[ESTABLISHING A BUSINESS ENTITY IN LITHUANIA] 320
continuously for at least 12 months. The participation exemption does not apply to dividends paid to foreign companies registered or organized in listed tax havens; also, it does not apply to dividends which are being paid to foreign companies if their main goal or objective is to get a tax benefit, which conflicts with Council Directive 2011/96/EU. Interest Interest paid to non-resident companies is generally subject to a 10% withholding tax. No withholding tax is applied to interest paid to resident companies in EEA countries or countries having a tax treaty with Lithuania. Other exemptions include interest on government securities issued in international markets, deposit interest and interest on subordinated loans meeting the criteria prescribed by the Bank of Lithuania. Royalties Royalties paid to non-resident companies are subject to a 10% withholding tax. No withholding tax is applied to royalty payments if the recipient is an associated company of the paying company and is a resident in another EU Member State. Two companies are “associated companies” if (i) one of them holds directly at least 25% of the capital of the other company or (ii) a third EU company holds directly at least 25% of the capital of the two companies. A minimum holding period is 2 years until royalty payment. Other income Income from sale or lease of immovable property located in Lithuania is subject to a withholding tax at a rate of 16%. Reassessment on a net basis is available upon request.
A 16% withholding tax applies to income paid to non-residents (including companies) for entertainment and sports activities performed in Lithuania, as well as to payments to members of supervisory boards. Reassessment on a net basis is available upon request for entertainment and sports activities. Capital gains received by foreign entities otherwise than through its permanent establishment are not subject to withholding tax in Lithuania. 4.1.5. Corporate Income Tax Resident companies and permanent establishments of foreign entities (including branches) in Lithuania are subject to corporate income tax on worldwide income. Permanent establishments of non-resident companies are subject of corporate income tax principally on the same grounds as resident companies. The general corporate income tax is 16%. A small company (its average number of employees does not exceed 10 persons, and its taxable income during the taxable period is less than EUR 300,000, taking into consideration the total average number of employees ant the total annual income of associated companies) may be exempt from CIT for the first tax period and entitled to a reduced rate of 6% for subsequent tax periods. Income earned from the commercialization of scientific research and experimental development production is subject to a reduced rate of 6%. Ordinary losses of up to 70% of taxable income in the taxable period may be carried forward indefinitely. Capital losses may be
ILN Corporate Group – Establishing a Business Entity Series
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