REPUBLIC OF LITHUANIA
LAW
ON TAXES ON PROFITS OF LEGAL PERSONS
(as amended by 13 July 1993)
1. Taxable Entities and Taxable Objects
Article 1. A profit tax shall be imposed on:
(a) enterprises with rights of legal persons, the activities
whereof are regulated by the Republic of Lithuania Law on
Enterprises, and
(b) legal persons engaged in non-profit activity, to the
extent said income shall be received from commercial-economic
activity, with the exception of non-budgetary resources of
institutions whose expenditures are fully reimbursed by the
State from the State Budget. (Amended 11 May 1993)
Article 2. A profit tax shall be imposed on taxable profit
computed according to the procedure defined in Chapter 2 of this
Law.
2. Definition of Taxable Profit
Article 3. The total of sales revenue and non-operating
revenues (hereinafter - gross revenue) shall constitute the
basis for computing the amount of the taxable profit.
Sales revenue shall comprise income generated from the sale
of goods and services and other assets (with the exception of
profit received from the exploitation of fixed assets for no
less than one year), compensation, and income generated from
renting assets.
Non-operating revenues shall constitute payments received
from economic sanctions and other income not related to the
production and sale of goods and services.
While computing taxable profit, the following income shall
be eliminated from non-operating revenues:
1) dividends and interest income received on bonds;
2) the share of profit received by shareholders from other
enterprises;
3) compensation for insured assets received from insurance
organisations;
4) the share of income (profit) received by founders from
individual (personal) enterprises or from partnerships; (Amended
11 May 1993) and
5) sums received for charity and sponsorship regulated by
the Republic of Lithuania Law on Charity and Sponsorship.
(Amended 13 July 1993)
Article 4. Profit shall be computed by deducting from gross
revenue the production and distribution costs related to goods
and services sold as specified in Article 5.
Taxable profit shall be computed by deducting from profit
amounts not liable to tax, as set forth in Article 6.
Taxable profit of legal persons engaged in non-profit
activity shall consist of the difference between income received
from paid activities and expenditures on administering said
activities. (Amended 11 May 1993)
Article 5. When computing taxable profit, the following
actual production and distribution costs, as well as expenses
related to the goods sold, shall be deducted from gross revenue
of an enterprise:
(1) material expenditures and other comparable expenditure,
including business trip expenses;
(2) depreciation charges providing for the replacement of
fixed assets, but not exceeding tax rates;
(3) labor costs;
(4) social insurance contributions;
(5) compulsory insurance contributions, with the exception
of insurance contributions for the state capital accumulated in
the enterprise;
(6) tax on State natural resources, licence fees (Amended 13
July 1993) and pollution tax, but not exceeding the established
rates and limits, and land and value-added taxes; and
(7) interest on bank credits and land rent;
(8) Repealed 13 July 1993.
When computing taxable profit, only actual production and
circulation costs confirmed by legal documents having legal
force and the expenses of an enterprise specified in Par.1
hereof shall be deducted from gross revenue.
Importation of material assets from abroad must be confirmed
by customs declarations.(Amended 11 May 1993)
Article 6. When computing taxable profit, the entire amount
of the actual expenses of those charitable organisations and
funds, societies and unions of the disabled as well as their
enterprises which are specified in the Republic of Lithuania Law
on Charity and Sponsorship and which expenses are related to
charitable and sponsorship affairs shall be deducted from
taxable profit computed in accordance with the procedure set
forth in Article 4 of this Law provided said expenses are
confirmed by legally enforceable documents.
When computing taxable profit of charity donors or sponsors
who are not specified in Par.1 hereof, the actual expenses
related to charitable and sponsorship affairs and confirmed by
legally enforceable documents shall be twice deducted from
taxable profit computed in the manner established in Article 4
of this Law; the deducted amount, however, must not exceed 40
percent of taxable profit. Sums allocated for charitable and
sponsorship affairs which are in excess of 40 percent of taxable
profit shall be liable for taxation in the general manner.
The procedure established in this Article shall not apply to
charity dispensed or financial support given to foreign legal
persons with the exception of cases when such charity is
dispensed or financial support is given through international
charitable organisations or Lithuanian communities located
abroad. (Amended 13 July 1993)
3. Tax Rates
Article 7. The tax rate shall be:
1) 10 percent of the portion of taxable profit appropriated
for capital investments.
Capital investment shall be acquisition of fixed assets for
long-term use (buildings, structures, machinery, technological
equipment and other fixed assets) and non-material property for
long-term use ( technological licences, patents, and trade marks)
as well as expenses related to unfinished construction work; and
2) 29 percent of other taxable profit. (Amended 6 February
1992 and 11 May 1993)
The Government of the Republic of Lithuania may fix lower
tax rates on taxable profits in the branches of economy that are
given priority. (Amended 30 May 1991)
4. Tax Reliefs
Article 8. The rate of profit tax for legal persons
producing agricultural products and for specialised enterprises
providing services for agriculture shall be 10 percent of the
taxable profit.
If the portion of income from agricultural products and
services provided for agriculture is less than 60 percent of
sales revenue, all profit shall be subject to taxation at the
rate provided in Article 7 of this Law.
The tax rate for creative unions (unions of architects,
artists, designers, photographers, composers, film makers,
scientists, writers, folk artists, theater actors and directors,
and journalists) as well as their companies and organisations
which allocate at least 29 percent of their profit for financing
the needs of creative unions, shall be 5 percent of the taxable
profit. (Amended 27 June 1991 and 11 May 1993)
Article 9. Enterprises which receive sales revenue only
for their own products and which employ handicapped employees
shall be entitled to the following deductions in computing
taxable profit: (Amended 11 May 1993)
Proportion of Handicapped Deduction of Taxable
Employees Profit
Over 50% 100%
40-50% 75%
30-40% 50%
20-30% 25%
The categories of individuals to whom the status of
handicapped employees is applicable and the method of computing
their proportion to the total number of employees, as well as
regulations elaborating on the application of such tax relief
shall be established by the Government of the Republic of
Lithuania.
Article 10. Local government Councils may allow certain
persons tax deductions or exempt them from profit tax for a
specified period of time; however, the sums due shall be payable
from the budgets of the local governments. Rules regarding the
means by which deficiencies in State Budget revenue are
satisfied shall be established by the Ministry of Finance of the
Republic of Lithuania.
If a taxpayer under the Laws of the Republic of Lithuania is
entitled to several tax reliefs, only the biggest tax relief
shall be granted. (Amended 11 May 1993)
5. Computation and Payment of Tax
Article 11. The Taxable Entity shall compute the amount of
the tax and pay the amount due to the appropriate budget, as
provided by the Law on Budgeting of the Republic of Lithuania.
Legal persons having structural units on the territories of
other local governments ("subsidiaries") shall pay at the end of
the appropriate period the amount of the tax due to be paid into
the budgets of the local governments in proportion to the number
of employees in the subsidiaries located on the various
territories of those governments. The tax shall be paid in the
prescribed manner only in cases where more than 20 people are
employed in subsidiaries.
Article 12. Payment for given taxable year shall be made in
installments, in advance, and the amount of a given installment
shall be computed by applying the installment rate.
The installment rate shall be computed by dividing the
total amount of the profit tax paid for the preceding taxable
year by the amount of sales revenue received during the
preceding taxable year.
The installment rate shall be computed from an estimate
submitted by the taxable entity in conjunction with the
appropriate State Tax Inspectorate, in accordance with the
procedure established by the Ministry of Finance.
The amount of advance payments shall be computed by applying
the installment rate to the actual sales revenue. The taxable
entity shall deposit estimated payments 3 times a month into the
appropriate budget by the date specified and in the manner
established by the Ministry of Finance.
For estimating advance payments for the period up to the
10th day of February of the upcoming taxable year or up to the
date specified by the State Tax Inspectorate, the installment
rate applied in the preceding taxable year shall be used.
Article 13. Taxable entities that receive a consideration
portion of income by means other than through banks shall deposit
advance payments in accordance with the procedure coordinated
with the appropriate State Tax Inspectorates.
Article 14. Following the close of each calendar quarter
and on or before the 15th day of the month of the next calendar
quarter, and following the close of the taxable year, that is,
on or before the 1st day of February of the following taxable
year, taxable entities shall file with the appropriate State tax
inspectorates and their departments financial statements
established by the Republic of Lithuania Law on the Principles
of Accounting and a profit tax return. (Amended 11 May 1993) The
form of the return and the information contained thereon shall
be established by the Ministry of Finance.
If the amount of tax shown on the return exceeds the amount
paid during the taxable year, the taxable entity shall, within
10 days from the due date for the filing of the return, deposit
the additional estimated sum required into the budget prescribed
by the Law on Budgeting of the Republic of Lithuania.
Any excess estimated amount paid in advance shall, with
taxable entity's consent, be either refunded or credited against
taxes subsequently due and payable.
6. Responsibility for Correct Computation of the
Amount and Payment of Profit Tax
Article 15. The taxable entity shall be held responsible
for correct computing of the amount of the profit tax.
If the taxable profit and profit tax are understated on the
tax return, the amount of tax due for the understated profit,
plus a penalty equal to 200 percent of the computed amount of
tax due for the understated profit shall be recovered into the
appropriate budget prescribed by the Law on Budgeting of the
Republic of Lithuania.
The amount of the tax due for the understated profit and the
penalty shall be paid within 5 days after such violation is
established. (Amended 11 May 1993)
Article 16. The taxable entity shall be held responsible
for paying the profit tax by the due date. Failure to pay the
taxes required under this Law shall subject the taxable entity
to liability for interest at the rate of 0.5 percent on the
principal amount due for each day that the tax remains unpaid.
Payments into the budget not deposited on the date prescribed
therefor shall be recoverable by the State Tax Inspectorate
without suit.
Article 17. Officers of the taxable entity shall be
personally responsible for furnishing false information
resulting in an erroneous assessment of the tax due, and shall
be subject to liability in accordance with the procedure
established by law.
VYTAUTAS LANDSBERGIS
President
Supreme Council
Republic of Lithuania
Vilnius
31 July 1990
No. I-442