Lithuania Double Taxation Avoidance Treaties and Agreements
Lithuanian Double Taxation Avoidance AgreementsUpdated on Friday 05th June 2015
The double tax treaties signed by Lithuania are following the OECD and UN model agreements. There are not many countries which has signed these types of agreements with Lithuania but many drafts are waiting for the ratification. So far, there are avoidance agreements signed with Armenia, Austria, Azerbaijan, Belarus, Belgium, Bulgaria, Canada, Croatia, China, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Kazakhstan, Kirghizstan, Korea, Latvia, Luxembourg, Macedonia, Malta, Moldova, Netherlands, Norway, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom, United States of America and Uzbekistan.
These treaties are very advantageous when it comes to withholding taxes on dividends, interests and royalties paid to non-resident entities. For example, the usual withholding tax on dividends paid to non-residents is 15% while the interests and royalties are subject to a withholding tax of 10%. These taxes can be reduced by the provisions of these double tax treaties or even exempt. Other provision is that for companies where the foreign participants invested more than 10% of the share capital for more than 12 months the dividends is not taxed at all.
The corporate tax in Lithuania is 15% and can be subject of the exemption, meaning that the profit is not charged at all in Lithuania or can be credited, meaning is charged in Lithuania but a credit is offered for that amount in the country of origin.
In order to avoid tax frauds, Lithuania is part of the EU agreements covering exchange of information between its members. According to these agreements the Lithuanian tax authorities must provide all the necessary information related to its tax payers to the relevant foreign tax authorities.
Usually the rest of the countries are signing tax exchange information, action that is not necessary in Lithuania because of its membership to the EU.
In order to beneficiate from the many provisions provided by the double tax treaties, the investors must provide an evidence of their status of tax payers in the partner country. Usually this proof is a certificate of tax payer issued by the foreign tax authority.