PROVISIONAL LAW

(1)persons deriving income through their labor 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 labor relations;

(3)private enterprises or partnerships with rights of natural persons that derive income from commercial activity registered in the established manner. Foreigners and persons possessing no citizenship of the Republic 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 of students. Article 3.Income received in foreign currency shall be subject to taxation according to specially promulgated regulations. Chapter 2 Assessment of Taxes on Income Derived from Sources Connected with Labor Relations Article 4.Income received at the principal job and connected with the labor relations shall be subject to taxation according to the income tax rates provided by the Supplement to this law, having subtracted from it the tax-exempt minimum. Article 5.The tax-exempt minimum income earnings received at the principal job from the sources connected with labor relations shall be:

(1)for 1st group invalids - 250 Rb.

(2)for 2nd group invalids - 200 Rb.

(3)for 3rd group invalids - 150 Rb.

(4)for persons with three and more children under 18 years of age -200 Rb.

(5)for the mother or father in case of a single parent family with one child under 18 - 150 Rb, and with two or more children under 18 - 200 Rb.

(6)for employees of enterprises producing agricultural products whose income generated from the sale of goods accounts for 80 percent of gross income - 150 Rb.

(7)for other persons not indicated in Par. 1-6 of this Article - 100 Rb. Additionally, for 1st and 2nd group visually handicapped persons and for parents with at least one disabled child, the tax shall be further reduced by 30 Rb. Article 6.The following monthly earnings in cash and in kind received at a principal job from the sources connected with labor relations shall be included in taxable income:

(1)wages, including various additional payments connected with temporary disability, pregnancy and childbirth, financed out of insurance funds - the total amount 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 considered 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 by Supplement 2 to this law. Article 7.The following shall be exempt from taxation:

(1)social security and social benefits from state funds and social insurance allowances, excluding temporary disablement and maternity allowances; benefits administered by the government of the Republic or local governments and financed out of charity funds and organizations; benefits paid by enterprises, institutions and organizations on the death of a member of an employee's family;

(2)sums paid out to refund business trip expenses established by existing labor laws, and pecuniary compensations for material damage not exceeding established norms. Taxable income also shall be reduced by the amount expended on charity. "Charity" means transference of a person's earnings according to his application to organizations which performs charity functions set forth in their statutes (regulations) and also educational, health care, sports, and social security institutions financed out of state or local government budgets, if said institutions and organizations do not provide any facilities for this person. Article 8.The income earned at extra jobs and set forth in Article 6 of this law shall be subject to taxation at the rate specified in Supplement

1. "Principal job" means that enterprise, institutions or organization where employee's work record book is kept. Article 9.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 10.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. It is prohibited to pay income tax from the financial recourses 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 11.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. Article 12.Refunds of overpaid income taxes are allowed for a period not exceeding 2 years from the month in which the overpayment was discovered. Article 13.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. 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. Article 14.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 15.Income of clergymen earned from the believers for the performance of religious rites is subject to tax rates established under Chapter 2 of this law and the tax is imposed in the manner prescribed by Chapter
2. 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 16.The Royalty paid to authors and their lineal descendants for works of science, literature, art, discoveries and inventions 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 1000 rubles for each discovery or invention. Article 17.Income tax on royalties shall be assessed and withheld where they are paid out. Article 18.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 1st and 2nd group invalids irrespective of their age) are eligible for the 50 percent reduction of income tax computed under this Article. Article 19.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 2 percentage years. Article 20.The underpaid sums of income tax, not withheld or withheld, as well as a penalty equal to 300 percent of the sums due, may be recovered without initiation of a lawsuit from an enterprise, institution or organization which has paid out such a royalty. Article 21.The overpayment 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 22.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 23.Councils of local governments have the right to reduce income tax for certain tax-payers, or to exempt them from income tax, by compensating same from the local budget. Chapter 4 Taxation of Income Derived from the Commercial Activity Registered in the Established Manner Article 24.The taxable income of partnerships producing agricultural goods the sales revenues of which make up 80 percent of total earned income derived from commercial activity registered in the established manner is subject to a 10 percent rate of income tax. The taxable income of other partnerships and of private enterprises with the rights of natural persons, derived from commercial activity registered in the established manner, is subject to a 30 percent rate of income tax. Article 25.Private enterprises and partnerships with the rights of natural persons can be subject to a license fee. Having obtained the license, enterprises do not pay income tax on income derived from the activity indicated in the license. The rate of license fee is assessed by the councils of local governments of the higher level. Article 26.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 providing for the replacement of fixed assets;

(3)labor costs;

(4)social insurance premiums;

(5)compulsory insurance premiums;

(6)land and value-added taxes;

(7)interest on bank credits;

(8)environmental expenditures. Article 27.When computing taxable income, expenses related to the following shall be entirely or partly deducted from gross income:

(1)charitable, cultural, educational and other socially oriented expenses; and

(2)scientific research, design and construction expenses and expenses associated with introducing new technology. The rules for deducting expenses from gross income are the same as in computing tax on the profit of legal persons. Article 28.Income derived from the sale of agricultural goods produced on individual small holdings, farm holdings, private enterprises with the rights of natural persons excluding income derived from the sale of soft-fur carnivorous animals and nutrias and their products, flower-growing and greenhouse production shall be exempt from taxation. Article 29.Councils of local governments shall have the rights to reduce income tax or to exempt from income tax certain private enterprises and partnerships with the rights of natural person by compensating the same from the local budgets. Article 30.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 31.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 32.If a false tax return is filed, the total sum of underpayment and a penalty equal to 200 percent of the understated income shall be recovered without suing for claims. Chapter 5 Taxation of Miscellaneous Receipts Article 33.Gross income generated from the rent of property, and income derived from interest on credit as well as other receipts not indicated in Chapter 2, 3 and 4 of this law shall be subject to a 20 percent rate of income tax. Article 34.Taxes on miscellaneous receipts of persons are levied by the State Tax Inspectorate of 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 according to the procedure established by the Ministry of Finance. Article 35.Income Tax is not deducted:

(1)income derived from blood-donations;

(2)income received by legacy and gift (except the inherited royalty) the taxation of which is regulated by other standard acts;

(3)recovered alimony;

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

(5)sums received as compensation, the rate of which is established by the existing laws on labor, 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 shares;

(9)sums received from compulsory and voluntary insurance;

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

(11)gains from sale of personal property excluding self- made commodities meant for sale. 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 a taxpayer receiving miscellaneous remuneration. Returns from 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. Article 38.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 39.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 40.If gross income is understated in the turn, the total sum of underpayment, plus a penalty equal to 200 percent of the underpayment, is recoverable without suit. Article 41.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 labor relations (property rent and others). Within 10 days from the date the money was paid out, this information must be submitted to that 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. Vytautas Landsbergis President Supreme Council Republic of Lithuania XX October 1990 No. I-641 PROVISIONAL LAW ON INCOME TAX ON NATURAL PERSONS SUPPLEMENT 1 Rates of income tax applied in computing tax charged on taxable income earned at principal job and connected with labor relations: Amount of taxable income Rate of tax per month from 1 to 600 Rb 18% from 601 to 900 Rb 108 Rb + 20% of the sum in excess of 600 Rb from 901 to 1400 Rb 168 Rb + 24% of the sum in excess of 900 Rb from 1001 to 1900 Rb 288 Rb + 28% of the sum in excess of 1400 Rb in excess of 1900 Rb 428 Rb + 33% of the sum PROVISIONAL LAW ON INCOME TAX OF NATURAL PERSONS SUPPLEMENT 2 Rates of Income Tax used in computing tax charged on taxable income earned at extra job and connected with labor relations: Amount of income per month Rate of tax up to 200 Rb 18% from 201 to 700 Rb 36 Rb + 20% of the sum inexcess of 200 Rb from 701 to 1000 Rb 136 Rb + 25% of the sum in excess of 700 Rb from 1001 to 1500 Rb 211 Rb + 30% of the sum in excess of 1000 Rb from 1501 and more 361 Rb + 35% of the sum in excess of 1500 Rb RESOLUTION ON THE PROVISIONAL LAW ON INCOME TAX OF NATURAL PERSONS ENTRY INTO FORCE The Supreme Council of the Republic of Lithuania resolves:

1. To establish, that the Law of the Republic of Lithuania on Income Tax of Natural Persons comes into force with the imposition of income tax upon income earned after 1 January 1991, and is valid until 31 December
3. To establish that, until the legislative acts of the Republic of Lithuania are coordinated with the Provisional Law of the Republic of Lithuania on Income Tax of Natural Persons, those parts of legislative acts which do not contradict this law are valid.
4. To commission the government of the Republic of Lithuania by 1 January 1991 to arrange and submit to the Supreme Council for consideration: 3.1 Regulations on the imposition of tax on income of natural persons received in foreign currency. 3.2 Regulations on the assessment of income tax of natural persons, taking into account inflation.
5. To commission the Government of the Republic of Lithuania to establish by 1 January 1991 regulations on computing the value of income received in kind.
6. To commission the Ministry of Finance to establish by 1 January 1991: 5.1 Regulations on refunding to the State Budget revenues not received due to the income tax deductions allowed by self-governments to natural persons; 5.2 The form of the license, and regulations for obtaining same, for private enterprises ad partnership having the rights of natural persons; 5.3 The form of income tax return for private enterprises and partnerships possessing the rights of natural persons, and regulations for filling it in, including accounting regulations.
7. To establish that interest paid to natural persons by credit institutions on their deposits is not taxable if it does not exceed 4 percent per year.
8. The taxable income earned in 1991 by partnerships engaged in agricultural production is subject to tax rate of 5 percent in lieu of 10 percent tax rate established under Article 24 of this law.
9. To establish that tax-exempt minimum of income earned in 1991 by taxpayers indicated in Section

(6)of Article 5 of this law is 200 Rb. Bronius Kuzmickas Vice President Supreme Council Republic of Lithuania 9 October 1990 No. I-644