Taxation & Trading Across Boarders

Value, % Joint-stock company Public company Association
Corporate income tax 15* 15* 15**
Value added tax 21 21 21
Personal income tax 15 15 15
Health insurance 6 6 6
Social security tax 31+3 paid by employee 31+3 paid by employee 31+3 paid by employee
Tax on dividends 0-15 - -

* Reduced 5 % corporate income tax is paid by companies who employ no more than 10 people and its income is no bigger than 1.000.000 Lt per year.

** Corporate income tax is paid when association's profit is over 25.000 Lt per year.

The Lithuanian tax burden has been one of the lowest in the European Union according to the research "Taxation Trends in the European Union" concluded by Eurostat in 2011. Lithuania exhibits the sixth lowest total tax burden (including social contributions) in the EU (29.3 % of the GDP against an EU-27 average of 38.4 %). The tax on corporate income is 15 %, being the fourth lowest in the EU-27 and far from the EU average of 23.2 %.

According to a new PwC study "Paying Taxes 2013" Lithuania ranks above Germany, Belgium and Poland by total taxes borne by the business as a percentage of commercial profits. The study also says that in Lithuania an average company spends less time on tax administration and payment, only 175 hours, than in Europe on average (184 hours) and in the world (267 hours).

Among other favourable taxation conditions Lithuania offers the following advantages on dividends:

- 0 % withholding tax on dividends distributed to a foreign/Lithuanian entity where the recipient has held not less than 10 % 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;

Lithuania has a number of free economic zones which are located in the country's economically important centres and provide favourable conditions for developing business activities by offering prepared industrial sites with physical and/or legal infrastructure, support services, and tax incentives.

Kaunas Free Economic Zone (for more information please visit www.ftz.lt) and Klaipeda Free Economic Zone (www.fez.lt) offer no corporate tax during the first 6 years and only 50% of corporate tax over the next 10 years (regular rate: 15%) , no tax on dividends for foreign investors (regular rate: 0   to 15).

What is more, in the beginning of year 2012 five new free economic zones were established - in the cities of Akmene, Kedainiai, Marijampole, Panevezys and Siauliai.

Lithuania, as a member of the European Union, uses all the benefits of free movement of goods in the single market of the European Union without internal frontiers. Lithuania is ranked in the 27th position for Trading Across Boarders in Doing Business 2012 data from World Bank and International Finance Corporation (IFC), measuring the ease of procedures and the level of costs in importing and exporting goods across 183 economies worldwide (whilst neighboring Poland takes the 126th position).

Sources: Doing Business Project, www.doingbusiness.org.

European Commission, www.ec.europa.eu.

PwC study "Paying Taxes 2013",  http://www.pwc.com/gx/en/paying-taxes/index.jhtml