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Updated 04.01.2024   Important details Dividends are entitled to shareholders who were shareholders of the company on the day of the shareholders' meeting announcing the dividends, regardless which year profit are distributed. Dividends are also considered to be shareholders' income received by reducing the company's authorized capital, if this capital has been increased from the company's profit. Income received by the owner of an Individual enterprise or a member of a Small partnership after the distribution of the company's profits is treated as dividends. Private limited companies (UAB) and public limited companies (AB) may pay dividends only in cash. Dividends cannot be paid in advance. Dividends are usually paid once a year, when the result for the year ended, is calculated, but they can also be paid for a period shorter than the financial year, provided that all the requirements for the payment of interim dividends are met.   Taxation of dividends If dividends are received by individuals, they are subject to personal income tax (PIT), if legal entities are subject to income tax (IT).   Lithuanian company pays a Lithuanian resident Dividends paid by a Lithuanian company to a Lithuanian resident are taxed at 15% PIT.   Lithuanian company pays a foreigner Dividends paid by a Lithuanian company to a foreigner are taxed at 15% PIT in Lithuania. If Lithuania has concluded a double taxation avoidance agreement with the state of residence of the foreigner receiving the dividends, then the dividends are taxed in both countries according to the rates provided for in the agreement, which in Lithuania is usually lower than the standard rate.   Lithuanian company pays another Lithuanian company Dividends paid by a Lithuanian company to another Lithuanian company are not taxable if the company receiving the dividends holds (or intends to hold) at least 10% of the voting shares in the company paying the dividends for 12 months. If a company with the intention of holding shares for more than 12 months has benefited from this benefit but has subsequently transferred the shares before the end of 12 months, the dividends paid must be taxed at 15% IT. If the company receiving the dividends does not meet any of these conditions, the dividends paid are taxed at 15% IT.   Lithuanian company pays a foreign company Dividends paid by a Lithuanian company to a foreign company are not taxable if the foreign company holds (or intends to hold) at least 10% of the voting shares in the company paying the dividends for 12 months and is not registered in the offshore territories. If a foreign company does not meet any of these conditions, the Lithuanian company must pay 15% IT when paying dividends. If Lithuania has concluded a double taxation avoidance agreement with the state where the foreign company receiving the dividends is registered, the rate provided for in the agreement shall be applied. Note: If a foreign company meets the above conditions under which dividends paid to it are not taxable, then the tax rate provided for in the double taxation agreement does not apply.   A foreign company pays a Lithuanian company Dividends paid by a foreign company to a Lithuanian company are not taxable in Lithuania if: — The foreign company is registered in a state of the European Economic Area and is a payer of income tax or similar tax; or — The Lithuanian company has been holding (or intends to hold) at least 10% of the voting shares in a foreign company paying dividends for 12 months without interruption and this company is not registered in the offshore territories. If none of these conditions is met, the Lithuanian company pays 15% IT on the dividends received from the foreign company.   A foreign company pays a resident of Lithuania Dividends paid by a foreign company to a resident of Lithuania are taxed at 15% PIT in Lithuania. If Lithuania has concluded a double taxation avoidance agreement with the state where the company paying the dividends is registered, then the dividends are taxed at the rate provided for in the agreement, which is usually lower than the standard rate.   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 2430344  /  info@audita.lt    
Updated 04.01.2024   When a shareholder grants a loan to a company, the tax consequences arise in the following cases: 1. The company may include interest paid in allowable deductions if the interest rate corresponds to market interest. If the amount of interest paid exceeds the interest available on the market, the excess will not be considered as a allowable deduction. In order to prove the market interest rate, it is necessary to prove the interest that a particular company can borrow on the market from an unrelated person. Therefore, we recommend that you have documentation of the loan transaction with the shareholder that would justify the compliance of the applied interest rate with the interest in the market (for example, offers of commercial banks to the company to conclude a loan agreement). 2. If the amount borrowed exceeds the company's equity * more than 4 times, the tax administrator may recognize the interest paid on the excess as a not allowable deduction and tax it as dividends if both of the following conditions are met: a) The interest rate is higher than the market interest rate; b) The shareholder (lender) controls ** the company on the last day of the tax period. 3. Interest paid to a natural person shareholder (both a resident of Lithuania and a foreigner) shall be taxed in Lithuania at the rate of 15% of personal income tax. 4. Interest paid to a Lithuanian legal entity is taxed at the applicable corporate income tax rate (15% or 5%). 5. Interest paid to a legal person registered in a state of the European Economic Area or in a state with which Lithuania has concluded a double taxation agreement is not taxable. 6. Interest paid to a legal person that is not registered in a state of the European Economic Area or in a state with which a double taxation agreement has been concluded shall be taxed at the rate of 10%. 7. A natural person shareholder may lend to the company without interest. In this case, there are no tax consequences for either the shareholder or the company.   * The ratio of borrowed amount to equity is calculated on the last day of the tax period (excluding the result of that tax period). ** A shareholder is considered to control a company if he directly or indirectly owns more than 50% of the shares or together with related parties holds more than 50% of the shares and the shareholder himself owns at least 10% of the shares.   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 2430344  /  info@audita.lt
Updated 04.01.2024   Taxation of the transfer of shares When the income from the transferred shares is classified as taxable income, only the gain on the sale of the shares is taxable. i. y. the difference between the revenue received and the purchase price. The purchase price of the shares consists of the shares purchase price, plus the actual acquisition costs of the shares: commission, taxes, state fees, etc.  
Taxation of the resident (person) When the personal income from the transferred shares is classified as taxable income, the share of the profit from the sale of shares not exceeding 120 VDU* (average salary) will be taxed at the rate of 15%, and the share of the profit exceeding 120 VDU at the rate of 20%. Please note that when calculating whether the income of a resident did not exceed 120 VDU, not only the income from the sale of shares but also other income received by the resident is added together (excluding income from employment, dividends and individual activities), i.e. if you receive income from the sale of shares and other taxable income, it will be aggregated and the rates of 15% and 20% will be applied accordingly. The part of the profit from the sale of shares not exceeding EUR 500 is not taxable. This relief does not apply when: 1. The shares are transferred to the company which issued them; 2. The shares were acquired by increasing the authorized capital from the company's funds (there are additional conditions); 3. Income from the sale of shares received from foreign companies registered or otherwise organized in the offshore territories; 4. When the shares are deemed to have been transferred in the liquidation of the company.
  Entity taxation Capital gain from the sale of shares (the difference between the sale and purchase prices of shares) is subject to income tax at the rate of 5% or 15%. Capital gain from the sale of shares is not taxable if both of the following conditions are met: 1. The company whose shares are transferred shall be incorporated or otherwise organized in a State of the European Economic Area, or in a State which has been concluded a double taxation agreement with Lithuania, and is liable to corporate tax or tax equivalent thereto. 2. The company transferring the shares shall hold more than 10% of the voting shares of the company whose shares are transferred for at least 2 years without interruptions. This relief does not apply when the shares are transferred to the shares issuing company.
  * 120 VDU, in 2024 amounts to EUR 228,324 (120 VDU * EUR 1902.70).   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 2430344  /  info@audita.lt
Updated 01.09.2021   The employer may not unilaterally reduce the employee's salary without the employee's consent, with the following exceptions: 1. When the remuneration of a certain industry, enterprise or category of employees is changed by laws or Government resolutions. 2. When the provisions of a collective agreement change the remuneration of the whole enterprise or of a certain category of employees. The written consent of an employee is required only if the change in the terms of remuneration reduces the employee's salary agreed in the employment contract concluded prior to the conclusion of the collective agreement. 3. Where the conditions of remuneration are changed not in the employment contract but in the regulations, the orders of the head of the company, other administrative acts and the employment contract do not contain specific references to these documents.   Example The employment contract stipulates the following payment terms: the employee is paid a fixed part of the salary of EUR 2,000 and a variable part - up to 30% the amount of the fixed part of the salary (there is no reference to a specific document). In this case, the variable part is calculated and paid according to the procedure approved by the order of the manager. Changing this procedure will not require the employee's consent to the variable part, as the terms of payment set out in the employment contract will not be changed.   Tips for the employer The employment contract shall provide only for a fixed part of the salary and shall not discuss the payment of bonuses or bonuses. It is recommended that bonuses and bonuses be provided in local documents (regulations, company manager's orders, other administrative acts), as in this case the employer may change, pay or not pay bonuses and bonuses at its discretion and does not require the written consent of the employee.   We will be happy to assist you with accounting, taxation or legal matters Get in touch with us today +370 5 2430344 / info@audita.lt
Updated 01.11.2023   The classic situation 2 shareholders set up a company, the shares of which were divided equally 50/50, and one of them became the manager. The company has been operating successfully for some time, orders have been growing and profits have been rising, but one day the attitude of the shareholders differed. As the disagreement escalated, they encountered unexpected problems: — the company did not pay dividends because none of the shareholders had enough votes to make a decision; — the shareholders could not change the manager because none of them had enough votes to make a decision; — the shareholder who became the manager was able to act at his own discretion and use the company's resources, as the manager is allowed to make many decisions without the consent of the shareholders; — the manager could fire another shareholder (who worked for the company) and separate him from the company's activities. Unfortunately, such situations occur often and regardless of the number of shareholders in the company.   Shareholders’ agreement To avoid similar situations, shareholders can enter into a shareholders ’agreement and agree on how they will behave in certain situations. For example, shareholders may agree that if the shareholders do not make a decision on the distribution of profits, the company must pay a proportion of the distributable profits as dividends. The shareholders may agree that the manager is appointed for a specified period, after which the decision on the manager is made by another shareholder. Shareholders may also agree: how the shares would be redeemed if they could no longer work together; whether shareholders can engage in competing activities; how the shareholder can obtain information about the company's activities; and other issues. A shareholders' agreement can be concluded when setting up a new company or already in operation, it is important to do so before the start of disagreements.    
We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 2430344  /  info@audita.lt

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