[ESTABLISHING A BUSINESS ENTITY IN LITHUANIA] 316
• stage three covers several of the following operations: selling, supply, delivery, payment (remuneration) and other essentially similar operations. If the activity of a foreign entity is not temporary, the cycle of commercial operations has not been completed but the stage of performed activity is considered as an independent activity of a foreign entity (or its part), the foreign entity may also be deemed having a permanent establishment in Lithuania. The two second conditions, based on which it is established whether or not a foreign entity performs its activities in Lithuania through its permanent establishment, are: • a representative/agent through which the activity is performed, • the use by a foreign entity in Lithuania of a construction site, a construction, assembly or equipment facility, equipment or structures for prospecting or extraction of natural resources in Lithuania.
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 15%. Reassessment on a net basis is available upon request. A 15% 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
4.1.4. Withholding Taxes Dividends
A 15% withholding tax is applied to dividends paid by a Lithuanian company to a foreign company. Full participation exemption is applicable to dividends if the recipient foreign company has held at least 10% of the voting shares in the distributing Lithuanian company 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
ILN Corporate Group – Establishing a Business Entity Series
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