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Lithuania Enacts Corporate Tax And VAT Changes

by Ulrika Lomas, Tax-News.com, Brussels

17 January 2018


Enhanced corporate tax incentives and certain changes to value-added tax rules have been introduced in Lithuania as part of the 2018 Budget, approved by parliament in December.

Under the new law, effective January 1, 2018, newly established companies can benefit from a zero percent corporate tax rate for the first year of operations, provided that annual income does not exceed EUR300,000 (USD367,000) and the company employs no more than 10 employees on average. However, shareholders must be natural persons, and the company must not be reorganized or cease trading for the first three tax years.

In addition, companies can claim a reduced five percent rate of corporate tax on the share of profits generated by the use of the research and development-based intangible assets. Companies may also benefit from an enhanced deduction on R&D spending.

Furthermore, the new law increases the allowed reduction of taxable profit related to investment in certain fixed assets from 50 percent to 100 percent. These assets include computer equipment, software and intellectual property rights, machinery and equipment, and road transportation vehicles such as trucks.

With regards to VAT, thermal energy equipment qualifies for the reduced nine percent rate of VAT under the new laws, and all non-reimbursable prescription medicines is subject to VAT at five percent, a measure intended to increase access to medicines.

TAGS: VAT rates | tax | investment | value added tax (VAT) | tax incentives | energy | law | intellectual property | employees | corporation tax | Lithuania | research and development

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