Lithuania became more attractive for investors

14.02.2012 At the current moment Lithuania provides significant benefits to small business as well as persons that take activities in free economic zones of the state. From 1 January 2012 several amendments to the Law on Corporate Income Tax entered into force according to which now the right to use 5% corporate tax rate applies to companies that meet two conditions:

•    The number of employees doesn’t exceed 10;
•    Annual income doesn’t exceed 1 mln. litas (let’s recall that previously allowed income for 5% corporate tax rate application was 500 000 litas).

As for investments into free economic zones (FEZ) in Lithuania - Klaipeda and Kaunas - from 1 January current year the list of activities providing the right for tax benefits was extended. Now added list includes manufacturing, repair and maintenance of aircrafts and spacecrafts, programming and development of IT products, storage and processing of data, the IT service. The legislation provides with the following benefits in the case of investing in FEZ of Lithuania: the companies with authorized capital 1 million euro and performing activity that provides with the right to use such benefits, are exempt from corporate tax for 6 years, next 10 years there will be the tax burden to pay such a mandatory fee only at 50% from the tax sum. The main types of “benefits activity” in FEZ are: supply of gas, water, electricity, logistics, financial intermediation, health care, construction, etc.

Another legislative change in the tax sphere of Lithuania was increase of the company income in the case when it’s compulsory to register for VAT number: since 1 January 2012 this amount is 155,000 litas (previously that was 100,000 litas).

Expert’s opinion

“2012 started with reforms of the tax sphere in many European states. Lithuania didn’t become exclusion. For making incentives for investments flows the country decided to reduce tax burden.

Moreover as we can see Lithuania made a bet for IT sphere and included related types of activities to the list of FEZ that provides with significant benefits.

Together with other advantages of Lithuania: not expensive process of companies incorporation, comparatively simple procedure of residence permit obtaining and relatively small tax rates (basic rate of corporate tax is 15%) - the state has all the chances to attract investors’ attention”.

On the basis: www.tmagazine.ey.com

Vorontsova Maria ( the lawyer of international consulting department of Honest&Bright)