Expatriates’ tax regime
General principles of individual taxation
2. income sourced in Lithuania and received otherwise than through a fixed base, i.e.:
- income from distributed profits;
- income from distributed profits and annual bonuses to Board and Supervisory Board members;
- income from the rent of immovable property located in Lithuania;
- income incidental to employment relations or relations in their essence corresponding to employment relations;
- income from sports activities, including income connected directly or indirectly to those activities, irrespective of whether it is paid directly to a sportsman or a third person acting on behalf of the sportsman;
- income from performing activities, including income connected directly or indirectly to those activities, irrespective of whether it is paid directly to a performing artist or a third person acting on behalf of the performing artist;
- income from the sale or other transfer into ownership of movable property where such type of property is subject to legal registration under the legal acts of the Republic of Lithuania and where it is (or must be) registered in Lithuania, and also from the sale or other transfer into ownership of immovable property located in Lithuania;
- compensations for violation of copyright or neighbouring rights.
A natural person who is not deemed to be a resident of Lithuania may, in accordance with the procedure established by the Government of the Republic of Lithuania, apply to the tax administrator for recognition as a resident of Lithuania, provided that his income sourced in Lithuania during the tax period (except for the income on which income tax reliefs provided by the treaties of the Republic of Lithuania or the avoidance of double taxation were applied during the said tax period) accounts for not less than 90% of the total income received during the tax period.
A permanent residency status for Lithuanian taxation purposes applies to an individual:
- who has a main permanent residence place in the territory of Lithuania within the tax period (i.e. calendar year).; or
- who’s place of personal, social or economic interest within the tax period is more likely in Lithuania rather than abroad; or
- who is present in Lithuania permanently or with intermissions equal or exceeding, in total, 183 days within the tax periodany twelve-month period commencing or ending in the calendar year or commencing in one and ending in another calendar year.; or
- who is present in Lithuania permanently or with intermissions equal or exceeding, in total, 280 days within the tax periods following each other and in one of such tax periods his/her presence permanently or with intermissions become equal or exceeding, in total, 90 days; or
- who is a citizen of the Republic of Lithuania who receives remuneration under an employment contract or a contract in its essence corresponding to an employment contract or whose costs of living in another country are covered from the state budget or municipal budgets of Lithuania.
Thus, permanent Lithuanian tax residents have full tax liability on their worldwide income, unless:
- A specific type of income is tax exempt in accordance with the Lithuanian legislation; and/or
- A tax relief under the double tax avoidance treaty is available.
The Law on Individual Income Tax provides for three tax rates:
15% standard personal income tax rate;
15% income tax rate on income from distributed profits;
5% income tax rate on income received from sale of waste.
Fixed income tax is applicable to individuals acquired business certificates for the appropriate activity.
The Law on Individual Income Tax establishes for two types of income:
Type A income received from Lithuanian entities and permanent establishments of foreign entities; sport and executants’ activity income; income received from sale or other transfer of title to immovable property as well as movable property subject to mandatory registration. Employment income and income of the similar character received from the permanent resident, sport and executants’ activity income, interest and royalties received from the permanent resident.
Type B other income not attributed to type-A (like gambling and lottery income, individual activity income, etc.).
Income tax from type-A income is calculated and paid by entity paying out the income. Income tax from type-B income is calculated and paid by the tax payer himself upon the end of calendar year presenting annual tax return until 1 May of the following year.
If a temporary resident receives income from the individual activity through his/her permanent base, income tax has to be paid upon the end of calendar year presenting annual tax return until 1 May of the following year. However, if the temporary resident receives other type-B income (other than income from the individual activity through his/her permanent base) he/she must calculate and pay income tax presenting tax return not later than within 25 days from the date of receipt of income.
When income is received from or through Lithuanian registered entities, income tax is deducted and paid to the state budget by those entities. When income is received from other individuals or foreign registered entities, then foreign residents must file individual income tax returns to the tax inspectorate of place of residence or place of work.