Corporate income tax changes for 2014 in Lithuania
Few Corporate income tax amendments applicable for 2014 income is a good sign, indicating stability in Lithuanian corporate tax system. Besides that, most of law changes are business oriented. However it is worth to mention that Lithuania keeps a steady pace in strengthening investment related tax rules.
Lower tax rate
One of the welcomed incentives Lithuania did for star up‘s and small business is lowering of corporate income tax rate. Standard tax rate in Lithuania is 15 %. Companies which have 10 or less employees and whos annual turnover is less than 300 000 EUR, income shall be taxed with 5 % corporate income tax. Lower tax rate applies for 2015 and future income. Limitations to related persons apply.
Transfer of losses
Calculating corporate income tax for 2014, companies are allowed to deduct previous year losses equal up to 70 % of current year taxable profit. Thus 30 % of profit is be taxed notwithstanding that company has accrued losses in previous periods. Limits apply only to subjects paying CIT at 15 % rate.
Losses from equities and derivatives may be transferred 5 subsequent tax periods starting the following year when losses arose. Not applicable for financial institutions.
When transferred to subsequent tax year, losses from shares and derivatives, shall be covered only by income received from realization of shares and derivatives.
If investor has suffered losses from sales of shares, of unit registered in European Economic Area or country with whom Lithuania has signed double taxation treaty, and which is a profit tax payer in country of registration, and more than 25 % of shares were held in unit for more than 2 years , losses may be transferred only once. Losses transferred shall be deducted from share sales income and may not be higher than income received from share capital gains during the tax period.
Taxation of share transfers
Capital gains from sale of company shares, established in European Economic Area or country with whom Lithuania has double taxation treaty are exempt from corporate income tax, if more than 25 % of shares were held for more than 2 years, 3 years in case of restructuring. Tax benefit does not apply if shares are transfered back to issuing establishment. Applicable for transactions performed 2014 onwards.
Company which made a donation for movie production during 2014 is allowed to minimize it‘s corporate income tax by subtracting the sum donated from the tax due. Deductable amount can not be higher than 75 % of calculated corporate income tax. However if deduction amout is higher, remaining amount may be deducted from corporate income tax during 2 subsequent tax periods.
Company executing an investment project (purchase of long term property as maschinery, software, IT equipment, buildings, ownership/license rights, trucks, trailers and semitrailers etc.) may deduct such expenditure, sufered during 2014, from corporate income tax due. Deduction (subtraction from tax due) is limited to 50 % of calculated corporate income tax. Sums over the limit may be may be deducted from corporate income tax during 2 subsequent tax periods. Objects purchsed during investment project shall be new, produced within 2 years. Trucks, buses, trailers and semitrailers shall not be older than 5 years. Deductable amount for vehicles is limited to 300 000 EUR.
Andrius Apanavičius, lawyer of the Gencs Valters Law Firm in Vilnius
Practising in fields of Taxation in Latvia, Lithuania and Estonia
T: +370 52 61 10 00
F: +370 52 61 11 00