Restriction on losses carried forward
According to the recent amendments of the Corporate Income Tax Law (hereinafter – CIT Law), the amount of losses carried forward cannot exceed 70% of entity’s income received during a fiscal year calculated deducting non-taxable income, deductible expenses and deductible expenses of limited amounts save for losses of the previous fiscal periods.
The said restriction is not applicable to legal entities that are entitled to apply reduced corporate tax rate of 5%.
Investment income of insurance companies shall be subject to tax
Investment income of non-life insurance companies shall be subject to corporate tax. Exception applies to investment income of life insurance companies save for dividends and other distributable profits.
Prolongation of the investment incentive
The investment incentive was prolonged for additional 5 years, i.e. taxable profit may be reduced up to 50% by investment expenses incurred during 2014-2018. The list of investment assets was also extended and currently applies, among others, to trucks, trailers and semitrailers.
Noteworthy that the taxable profit may be reduced up to 1 million Litas during the taxable period.
Double tax incentive to movies’ supporters
When calculating taxable profit for the year 2014 and further, a legal entity may deduct funds granted free of charge to movie maker within the period of 2014-2018 for the production of movies in Lithuania subject to conditions set in the CIT Law.
Furthermore, the calculated corporate tax may be reduced up to 75% of tax payable. If funds granted exceeding 75% of corporate tax payable, exceeding amount may reduce profits of 2 further successive years.
Payment of corporate tax
Corporate income tax for the year 2013 and further periods has to be paid until the deadline for presentation of annual corporate tax return, i.e. until the first day of the sixth month of the next fiscal period. If fiscal period coincides with calendar year, then payment has to take place on 1 June.
Tax incentive on capital gain upon transfer of shares
According to the CIT Law, income from the increase in the value of assets resulting from transfer of shares of an entity, registered or otherwise organised in a state of the European Economic Area or in a state with which a treaty for the avoidance of double taxation has been concluded and brought into effect, to another entity or a natural person where the entity transferring the shares held more than 25% of voting shares in that entity for an uninterrupted period of at least two years or, where the shares were transferred in the cases of reorganisation when held more than 25% of voting shares in that entity for an uninterrupted period of at least three years, is not subject to corporate tax. This tax incentive shall also be applicable when shares are required to sell under the applicable laws irrespective of the above holding of shares periods (i.e. may be less than 2 or 3 years).
Withholding tax on any income due to members of the Supervisory Council
Starting 2014 any income paid to members of the Supervisory Council of the Lithuanian registered entity is subject to withholding tax in Lithuania.
Amendments on preferential VAT rates
Preferential VAT rate of 9% applicable to heating energy and hot water is prolonged until 31 December 2014.
Starting 1 January 2015 preferential 9% VAT rate shall apply to accommodation services for tourism purposes.
Application of the preferential VAT rate of 5% to pharmaceuticals and medicine support devices subject to compensation from the Treasury was prolonged for unlimited time.
Starting to 1 January 2014 5% VAT rate shall apply to imported technical assistance means for the persons with disabilities.
Personal income tax
The following amendments to the Personal Income Tax Law shall come into effect from 1 January 2014:
1) Trade in securities shall not be considered individual activity for the personal income tax purposes. Consequently, such income shall be subject to 15% personal income tax rate only;
2) Personal income tax rate on distributed profits including dividends calculated and declared for the year 2014 and further periods shall be reduced from 20% to 15%;
3) Interest on deposits and debt securities including companies’ debentures shall be subject to tax if the interest amount shall exceed LTL 10,000. Furthermore, interests on deposits in credit institutions located in EEA shall also be tax free if the deposit agreements were concluded before 31 December 2013;
4) Capital gain on sale of securities shall be subject to 15% personal income tax if capital gain exceeding LTL 10,000. Capital gain that is not exceeding LTL 10,000 shall be tax free. Note that LTL 10,000 non-taxable amount shall not apply in the following events: a) when shares considered sold in case of company’s liquidation; 2) when shares sold to the company that has issued such shares; 3) when shares were obtained or nominal value of the existing shares was increased during the increase of the authorized capital from the funds of the company;
5) All pay-outs (including annual bonus) due to the Board and Supervisory Council members shall be subject to standard personal income tax rate;
6) Non-taxable minimum has increased by LTL 100 (up to LTL 570) and up to LTL 700 starting 1 January 2015 if work remuneration is not exceeding minimum established by the Government. Additional non-taxable amount for each child is increased by LTL 100 (i.e. up to LTL 200);
The following tax incentives were annulled from 1 January 2014:
1) Interests received on loans granted to legal entities and individuals shall be subject to standard personal income tax rate (before 2014 interests were not taxable if meeting the established criteria);
2) Sale of securities acquired before 1 January 1999 shall be subject to standard personal income tax rate (before 2014 capital gain on sale of such securities was free of charge);
3) Sale of securities acquired after 1 January 1999 shall be subject to standard personal income tax rate irrespective of period of possession and number of shares hold (before 2014 capital gain on sale of securities hold for not less than 366 days and if shareholding was not exceeding 10% during 3 years period were free of charge).
Reporting to the social security and Labour authorities
According to the Government Resolution No. 1232 dated 10 October 2012, the employers have to present information to the Social Security authorities on employees‘ professions referring to the Professions Classifier. The above information must be presented until 1 March 2014 filling standard form application (14-SD).
Until 1 January 2014 the employers have to present information to the Labour Authorities on safety at work status and work place compliance to the legislation requirements by filling appropriate questionnaire. According to the latest information, the above period was extended until 1 March 2014.