Lithuania legal and accounting and tax considerations in 2023
- The corporate tax rate in Lithuania is 15%. However, companies benefit from a reduced rate of only 5%, provided they: i) employ fewer than 10 staff or ii) generate less than €300,000 of annual profit;
- Annual tax returns must be filed and fully paid by June 1st. Failure to do so may be sanctioned by a fine of up to 50% of the amount due;
- The standard Value Added Tax (VAT) in Lithuania is 21%. All businesses are required to register and VAT returns must be filed and paid every month;
- Lithuanian companies may carry losses forward indefinitely, but such losses cannot be offset against more than 70% of their taxable income for the year. Carryback of losses is not permitted;
- Dividends paid to non-residents suffer 15% withholding tax unless the rate is reduced under a double taxation treaty (DTA) or the EU Parent-Subsidiary Directive;
- Capital gains are subject to the standard corporate tax rate of 15%, but resident companies may qualify for full tax exemptions, including on the sale of shares held for at least 2 years in another EEA company;
- Interest and royalties paid to a non-resident are subject to a 10% withholding tax, unless reduced by a tax treaty;
- Employers are required to pay social security contributions of up to 41% of their staff payroll expenditure;
- Lithuania does not implement a net wealth tax, which unlike some other EU countries, including France, Spain and the Netherlands;
- Lithuania has signed double taxation avoidance agreements with 50 countries including Canada, China, Austria, and the United Kingdom;
- Healy Consultants will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparing financial accounting records and iv) preparing forecasts, budgets and performing sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
- All companies must maintain a registered office address in Lithuania at all times;
- Detailed information on all Lithuanian companies is available for residents to view and comprises i) the company’s name, address and legal status; ii) the names and addresses of the shareholders and directors; and iii) the amount of issued and paid-up share capital;
- The minimum share capital for Lithuanian companies is i) €2,500 for a UAB limited liability company and ii) €40,000 for an AB public limited company. 25% of the company’s share capital must be paid up at incorporation;
- An Annual audit is required for any Lithuanian company with annual turnover exceeding €1.4 million.
- All employment contracts must be translated into Lithuanian. Non-Lithuanian-speaking employees must also be provided with a contract copy in a language they understand;
- In accordance with the Lithuanian Labour Code the period of probation may not exceed three months;
- The minimum wage is fixed at €289.62 per month;
- The standard working week is fixed at a maximum of 40 hours of work and all employees are entitled to:
- At least 20 days of paid annual holiday time;
- 12 paid public holidays and;
- 11 days of paid sick leave.
- Employers may suspend their employees’ employment contract in case of i) intoxication during work hours and ii) work being performed in clear violation of Lithuanian Labour Laws;
- In case of labour conflicts, local Municipal Courts will carry out mediation for the settlement of collective labour disputes;
- In accordance with Articles 26 and 29 of the Law On The Employment Contract, all terminated employees must be provided with 1 month’s notice and four months’ severance pay.
Other business regulations
- Lithuania is a member of the World Intellectual Property Organization, which allows foreign businesses to i) apply for Lithuanian patents and trademarks and ii) receive the same intellectual property protection conferred to Lithuania nationals;
- Lithuania has acceded to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the UNCITRAL New York Convention). Arbitration awards made in countries that are party to this convention are therefore enforceable in Lithuania according to the provisions of the convention;
- While the Lithuanian Prevention of Corruption Law punishes businessmen convicted of bribing public officers, there is no comprehensive whistle-blower protection regulation currently implemented.