Payment of the Fixed Income Tax in Respect of Income Derived from Activities Conducted under a Business Certificate, and the Procedure for the Issue of a Business Certificate
Income tax of the fixed amount shall be paid into the budget prior to the issue of a business certificate. The procedure for the issue of a business certificate shall be established by the Government of the Republic of Lithuania.
Article 27. Calculation, Declaration and Payment of Income Tax in Respect of Income Derived during the Tax Period, Refund of Overpaid Amounts and Submission of an Annual Income Tax Return
1. Unless otherwise provided by this Article, a resident of Lithuania who during the tax period has derived income that in accordance with the procedure for tax payment is attributable to income in both categories A and B must, at the close of the tax period, before 1 May of the calendar year following that tax period (unless otherwise provided by Article 28 of this Law), himself or through his authorised person file his annual income tax return with the tax administrator for the previous tax period and declare therein all the income derived during the previous tax period and income tax calculated thereon.
2. If during the tax period a resident of Lithuania has derived income subject to different rates of income tax under Article 6 of this Law, the following rates shall apply in calculating income tax:
1) the 15% rate shall apply to that share of the taxable income, which is proportionate to the share of the income subject to that rate under Article 6 of this Law in all the income of a resident of Lithuania during the tax period, after deducting from it the amounts of the income specified in subparagraphs 1 and 2 of Article 16 (1) of this Law;
3. Unless otherwise provided by this Article, the right to file no annual income tax return shall be enjoyed by a resident of Lithuania who:
1) does not intend to use the right of deducting from his income the ANTEA or ANATEA and/or expenses specified in Article 21 (1) of this Law, and
4. A farmer and members of the farm who have derived income during the tax period from agricultural activities carried out on the farmer’s farm registered in accordance with the procedure prescribed by the Law on the Farmer’s Farm must file an annual income tax return, irrespective of the exceptions specified in paragraph 3 of this Article.
5. A resident of Lithuania who during the tax period has derived income from the activities for which he held (a) business certificate(s) must file an annual income tax return.
6. The form of an income tax return, as well as the procedure for completing and filing thereof shall be established by the central tax administrator upon agreement with the Minister of Finance.
7. A resident of Lithuania who under this Article has an obligation to file an annual income tax return must pay into the budget the difference of income tax between the amounts of income tax calculated in his annual income tax return for the tax period and of income tax paid (withheld) during the tax period before the deadline for the submission of an annual income tax return set in this Article.
8. A resident of Lithuania who during the tax period has derived positive income shall, together with his annual income tax return, file with the central tax administrator an annex of the established form, which shall contain information on the shares (interests, member shares) of controlled units under direct or indirect control or other rights to a share of distributable profit or pre-emptive rights to the acquisition thereof, as well as:
9. If overpayment of income tax is calculated in the annual income tax return filed by a resident of Lithuania, it may be credited against tax or refunded in accordance with the procedure prescribed by the Law on Tax Administration, provided the tax on the total category A income derived by a resident during that tax period was withheld and paid into the budget. If income tax was not withheld and/or paid, the part of the overpaid income tax calculated in the annual income tax return, which is equal to the amount of income tax that is not withheld from and/or paid on category A income derived by a resident, may not be credited against tax or refunded until the amount of income tax that was not withheld from and/or paid on category A income derived by a resident is paid into the budget.
Article 28. Declaration and Payment of Income Tax by a Natural Person who has become a Resident of Lithuania in Respect of Income Received during the Tax Period
If a natural person has become a resident of Lithuania under the provisions of subparagraph 4 of Article 4 (1) of this Law, an annual income tax return for the calendar year during which he arrived to Lithuania must be filed and income tax paid not later than by 31 December of the calendar year following the calendar year of his arrival.
Article 29. Declaration and Payment of Income Tax by a Natural Person Departing from Lithuania Permanently in Respect of Income Derived during the Tax Period of Departure
1. With the exception of the case specified in paragraph 2 of this Article, a resident of Lithuania departing from Lithuania permanently must prior to his departure file an income tax return of a natural person departing from Lithuania permanently, as well as calculate and declare the income derived during that tax period before the date of departure and pay income tax before the date of departure. Such a resident of Lithuania must also file an annual income tax return and pay income tax in accordance with the procedure prescribed by this Law, unless otherwise provided by this Article.
2. A natural person considered a resident of Lithuania under Article 4 (3) of this Law, departing from Lithuania permanently, must prior to his departure file an income tax return of a natural person departing from Lithuania permanently, as well as calculate and declare the income derived during that tax period before the date of departure and pay income tax before the date of departure.
Article 30. Procedure for Calculation, Declaration and Payment of Income Tax by a Non-resident of Lithuania on Income Derived from Individual Activities through the Fixed Base. Income Tax Return of a Non-resident of Lithuania on Income Derived from Individual Activities through the Fixed Base
1. A non-resident of Lithuania who during the tax period has derived income from individual activities through the fixed base must, at the close of the tax period, before 1 May of the calendar year following that tax period, file his annual income tax return and declare therein all the income derived during that tax period from individual activities through the fixed base and the amount of income tax calculated thereon in accordance with the procedure prescribed by this Law.
2. Income tax on the income derived by a non-resident of Lithuania from individual activities through the fixed base during the tax period, which is calculated in the annual income tax return on the income from individual activities through the fixed base shall be paid into the budget before the deadline set in this Article for the submission of an annual income tax return on the income from individual activities through the fixed base.
3. Where a non-resident of Lithuania derives through the fixed base income related to such activities and attributed under this Law to category A income, the income tax payable under the annual income tax return on income from individual activities through the fixed base shall be reduced by the amount of income tax withheld from and paid on that category A income.
5. Forms of income tax returns of a non-resident of Lithuania on the income from individual activities through the fixed base, as well as the procedure for completing and filing thereof shall be established by the central tax administrator upon agreement with the Minister of Finance.
Article 31. Procedure for Calculation, Declaration and Payment of Income Tax by a Non-resident of Lithuania in Respect of Category B Income not Specified in Article 30 of this Law. Income Tax Return of a Non-resident of Lithuania in Respect of Category B Income not Specified in Article 30 of this Law
1. A non-resident of Lithuania who during the tax period has derived any income attributed to category B income not specified in Article 30 of this Law must calculate income tax on that income and pay it into the budget, as well as file the relating income tax return not later than within 25 days after the receipt of that income.
Article 32. Adjustment of Income Tax on Certain Income from the Sale of Property
1. A person who has derived income from Lithuanian entities, foreign entities through their permanent establishments or non-residents of Lithuania through their fixed bases from the sale or other transfer into ownership of movable property if that type of property is subject to legal registration under legal acts of the Republic of Lithuania and is (or must be) registered in Lithuania, or immovable property located in Lithuania, from which income tax has been withheld in accordance with the procedure prescribed by Article 23 of this Law, shall have the right to apply to the tax administrator for the adjustment of income tax on the property sold, i.e. to have income tax adjusted by deducting the expenses specified in Article 19 of this Law from the proceeds derived.
2. The tax administrator shall adjust income tax only where supporting documents conforming to the requirements laid down in Article 19 of this Law are produced in respect of such expenses.
3. Applications for the adjustment of income tax shall be filed in accordance with the procedure established by the central tax administrator and agreed with the Minister of Finance.
Article 33. Obligations of a Lithuanian Entity, Permanent Establishment and Individual Making Payments
1. In making payments, which under the procedure for tax payment are attributed to category A income of individuals, to individuals, a resident of Lithuania, a non-resident of Lithuania through the fixed base, as well as a Lithuanian entity or a foreign entity through the permanent establishment shall, upon a request of an individual to whom the payment is made, issue statements which shall specify the payment calculated and paid out, the TEA applied, as well as the sum of income tax withheld and paid. If a resident is made payments by a foreign entity through its permanent establishment, those statements shall be issued to that resident of Lithuania by a person authorised by the foreign entity. If a resident is made payments by a non-resident of Lithuania through his fixed base, those statements may be issued to the resident of Lithuania by that non-resident of Lithuania or a person authorised by him. Statements shall be issued within 10 working days from the date of the request.
2. In making payments, which under the procedure for tax payment are attributed to category B income, to individuals during the tax period, a Lithuanian entity, a foreign entity through its permanent establishment or a non-resident of Lithuania through his fixed base must, by 1 February of the calendar year following that tax period, submit to the tax administrator statements on such payments made to individuals. If an individual is made payments by a foreign entity through its permanent establishment, those statements shall be submitted to the tax administrator by a person authorised by the foreign entity. If an individual is made payments by a non-resident of Lithuania through his fixed base, those statements shall be submitted by that non-resident of Lithuania or a person authorised by him.
Article 34. Obligations of the Tax Administrator
1. The tax return forms and methodological instructions for completing thereof shall be issued to individuals and tax withholders free of charge.
2. Upon a request of an individual, the tax administrator must, within 10 working days from the submission of the request, issue statements specifying the income derived by an individual in Lithuania and the amount of income tax paid, or certify the statements issued by persons making payments in accordance with the procedure established in this Law. In the event of verification, a statement shall be issued no later than within 10 days after the completion of the verification. The procedure for the issue of statements or for the approval of statements issued by persons making payments shall be established by the central tax administrator.
3. Upon a request of a resident of Lithuania, the tax administrator must, at the close of the tax period and in accordance with the procedure established by the Government or an institution authorised by it, transfer up to 2% of the amount of income tax paid on the income of the said resident of Lithuania for the respective tax period to Lithuanian entities which, in accordance with the Law on Charity and Sponsorship, are entitled to support.
Article 35. Obligations of a Taxpayer
1. A resident of Lithuania who exercised his right to deduct from his income expenses specified in Article 21 of this Law must keep the original documents supporting payment or copies thereof certified in accordance with the procedure established for notary actions for a period not less 10 years after the filing of the annual income tax return for the respective tax period.
Article 36. Liability
1. If an individual fails to meet the requirements for filing a request for the application of TEA as set in Article 20 (5) of this Law and that resulted in the underpaid income tax, the liability for that breach shall lie with the individual in accordance with the procedure prescribed by laws and other legal acts of the Republic of Lithuania.
Article 37. Deductions of Income Tax paid in Foreign Countries
1. A resident of Lithuania may deduct the amount of income tax or equivalent tax paid in a foreign country on the income derived in that country during that tax period from the amount of income tax calculated in accordance with the procedure prescribed by this Law, if a double taxation avoidance treaty is concluded with that country and applied or if that country is entered into the list approved by the Minister of Finance.
2. A resident of Lithuania shall have the right to reduce income tax on his positive income payable into the budget and computed in accordance with this Law by the amount of the tax on the positive income of a controlled foreign entity included into the income of the resident of Lithuania, which was paid in a foreign country with which the Republic of Lithuania has concluded a double taxation avoidance treaty and under the relevant law whereof the positive income of the controlled foreign entity is included into the income of the entity of that country and taxed following analogous regulations laid down in the Law on Profit Tax.
3. If the amount of income tax calculated on the income derived in a foreign country in accordance with the procedure prescribed by this Law is lower than the amount of income tax or equivalent tax paid on that income in that foreign country, only the amount of income tax calculated in accordance with the procedure prescribed by this Law shall be deducted.
4. If a resident of Lithuania derives during the tax period income in several foreign countries, the amount of income tax to be deducted shall be calculated in respect of every country where the income was derived.
5. Deductions from the calculated amount of income tax in accordance with the procedure established in this Article shall be allowed only where documents certified by the tax administrator of a foreign country have been filed concerning the income derived in that country during the tax period as well as the amount of income tax or equivalent tax calculated and paid on that income.
Article 38. Inclusion of Income Tax
1. Before 31 December 2003 (inclusive), the income tax paid by, and any tax underpayment made/recovered by a resident of Lithuania, as well as the income tax withheld and paid by a tax withholder under this Law on payments made to the resident of Lithuania and any tax underpayment made/recovered, where the above amounts are to be allocated to municipal budgets under legal acts of the Republic of Lithuania, shall be included therein in accordance with the following procedure:
1) the income tax paid by, and any tax underpayment made/recovered by a resident of Lithuania shall be entered into the budget of the municipality in the territory whereof the said resident has his permanent place of residence;
2) the income tax withheld and paid by a tax withholder, as well as any tax underpayment made/recovered shall be entered into the budget of the municipality in the territory whereof the said tax withholder is/must be registered or resides;
3) where a Lithuanian entity has subdivisions in the territories of other municipalities, the income tax withheld from and paid on the income connected with employment relations or equivalent income derived by residents of Lithuania working in those subdivisions shall, in accordance with the data provided in the return of the tax withholder, be transferred by the tax administrator to the budget of the municipality in the territory whereof the said subdivisions are located.
2. From 1 January 2004 (inclusive), the income tax paid by, and any tax underpayment made/recovered by a resident of Lithuania, as well as the income tax withheld and paid by a tax withholder under this Law on payments made to the resident of Lithuania and any tax underpayment made/recovered, where the above amounts are to be allocated to municipal budgets under legal acts of the Republic of Lithuania, shall be included therein in accordance with the following procedure:
1) the income tax paid by, and any tax underpayment made/recovered by a resident of Lithuania shall be entered into the budget of the municipality in the territory whereof the said resident has his permanent place of residence;
2) the income tax withheld and paid by a tax withholder shall be entered into the budget of the municipality in the territory whereof the said resident of Lithuania has his permanent place of residence (in accordance with the data provided in the returns of the tax withholder);
3. The income tax paid by, and any tax underpayment made/recovered by a non-resident of Lithuania, as well as the income tax withheld and paid by a tax withholder under this Law on payments made to the non-resident of Lithuania and any tax underpayment made/recovered, where the above amounts are to be allocated to municipal budgets under legal acts of the Republic of Lithuania, shall be included therein in accordance with the following procedure:
1) the income tax paid by, and any tax underpayment made/recovered by a non-resident of Lithuania shall be entered into the budget of the municipality in the territory whereof he resides, or into the budget of the municipality in the territory whereof activities are carried out if he has no place of residence in Lithuania;
2) the income tax withheld and paid by a tax withholder on payments made to the non-resident of Lithuania as well as any tax underpayment made/recovered shall be entered into the budget of the municipality in the territory whereof the said non-resident resides, or into the budget of the municipality in the territory whereof the said tax withholder is/must be registered or resides if the non-resident of Lithuania has no place of residence or activities.
4. The income tax paid by, and any tax underpayment made/recovered by a non-resident of Lithuania, which cannot be entered into the budget of the respective municipality in accordance with the provisions of paragraph 3 of this Article, shall be entered into the State budget.
5. Any individual income tax paid or tax underpayment made following the entry into force of this Law, where the above amounts are to be allocated to municipal budgets under legal acts of the Republic of Lithuania, with the exception of individual income tax underpayments paid by unlimited civil liability entities as entities, shall be entered in accordance with the procedure prescribed by paragraphs 1, 3 and 4 of this Article.
Article 39. Application of the Law and Proposals to the Government
2. The provisions laid down in subparagraph 7 of Article 2 (14) of this Law concerning the difference in the prices of shares paid in cash shall apply from 1 January 2004.
3. The Government of the Republic of Lithuania or an institution authorised by it, as well as the central tax administrator shall draft and approve all the legal acts necessary for the implementation of this Law not later than 3 months prior to the entry into force of this Law.
4. From 1 January 2003, the following shall be repealed:
2) Law of the Republic of Lithuania on the Extension of the Validity of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
3) Law of the Republic of Lithuania on the Extension of the Validity of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
4) Article 2 of the Law of the Republic of Lithuania Supplementing Tax Laws of the Republic of Lithuania;
5) Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
6) Resolution of the Supreme Council of the Republic of Lithuania on the Application of the First Paragraph of the Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
7) Resolution of the Supreme Council of the Republic of Lithuania on the Procedure for the Entry into Force of Article 10 of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
8) Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Law of the Republic of Lithuania Amending Article 5 of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
9) Resolution of the Supreme Council of the Republic of Lithuania Amending Paragraph 8 of the Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
10) Resolution of the Supreme Council of the Republic of Lithuania on the Minimum Standard of Living and the Minimum Exempt from Income Tax of Natural Persons;
11) Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Law of the Republic of Lithuania Amending and Supplementing the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
12) Resolution of the Supreme Council of the Republic of Lithuania on the Entry into Force of the Law of the Republic of Lithuania Amending and Supplementing the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
13) Resolution of the Seimas of the Republic of Lithuania on the Application of the Law of the Republic of Lithuania Amending and Supplementing the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons;
14) Resolution of the Seimas of the Republic of Lithuania on the Procedure for the Implementation of the Law of the Republic of Lithuania Amending the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons.
I hereby promulgate this Law enacted by the Seimas of the Republic of Lithuania.