Lithuania: Amendments to the Corporate Income Tax Law

On 1 January 2012, several amendments Corporate Income Tax Law have become effective.

Incentives for small businesses. The threshold of the maximum annual income for small companies, i.e. companies with not more than 10 employees, allowing them to qualify for a reduced corporate income tax rate of 5%, is increased from LTL500,000 to LTL1,000,000.

Incentives for investment projects. The scope of application of the incentive for investment projects is widened. Originally, Lithuanian companies carrying out investment projects could, in addition to standard depreciation, for corporate income tax purposes, deduct expenses incurred for specific types of long-term assets acquired in relation to the investment project and used by the entity for at least three years.

For the purposes of calculating taxable income for 2011 and subsequent tax years, companies may now enjoy the deduction of costs on acquisition of long-term assets, even if the assets were used for a period shorter than three years because the assets were transferred to another company as a result of reorganization, and the transferee continues to use the assets until the three year period requirement is satisfied.

Free economic zones. The list of activities to which the incentive for companies established in the free economic zones is applicable was extended. Companies established in a free economic zone, satisfying the €1,000,000 capital investment requirement and carrying out one of the mentioned activities, are exempt from corporate income tax for the first 6 years from the start of their activity in the free economic zone and may enjoy a 50% reduction of corporate income tax for the next 10 years.

VAT. The VAT registration threshold was increased to LTL 155,000. Only transactions performed in Lithuania will be taken into account for the calculation of this threshold. When the above mentioned threshold over the last 12 months is exceeded, VAT payable should be calculated not on the income exceeding the threshold but on the income of the transaction the value of which exceeded the threshold.

 

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