background image

In late December 2008, the parliament passed numerous tax law amendments together with the State Budget Act for 2009. The amendments take effect on 1 January 2009. The major amendments regarding corporate income tax are summarized below. (a) Tax rate. The general corporate income tax (CIT) rate is increased from 15% to 20%.

(b) Dividends. The withholding tax on dividends is increased from 15% to 20%. The condition for the participation exemption is amended, so that it does not apply to a part of distributed profit subject to 0% rate or other incentives, except for companies in the free economic zones.

(c) Incentives. The new incentive is introduced providing for up to a 50% reduction of taxable profit in the given tax period by the amount of expenses actually incurred from the investment into certain groups of fixed assets (machinery and equipment, computer hardware and software, communication equipment, acquired rights), subject to certain conditions. The incentive is applicable in the tax years 2009 to 2013.

(d) Agricultural companies. A tax rate of 5% applies to the profits of agricultural producers if the income derived from agriculture-related activities comprises more than 50% of the turnover. In 2010, the tax rate of 10% will apply. Previously, these companies were relieved from CIT.

(e) Withholding taxes. The withholding tax rate is increased from 15% to 20% in respect of the following types of income:

-   income paid to non-resident companies for the disposal or lease of immovable property located in Lithuania;
-   income paid to non-resident companies for entertainment and sports activities performed in Lithuania; and
-   annual bonuses (tantiems) paid to the members of the supervisory council of a company.