[ESTABLISHING A BUSINESS ENTITY IN LITHUANIA] 317
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
4.1.6. Further Corporate Tax Exemptions For corporate taxpayers who have been implementing investment projects (e.g., acquisition of fixed assets such as machinery and equipment, trucks and trailers, computer hardware and software, communication equipment and rights), taxable profits may be reduced up to 100%. R&D costs may be deducted by a triple amount in the taxable period when they are incurred. Companies established in free economic zones are exempt from corporate income tax for the first 10 years following the date of capital investments and they are subject to a 50% reduction in the CIT rate for 6 subsequent years: • if capital investments are not less than EUR 1,000,000 and the companies meet certain other conditions; • if capital investments are not less than EUR 100,000, the average number of employees is not less than 20 in the financial year, and the companies meet certain other conditions. 4.1.7. Employment Related Taxes The government of Lithuania has set forth the minimum pay (EUR 5,14 per hour) and minimum monthly wage (EUR 840 per month). The hourly pay or monthly wages of an employee may not be lower than the minimum hourly pay or the minimum monthly wage. The minimum monthly wage can only be paid for unqualified work. Taxes that shall be deducted from the agreed employee wage are the following: • personal income tax (standard rate is 20%, any portion exceeding EUR 101,094 (60 average monthly
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 15%. 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 5% for subsequent tax periods. Income earned from the commercialization of scientific research and experimental development production is subject to a reduced rate of 5%. Ordinary losses of up to 70% of taxable income in the taxable period may be carried forward indefinitely. Capital losses may be carried forward for 5 years to be offset against future capital gains. Tax losses can also be transferred from one company to another within the same group of companies and within the same tax period if certain conditions are met.
ILN Corporate Group – Establishing a Business Entity Series
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