REPUBLIC OF LITHUANIA

(1)persons deriving income through their labour at enterprises,institutions, and organizations on the territory of the Republic of Lithuania and at foreign enterprises, institutions and organizations owned by Lithuania;

(2)permanent residents of the Republic of Lithuania deriving income from inhabitants as well as deriving income from enterprises, institutions and organizations on the territory of Lithuania and beyond its boundaries not connected with labour relations;

(3)private enterprises or partnerships without rights of legal persons and partnerships deriving income from commercial activity registered in the established manner. Foreigners and persons possessing no citizenship of the Republic of Lithuania pay this tax in the same manner as citizens of the Republic of Lithuania. If international agreements provide for a different procedure of paying, the income tax is paid as provided by these agreements. Article 2. Income tax shall not be levied on:

(1)retirement and old-age pensions paid out from state social insurance funds, and state and local government budgets;

(2)stipends and other benefits and payments paid from the stipend funds of students of educational institutions financed from the budget (Amended 13 July 1993). Article

1. Income received in foreign currency shall be subject to taxation according to the regulations promulgated by the Government (Amended 13 July 1993). Chapter 2 Determination of Taxes on Income Derived from Sources Connected with Labour Relations Article
2. Income received at the principal job and connected with the labour relations, as well as income derived from other activities provided for in the bylaws of an enterprise ( with the exception of income the taxation of which shall be regulated by Articles 3 and 4 of this Law) shall be subject to taxation at income tax rates provided in the Supplement 1 of this Law, having subtracted from it the tax- exempt minimum (Amended 13 July 1993). Article
3. The tax-exempt minimum income earnings received at the principal job from the sources connected with labour relations shall be:

(1)for the disabled of Group 1 - 1.1 MSL earnings (minimum standard of living determined in accordance with the Law of the Republic of Lithuania on Individual Income Security) ;

(2)for the disabled of Group 2 - 1.0 MSL earnings;

(3)for the disabled of Group 3 - 0.9 MSL earnings;

(4)for persons with three and more children under 18 years of age -1.0 MSL earnings;

(5)for the mother or father in case of a single parent family with one child under 18 - 0.9 MSL earnings and with two or more children under 18 - 1.0 MSL earnings;

(6)for employees of enterprises producing agricultural products, whose monthly income generated from activities not connected with production or processing of agricultural products does not exceed 20 percent of gross monthly income - 0.9 MSL earnings; and

(7)for other persons not indicated in Par. 1-6 of this Article - O.8 MSL earnings. In addition, for visually handicapped persons of Group 1 and 2, for parents with at least one handicapped child, as well as for parents with 4 and more children for the 4th and each successive child the tax shall be further reduced by 0.1 MSL earnings (Amended 13 July 1993). Article 6. The following monthly earnings in cash and in kind received at the principal job shall be included in taxable income:

(1)wages, including various additional payments, sickness, maternity benefits paid from the resources of social insurance - the sums calculated for that month. Sums of earnings payable by enterprises, institutions and organizations for work of more than one month in duration and whose duration has been recorded provided the full monthly wage or a portion thereof has not been paid during that period, shall be phased out in proportion to the number of months worked (but not for a period in excess of 12 months);

(2)one-time bonuses, taxable allowances and other payments - the sums paid out within a month;

(3)bonuses and other incentive payments for work done within the period exceeding one month shall be phased out proportionately to the number of recorded months (but not exceeding 12 months) and shall be subject to taxation at income tax rates provided in Supplement 2 of this Law, which were valid in that month when these payments were calculated for being paid. Additional payment (shares of profit) shall also be taxed in the same manner. Provided several such bonuses or other incentive payments shall be paid within a month, tax shall be imposed on each of them;

(4)upon discharge from work an employee shall be paid a compensation in the amount established in Articles 30 and 42 of the Law on the Employment Contract, compensations for the unused vacations, gratuities, as well as sums adjudged for the compensation of damage due to the constrained absence from work resulting from the unlawful dismissal from work, in calculating income tax from these payments, they must be divided into as many parts as the sum of respective payments make up average monthly wages and each of them shall be taxed separately at income tax rates provided in Supplement 2 of this Law (Amended 13 July 1993). Article 7. The following shall be exempt from taxation:

(1)social security and social assistance benefits paid from state and social insurance resources, excluding sickness and maternity allowances; benefits administered by the Government of the Republic of Lithuania or local governments, as well as benefits paid from charity funds and organizations ( benefits - paid to the employees of the above mentioned funds and organizations excluded); benefits paid by enterprises, institutions and organizations on the death of a member of an employee's family as well as in cases of natural calamities or fire ( Amended 13 July 1993); bonuses from the state budget which are distributed on the basis of merit;

(2)compensation for material and moral damage as well as compensations in the amounts established by laws and the Government of the Republic of Lithuania: to refund business trip expenses, to reduce food prices at canteens and cafes of enterprises, compensations of other expenses of employees, connected with business;

(3)prizes received during personal celebrations or competitions or on any other occasion provided that the value of these gifts and prizes during the calendar year do not exceed the tax-exempt minimum income earnings. Taxable income shall be reduced by the amount expended on charity and sponsorship according to the procedure established by the Republic of Lithuania Law on Charity and Sponsorship (Amended 13 July 1993). Article

1. The income earned at extra jobs specified in Article 6 of this Law shall be subject to taxation pursuant to Article 6 at the rates provided in Supplement
2. If a person is employed at several jobs, taxes shall be withheld at the job which the employee chooses as his principal job and indicates it in the employment contract or in a special application submitted to the principal job. Payments made to students of educational instututions for work done during practical training or for collective assistance, payments made to patients of medical and labour preventoria, inmates of boarding homes, as well as the value of gifts donated to members of public organizations (associations, societies, trade unions, etc.) and political parties and sums of benefits paid to them from the resources of these organizations, exceeding the established tax- exempt minimum (provided that no subsidies from the State budget were received), shall be taxed according to the procedure provided for in Articles 4 and 6 of this Law (Amended 13 July 1993). Article
3. Income tax at the rates specified in Article 4 and 8 of this Law shall be withheld by those enterprises, institutions and organizations which assessed and paid out the income as well as by individual employers who pay wages to persons hired by them. Article
4. Enterprises, institutions, organizations and individual employers, upon the receipt of money from banking institutions for paying wages for the appropriate month (or the second half of a month), shall simultaneously file a payment order to such banking institutions for paying sums of income tax withheld from that month's wages. In calculating payments specified in paragraph 3 of Article 6, the tax withheld from them must be transferred to the budget upon receiving money for said payments from banking institutions (Amended 13 July 1993). It is prohibited to pay income tax from the financial resources of an organization. Organizations and individual employers having no clearing accounts with the banking institution, or who pay wages from their current receipts, shall file payment orders to a banking institution for the payment of withheld income taxes not later than the day after the wage was paid out. Article
5. Enterprises, institutions and organizations possessing subsidiaries located on the territory of other local governments shall transfer the income taxes withheld from incomes of employees of those subsidiaries to that budget which is located on the same territory. The taxes shall be transferred so only in cases where more than 20 persons are employed in these subsidiaries. Article
6. Refunds of overpaid income taxes are allowed for a period not exceeding 2 years from the month in which the overpayment was discovered. Article
7. For unpaid sums, whether or not withheld as taxes, said sums plus a penalty of 300 percent of the unpaid sums, shall be recovered from the delinquent enterprise, institution or organization, without a suit, but a claim for such sums shall extend only to the preceding 2 years. Institutions and organizations which are financed from the budget shall not pay penalties for underpaid sums of taxes (Amended 13 July 1993). An enterprise, institution or organization can recover up to 3 months of unpaid sums of income tax from an employee, which are calculated from the months when the underpayment was discovered. If an employee indicates more than one job as his principal job, the principal job shall be considered the one in which the smallest wages is received, and from it the underpaid sum and the penalty of 300 percent shall be sought out for the entire period (Amended 13 July 1993). Article
8. If the sums of tax withheld are not transferred to the budgets when due, interest at the rate of 0.5 percent for each day thereafter is charged on the amount due. Article
9. Income of churches as well as clergymen, religious ceremony attendants and technical staff (excluding persons who perform construction and restoration work) earned from the believers is exempt from taxes paid by natural persons. Chapter 3 Imposition of Income Tax on Royalties Paid to Authors and their Descendants for Works of Science, Literature, Art and Other Individual Works Article
10. The royalty paid to authors and their lineal descendants for works of science, literature, art, discoveries and inventions as well as for other individual works is subject to taxation at the rate of 13 percent. The authors of discoveries and inventions possessing author's certificate are entitled to a tax-exempt minimal royalty of 8 MSL earnings (Amended 13 July 1993) for each discovery or invention. Article
11. Income tax on royalties shall be assessed and withheld where they are paid out and shall be transferred to the budget according to the procedure provided for in Article 10 of this Law. Article
12. The royalty paid to the author's descendants for works for which such royalty had been paid already, is subject to an income tax rate of 60 percent. Children under 18, spouses and parents (women over 55 and men over 60 as well as disabled persons of Group 1 and 2 irrespective of their age) are eligible for the 50 percent reduction of income tax computed under this Article. Article
13. Erroneously assessed income tax imposed upon a royalty for works of science, literature and art can be reassessed and recovered for a period not exceeding the 2 preceding years. Article
14. The underpaid sums of income tax, not withheld or withheld, as well as a penalty equal to 300 percent of the sum due, may be recovered without initiation of a lawsuit from an enterprise, institution or organization which has paid out such a royalty. Article
15. The overpayment of tax is allowed to be refunded only for the period not exceeding the 2 preceding years starting from the month when the overpayment was discovered. Article
16. If sums of taxes withheld are not transferred to the budget when due, interest at the rate of 0.5 percent for each day thereafter is charged on the sums not transferred. Article
17. Councils of local governments shall have the right to reduce income tax for certain taxpayers, or to exempt them from income tax, by compensating same from local budget. Chapter 4 Taxation of Income Derived from the Commercial Activity Registered in the Established Manner Article
18. The taxable income of partnerships and private (personal) enterprises without the rights of a legal person the sales revenues of which account for 80 percent of total income derived from commercial activity registered in the established manner is subject to a 10 percent rate of income tax. Taxable income of other partnerships, or other private ( personal) enterprises without the rights of a legal person, used for capital investments in commercial-economic activities shall be subject to taxation at the rate of 12 percent whereas a 24 percent rate of income tax is imposed on other taxable income. The Government of the Republic of Lithuania may establish lower rates of income tax on the taxable income of priority branches of economy (Amended 13 July 1993). Article
19. Patent fee may be established for private (personal) enterprises and partnerships without the rights of a legal person. Enterprises which have aqcuired the patent shall not pay income tax from income derived from the activities stated in the patent. The procedure for issuing patents shall be established by the Government of the Republic of Lithuania (Amended 13 July 1993). Article
20. Taxable income shall be calculated by deducting the following certified input costs from gross income.

(1)material expenditure and other comparable expenditure;

(2)depreciation charges not exceeding tax rates approved by the Government of the Republic of Lithuania (Amended 13 July 1993);

(3)labour costs;

(4)social insurance contributions;

(5)compulsory insurance contributions;

(6)taxes for state natural resources and environmental pollution, without exceeding established rates and limits, fees for licences, land taxes and land rent, excise duties and value- added taxes;

(7)interest paid on loans redeemed when due;

(8)repealed 13 July

1. Article
2. In determining taxable income, charitable and sponsorship expenses shall be entirely or partly deducted from gross income (Amended 13 July 1993). The rules for deducting expenses from gross income shall be the same as computing the tax on profit of legal persons. Article
3. Income derived from the sale of agricultural goods produced on individual small farm holdings, excluding income derived from the sale of soft-fur carnivorous animals and nutrias and their products, shall be exempt from taxation. Private (personal) enterprises of creative unions ( of architects, artists, designers, photo artists, composers cinematographers, scientists, writers, folk artists, theatre, journalists) without the right of legal person shall be entitled to a tax relief provided for in Article 8 of the Law on Profit Tax of Legal Persons (Amended 13 July 1993). Article
4. Councils of local governments shall have the right to reduce income tax or to entirely exempt from taxes certain private ( personal) enterprises without the rights of a legal person and partnerships, by compensating same from the local budget. If the taxpayer is entitled to several tax reliefs under the laws of the Republic of Lithuania, only the biggest relief shall be provided (Amended 13 July 1993). Article
5. Private enterprises and partnerships shall file their returns with the State Tax Inspectorate not later than within 15 days following the close of the current calendar quarter. Article
6. Income tax is due not later than within 20 days following the close of the current calendar quarter. Failure to pay taxes when due shall subject the taxpayer to a liability for interest at the rate of 0.5 percent for each day thereafter. Article
7. If tax returns are not filed with the State Tax Inspectorate, or if not all income received is declared in the return, the sum from the undeclared income, regardless of the expenses and computed without applying reliefs established by this Law plus a penalty twice as high as this sum shall be recovered from the enterprise. If taxable income is understated in the return, the sum computed without applying reliefs plus a penalty twice as high as the sum shall be recovered from the understated income without sueing for claims (Amended 13 July 1993). Chapter 5 Taxation of Miscellaneous Receipts Article
8. Gross income generated from the rent of property, and income derived from interest on credit as well as other receipts not provided in Chapter 2, 3 and 4 of this Law shall be subject to a 20 percent rate of income tax. Article
9. Taxes on miscellaneous receipts of persons are levied by the State Tax Inspectorate according to their permanent place of residence. Tax levied on interest paid by credit institutions for deposits of natural persons is calculated and paid to the budget by credit institutions (Amended 13 July 1993). Article
10. Income Tax is not levied on:

(1)income derived from blood-donations;

(2)income received by legacy and gift, except the inherited royalty and gifts of enterprises, institutions and organizations (Amended 13 July 1993);

(3)recovered alimony;

(4)sums received as compensations for loosing a bread winner or capacity to work;

(5)sums received as compensation, the rate of which is established by the existing laws on labour, for business trip expenses, and for material and moral damages, and not exceeding the amount fixed;

(6)sums paid out for bonds issued by state or local government;

(7)lottery winnings;

(8)dividends on stocks and shares;

(9)sums received from compulsory and voluntary insurance;

(10)refunds for returned shares and sums for sold stocks;

(11)gains from sale of personal property owned by a resident by ownership right, excluding self-made or bought commodities meant for sale (Amended 13 July 1993).

(12)prizes and gifts received for merit in sports and other competitions in other fields. Article 36. Income tax is assessed in the following manner:

(1)income tax for the current year is computed according to the income return filed by the taxpayer. In such cases when the amount of income earned has changed considerably during the taxable year, the income tax can be reassessed;

(2)following the close of the year or upon the loss of the source of income, the tax is reassessed taking into account the factual amount of income earned. The difference between the amount of tax paid and the amount due is sought and recovered or refunded within a month and in case of loss of the source of income, within 15 days from the day that it was filed. Article 37. Assessment of the tax is based on:

(1)a return filed with the State Tax Inspectorate prior to January 15 by taxpayer receiving miscellaneous remuneration. Returns of income earned within a one-year period must be filed within 5 days after the first month that income is received and within 5 days after the loss of employment for which income has been received;

(2)the investigation results carried out by the State Tax Inspectorate and other material hearing upon the income of taxpayers. The tax shall be calculated and required to be paid by the property owner (main tenant). Article

1. If the tax was not collected from the taxpayer when due, it can be collected for the period not exceeding the 2 preceding years. Amendments to returns and refunds of taxes erroneously paid, are permissible only with respect to the preceding 2 years. Article
2. If the taxpayer has failed to pay tax when due, interest at the rate of 0.5 percent per day thereafter is imposed on the amount due. Article
3. Gross receipts derived from the sale of property of the inhabitants excluding that specified in paragraph 10 of Article 35 shall be taxed at the rate of 5 percent. The tax shall be computed and paid by an enterprise which has sold this property not later than within 10 days following the close of the month during which it was sold. For failure to pay tax when due, interest at the rate of 0.5 percent per day thereafter shall be imposed on the amount due. Article
4. Enterprises, institutions and organizations must provide the State Tax Inspectorate with the information pertaining to the sums of money paid to individuals not related with labour relations, excluding payments from which income tax has been withheld and benefits set forth in Article 35 of this Law. This information must be submitted to the State Tax Inspectorate on whose territory the person receiving the income permanently resides. If an enterprise, institution or organization fails to submit information by the fixed date, it shall be subject to a penalty at the rate of 0.5 percent per day but not exceeding 300 percent of the amount paid over. Article
5. Councils of local governments are entitled to reduce the income tax or to totally exempt from taxes separate individuals who have other earnings, compensating same from local budgets. VYTAUTAS LANDSBERGIS President Supreme Council Republic of Lithuania Vilnius 5 October 1990 No. I-641 PROVISIONAL LAW ON INCOME TAX OF NATURAL PERSONS Supplement 1 Income Tax Rates used while computing the tax from monthly taxable income received at the principal job
6. The 10 % rate is upheld for the portion of taxable income in the amount of 0.7 MSL earnings and less.
7. The 18 % rate is upheld for the portion of taxable income in excess of 0.7 MSL earnings but not in excess of 1.2 MSL earnings.
8. The 24 % rate is upheld for the portion of taxable income in excess of 1.2 MSL earnings but not in excess of 2 MLS earnings.
9. The 28 % rate is upheld for the portion of taxcable income in excess of 2 MSL earnings but not in excess of 3.8 MSL earnings.
10. The 33 % rate is upheld for the portion of taxable income in excess of 3.8 MSL earnings. (Amended 13 July 1993) PROVISIONAL LAW ON INCOME TAX OF NATURAL PERSONS Supplement 2 Rates of Income Tax which are used while computing the tax from monthly wages received at an extra job
11. The 18% rate is upheld for the portion of taxable income less than 0.4 MSL earnings.
12. The 20% rate is upheld for the portion of taxable income in excess of 0.4 MSL earnings but not in excess of 1.0 MSL earning.
13. The 25% rate is upheld for the portion of taxable income in excess of 1.0 MSL earning but not in excess of 1.5 MSL earnings.
14. The 30% rate is upheld for the portion of taxable income in excess of 1.5 MSL earnings but not in excess of 2.0 MSL earnings.
15. The 33% rate is upheld for the portion of the taxable income exceeding 2.0 MSL earning. (Amended 13 July 1993) ____________