Updated 22.05.2026
When a shareholder grants a loan to a company, the tax consequences arise in the following cases:
1. The interest paid by the company (for a loan to a shareholder) may be included in the allowable deductions* if the interest rate corresponds to the market interest rate. 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 shareholder who is a natural person (a resident of Lithuania) will be taxed from 2026 under the new progressive personal income tax (PIT) system. A 15% PIT rate applies to the portion of interest income up to 12 average monthly salaries (AMS) (EUR 27,745 in 2026). A 20% PIT rate applies to the portion of interest income from 12 AMS to 36 AMS (from EUR 27,745 to EUR 83,237 in 2026). A 25% PIT rate applies to the portion of interest income from 36 AMS to 60 AMS (from EUR 83,237 to EUR 138,729 in 2026), while a 32% PIT rate applies to the portion exceeding 60 AMS (above EUR 138,729 in 2026).
Please note that, when determining the amount of income earned by an individual and the applicable tax rate, not only interest income but also other income received by the individual is aggregated (Article 6 of the Law on Personal Income Tax).
4. Interest paid to a Lithuanian legal entity is taxed at a corporate income tax rate of 17% or 7% (the 7% rate may be applied to legal entities meeting the criteria for a small enterprise).
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. An individual shareholder may lend to the company without interest. In this case, there are no tax consequences for either the shareholder or the company.
* Allowable deductions are company expenses that can reduce the company’s profit on which corporate income tax is calculated.
** 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.
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