Lithuania has moved 7 levels up from 51st to 44th position in the Paying Taxes 2011 study from PricewaterhouseCoopers (PwC), World Bank and International Finance Corporation (IFC), measuring the ease of paying taxes across 183 economies worldwide as well as enabling an assessment of tax systems around the world from the point of view of business over a six year period.

Enterprises registered in Lithuania must pay taxes in Lithuania on profits and capital gains earned both in Lithuania and abroad. Withholding taxes paid abroad and not exceeding the tax payable in Lithuania on foreign income may be credited. Moreover, tax relief may be applied according to applicable international treaties.

Major Corporate Taxes

* Dividends may be exempt, if certain conditions are met.
** Standard rate, which in some countries may vary depending on the amount of salary. 
Source: PricewaterhouseCoopers UAB, www.pwc.com

Group taxation of corporate profit was introduced in 2010. This allows groups to balance profits and losses within them, whereby losses can be transferred among different entities of a group if the controlling entity holds at least 2/3 of the shares of the controlled entity, and some other conditions are met. If not transferred within a group, operating tax losses can be carried forward for an unlimited period of time. Losses incurred from disposal of securities can be carried forward for a period of five years and can be offset against income of the same nature.

• Entities can reduce taxable profit up to 50 percent if they are carrying out an investment project into qualifying assets, if certain conditions are met;
• Expenses incurred by companies carrying out R&D projects can be deducted three times; 
• 0 percent withholding tax on interest when the recipient of interest is established in the European Economic Area (EEA) or country with which Lithuania has signed a treaty for the avoidance of double taxation;
• 0 percent withholding tax on royalties paid to related parties meeting requirements of the EC Interest and Royalty Directive;
• 0 percent withholding tax on dividends distributed to a foreign/Lithuanian entity where the recipient has held not less than 10 percent of voting shares for a continuous period of at least 12 successive months;
• No corporate income tax on dividends received from EEA countries if the dividends were distributed from profits which were subject to corporate income taxation;
• No corporate income tax on capital gains on transfer of shares when a Lithuanian company is transferring the shares of the entity which is registered or otherwise organized in an EEA Member State or in another country, with which Lithuania has concluded a treaty for the avoidance of double taxation, and the transferring company holds over 25 percent of shares in the aforementioned entity for not less than two years (whereas in case of reorganisation – for not less than three years);
• Advanced Pricing Agreements (APAs) and Binding Rulings available as from 1 January 2012;
• 0 percent corporate income tax for six years in free economic zones.