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REPUBLIC OF LITHUANIA

REPUBLIC OF LITHUANIA REPUBLIC OF LITHUANIA LAW ON TAXES ON PROFITS OF LEGAL PERSONS (as amended by 13 July 1993) 1. Taxable Entities and Taxable Objects Article 1. A profit tax shall be imposed on: (

  1. a)enterprises with rights of legal persons, the activities whereof are regulated by the Republic of Lithuania Law on Enterprises, and (
  2. b)legal persons engaged in non-profit activity, to the extent said income shall be received from commercial-economic activity, with the exception of non-budgetary resources of institutions whose expenditures are fully reimbursed by the State from the State Budget. (Amended 11 May 1993) Article 2. A profit tax shall be imposed on taxable profit computed according to the procedure defined in Chapter 2 of this Law. 2. Definition of Taxable Profit Article 3. The total of sales revenue and non-operating revenues (hereinafter - gross revenue) shall constitute the basis for computing the amount of the taxable profit. Sales revenue shall comprise income generated from the sale of goods and services and other assets (with the exception of profit received from the exploitation of fixed assets for no less than one year), compensation, and income generated from renting assets. Non-operating revenues shall constitute payments received from economic sanctions and other income not related to the production and sale of goods and services. While computing taxable profit, the following income shall be eliminated from non-operating revenues: 1) dividends and interest income received on bonds; 2) the share of profit received by shareholders from other enterprises; 3) compensation for insured assets received from insurance organisations; 4) the share of income (profit) received by founders from individual (personal) enterprises or from partnerships; (Amended 11 May 1993) and 5) sums received for charity and sponsorship regulated by the Republic of Lithuania Law on Charity and Sponsorship. (Amended 13 July 1993) Article 4. Profit shall be computed by deducting from gross revenue the production and distribution costs related to goods and services sold as specified in Article 5. Taxable profit shall be computed by deducting from profit amounts not liable to tax, as set forth in Article 6. Taxable profit of legal persons engaged in non-profit activity shall consist of the difference between income received from paid activities and expenditures on administering said activities. (Amended 11 May 1993) Article 5. When computing taxable profit, the following actual production and distribution costs, as well as expenses related to the goods sold, shall be deducted from gross revenue of an enterprise:

(1)material expenditures and other comparable expenditure, including business trip expenses;
(2)depreciation charges providing for the replacement of fixed assets, but not exceeding tax rates;
(3)labor costs;
(4)social insurance contributions;
(5)compulsory insurance contributions, with the exception of insurance contributions for the state capital accumulated in the enterprise;
(6)tax on State natural resources, licence fees (Amended 13 July 1993) and pollution tax, but not exceeding the established rates and limits, and land and value-added taxes; and
(7)interest on bank credits and land rent;
(8)Repealed 13 July
  1. When computing taxable profit, only actual production and circulation costs confirmed by legal documents having legal force and the expenses of an enterprise specified in Par.1 hereof shall be deducted from gross revenue. Importation of material assets from abroad must be confirmed by customs declarations.(Amended 11 May 1993) Article
  2. When computing taxable profit, the entire amount of the actual expenses of those charitable organisations and funds, societies and unions of the disabled as well as their enterprises which are specified in the Republic of Lithuania Law on Charity and Sponsorship and which expenses are related to charitable and sponsorship affairs shall be deducted from taxable profit computed in accordance with the procedure set forth in Article 4 of this Law provided said expenses are confirmed by legally enforceable documents. When computing taxable profit of charity donors or sponsors who are not specified in Par.1 hereof, the actual expenses related to charitable and sponsorship affairs and confirmed by legally enforceable documents shall be twice deducted from taxable profit computed in the manner established in Article 4 of this Law; the deducted amount, however, must not exceed 40 percent of taxable profit. Sums allocated for charitable and sponsorship affairs which are in excess of 40 percent of taxable profit shall be liable for taxation in the general manner. The procedure established in this Article shall not apply to charity dispensed or financial support given to foreign legal persons with the exception of cases when such charity is dispensed or financial support is given through international charitable organisations or Lithuanian communities located abroad. (Amended 13 July 1993)
  3. Tax Rates Article
  4. The tax rate shall be: 1) 10 percent of the portion of taxable profit appropriated for capital investments. Capital investment shall be acquisition of fixed assets for long-term use (buildings, structures, machinery, technological equipment and other fixed assets) and non-material property for long-term use ( technological licences, patents, and trade marks) as well as expenses related to unfinished construction work; and 2) 29 percent of other taxable profit. (Amended 6 February 1992 and 11 May 1993) The Government of the Republic of Lithuania may fix lower tax rates on taxable profits in the branches of economy that are given priority. (Amended 30 May 1991)
  5. Tax Reliefs Article
  6. The rate of profit tax for legal persons producing agricultural products and for specialised enterprises providing services for agriculture shall be 10 percent of the taxable profit. If the portion of income from agricultural products and services provided for agriculture is less than 60 percent of sales revenue, all profit shall be subject to taxation at the rate provided in Article 7 of this Law. The tax rate for creative unions (unions of architects, artists, designers, photographers, composers, film makers, scientists, writers, folk artists, theater actors and directors, and journalists) as well as their companies and organisations which allocate at least 29 percent of their profit for financing the needs of creative unions, shall be 5 percent of the taxable profit. (Amended 27 June 1991 and 11 May 1993) Article
  7. Enterprises which receive sales revenue only for their own products and which employ handicapped employees shall be entitled to the following deductions in computing taxable profit: (Amended 11 May 1993) Proportion of Handicapped Deduction of Taxable Employees Profit Over 50% 100% 40-50% 75% 30-40% 50% 20-30% 25% The categories of individuals to whom the status of handicapped employees is applicable and the method of computing their proportion to the total number of employees, as well as regulations elaborating on the application of such tax relief shall be established by the Government of the Republic of Lithuania. Article
  8. Local government Councils may allow certain persons tax deductions or exempt them from profit tax for a specified period of time; however, the sums due shall be payable from the budgets of the local governments. Rules regarding the means by which deficiencies in State Budget revenue are satisfied shall be established by the Ministry of Finance of the Republic of Lithuania. If a taxpayer under the Laws of the Republic of Lithuania is entitled to several tax reliefs, only the biggest tax relief shall be granted. (Amended 11 May 1993)
  9. Computation and Payment of Tax Article
  10. The Taxable Entity shall compute the amount of the tax and pay the amount due to the appropriate budget, as provided by the Law on Budgeting of the Republic of Lithuania. Legal persons having structural units on the territories of other local governments ("subsidiaries") shall pay at the end of the appropriate period the amount of the tax due to be paid into the budgets of the local governments in proportion to the number of employees in the subsidiaries located on the various territories of those governments. The tax shall be paid in the prescribed manner only in cases where more than 20 people are employed in subsidiaries. Article
  11. Payment for given taxable year shall be made in installments, in advance, and the amount of a given installment shall be computed by applying the installment rate. The installment rate shall be computed by dividing the total amount of the profit tax paid for the preceding taxable year by the amount of sales revenue received during the preceding taxable year. The installment rate shall be computed from an estimate submitted by the taxable entity in conjunction with the appropriate State Tax Inspectorate, in accordance with the procedure established by the Ministry of Finance. The amount of advance payments shall be computed by applying the installment rate to the actual sales revenue. The taxable entity shall deposit estimated payments 3 times a month into the appropriate budget by the date specified and in the manner established by the Ministry of Finance. For estimating advance payments for the period up to the 10th day of February of the upcoming taxable year or up to the date specified by the State Tax Inspectorate, the installment rate applied in the preceding taxable year shall be used. Article
  12. Taxable entities that receive a consideration portion of income by means other than through banks shall deposit advance payments in accordance with the procedure coordinated with the appropriate State Tax Inspectorates. Article
  13. Following the close of each calendar quarter and on or before the 15th day of the month of the next calendar quarter, and following the close of the taxable year, that is, on or before the 1st day of February of the following taxable year, taxable entities shall file with the appropriate State tax inspectorates and their departments financial statements established by the Republic of Lithuania Law on the Principles of Accounting and a profit tax return. (Amended 11 May 1993) The form of the return and the information contained thereon shall be established by the Ministry of Finance. If the amount of tax shown on the return exceeds the amount paid during the taxable year, the taxable entity shall, within 10 days from the due date for the filing of the return, deposit the additional estimated sum required into the budget prescribed by the Law on Budgeting of the Republic of Lithuania. Any excess estimated amount paid in advance shall, with taxable entity's consent, be either refunded or credited against taxes subsequently due and payable.
  14. Responsibility for Correct Computation of the Amount and Payment of Profit Tax Article
  15. The taxable entity shall be held responsible for correct computing of the amount of the profit tax. If the taxable profit and profit tax are understated on the tax return, the amount of tax due for the understated profit, plus a penalty equal to 200 percent of the computed amount of tax due for the understated profit shall be recovered into the appropriate budget prescribed by the Law on Budgeting of the Republic of Lithuania. The amount of the tax due for the understated profit and the penalty shall be paid within 5 days after such violation is established. (Amended 11 May 1993) Article
  16. The taxable entity shall be held responsible for paying the profit tax by the due date. Failure to pay the taxes required under this Law shall subject the taxable entity to liability for interest at the rate of 0.5 percent on the principal amount due for each day that the tax remains unpaid. Payments into the budget not deposited on the date prescribed therefor shall be recoverable by the State Tax Inspectorate without suit. Article
  17. Officers of the taxable entity shall be personally responsible for furnishing false information resulting in an erroneous assessment of the tax due, and shall be subject to liability in accordance with the procedure established by law. VYTAUTAS LANDSBERGIS President Supreme Council Republic of Lithuania Vilnius 31 July 1990 No. I-442

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