Repatriation of Profits from Lithuania

Lithuania is of the three Baltic States which has become quite attractive to foreign investors after entering the European Union. Ever since the government has made important steps in attracting foreign capital and know-how which has led to the economic development of the country.

The authorities offer many incentives to foreign entrepreneurs coming to Lithuania for starting companies or for working here. Among these incentives are those related to the taxes a foreigner must pay in Lithuania. The repatriation of profits or income generated in Lithuania is part of the incentive package foreigners can benefit from here.

Those interested in opening companies in Lithuania can rely on our local consultants for personalized services. We can also advise on the rights of foreign investors of repatriating the profits earned in Lithuania to their country of origin.

Tax holidays for the repatriation of profits from Lithuania

The Lithuanian taxation system is made up of various tax holidays and breaks which provide for the repatriation of profits under very advantageous circumstances. The government has put in place various incentives, among which special tax rates (reductions and exemptions) which allow foreigners to send their earnings from various sources of income to their home countries.

The government has also introduced special laws related to foreign direct investments under which overseas companies and businessmen could benefit from lower income taxes under certain circumstances.

The following incentives are available for foreign investors doing business in Lithuania:

• -          tax deductions on the corporate income tax for research and development activities;
• -          reductions of the capital gains tax for holding companies registered in Lithuania;
• -          dividend tax exemptions under the EU Parent-Subsidiary Directive applicable to certain companies;
• -          a foreign tax credit which is limited to the amount of money paid under the Lithuanian corporate tax.

Foreign investors interested in how to minimize the taxes they pay here can ask for accounting services and business consultancy with our specialists.

 Repatriation of profits under Lithuania’s double tax treaties

The repatriation of profits from Lithuania is most of the times possible under the provisions of the double tax treaties signed with other countries. Investors from those countries can benefit from various tax deductions and exemptions in order to not be taxed on the same income in Lithuania and their home countries.

Among the most important provisions of such agreements are those related to permanent establishments which can take the form of branch offices. These entities will not be taxed in their home countries, but only in Lithuania, this way the parent company will be able to repatriate the profits made here without paying any additional taxes.

In the case of double taxation, the foreign company will be entitled to tax returns or credits in the limit of the amount of money paid as a tax in the other country. We remind foreign entrepreneurs that we offer specialized company registration services in Lithuania.

Repatriation of profits under the form of dividends earned in Lithuania

One of the best ways of repatriating profits as a foreign investor in Lithuania is dividend payments.  The withholding tax paid on the issuance of dividends is set at a flat rate of 15; however, under the participation exemption regime, reduced rates can apply.

In order to benefit from the participation exemption regime, one or more of the following conditions must be satisfied:

• -          dividends can be exempt from the withholding tax if a foreign company owns at least 10% of the subsidiary for a minimum period of one calendar year;
• -          dividends repatriated to a foreign company in an EU or EEA country can be exempt from the corporate tax if they are subject to the same corporate tax rate in the home country;
• -          dividends can also be exempt from the corporate tax if both conditions above are met;
• -          dividends tax exemptions are also available under the Parent-Subsidiary Directive.

In order to understand how the repatriation of profits from Lithuania works, we mention that taxation here is based on tax residency. This means that a natural person or company must be registered for taxation in Lithuania, case in which the income tax will be applied on the income any of them earns at a global level.  In the case of foreign citizens and companies, only the incomes made in Lithuania will be taxed here.

For full information on the taxation system applicable in Lithuania and the best way of repatriating profits to another country, please feel free to contact us. We can also help if you want to open a company in Lithuania.