[ESTABLISHING A BUSINESS ENTITY IN LITHUANIA] 318
all the other shareholders of that company. However, the shareholder or a group of shareholders, owning not less than 95% of the voting shares of a company’s shares, has the right to request the mandatory sale of the minority shareholders’ shares as well.
25% of shares, interests, member shares, voting rights or rights to a share in distributable profits or exclusive rights to acquire them). Additional interest deduction limitation rules apply to interest expenses incurred due to loans from all parties. Entities can fully deduct interest expenses that do not exceed interest income and deduct any excess amount of interest expenses that do not exceed 30% of earnings before interest, tax, depreciation and amortization (EBITDA) or up to EUR 3,000,000. EBITDA and the deductible amount of interest expenses are calculated on a group level. Entities that are members of a consolidated group are allowed to fully deduct interest expenses for financial accounting purposes if they can demonstrate that the ratio of their equity over their total assets is not more than 2% lower than the equivalent ratio of the group and all assets and liabilities are valued using the same method as in the consolidated financial statements. Interest expenses that are non-deductible in a year may be carried forward for an unlimited period of time. 4.1.2. Related-party Transactions Transfer pricing (TP) rules apply to transactions between a Lithuanian resident company and a person associated with the resident company (a controlled transaction). Transfer pricing documentation rules apply to domestic and cross-border transactions with associated enterprises. A master file shall be prepared by the companies that belong to a multinational entity group and whose revenue during the previous tax year exceeded EUR 15,000,000. A local file shall be prepared by the companies whose revenue in the previous tax year exceeded EUR 3,000,000. The preparation of a local file
Please note that shareholders of a company may conclude a shareholders' agreement, regulating relationships of shareholders of the company, including but not limited to, the agreement on voting in the general meeting of shareholders, various provisions beneficial for minority shareholders, etc. There is also a possibility to establish a protection for minority shareholders in the establishment documents of the company. 4. Foreign Investment, Thin Capitalization, Residency and Material Visa Restrictions 4.1 Taxation 4.1.1. Thin Capitalization Rule Thin capitalization ratio is 1:4. Interest and currency exchange loss on the capital borrowed from the controlling creditor, which exceeds the equity of the company more than 4 times, are non-deductible for corporate income tax purposes. The controlling creditor is the one who: • directly or indirectly holds more than 50% of shares or rights (options) to dividends; or • together with related parties, holds more than 50% of shares or rights (options) to dividends, and the holding of that creditor is not less than 10%; or • any company which is a part of the debtor’s company group (a company group exists when a parent company directly or indirectly holds more than
ILN Corporate Group – Establishing a Business Entity Series
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