Dividend Tax in Lithuania
Dividends are taxed at 15% rate. From 1st March 2012 it is possible to pay dividends few times per year -that is for a period shorter than financial year. Shareholders having shares providing them more than 1/3 of the votes (if bigger quorum is not required by articles of association) shall have a right to initiate paying dividends for a period shorter than financial year.
However, the aforementioned decision to pay dividends for the shareholders shall not be taken if:
- Company has outstanding obligations, paying terms of which are over till taking the decision;
- Company has losses in the financial year;
- Company's equity is smaller or after paying dividends would become smaller than total sum of the authorized capital, compulsory reserve, reappraisal reserve and reserve for acquiring the own shares.
Moreover, if company established in the Republic of Lithuania comes to the decision to divide the profit of the company to its shareholders, however that profit was exempted from corporate income tax reasoned by the incentive, it will be taxed at the rate of 15% of the proportionate part of the distributed profits.
Since any personal income by residents will be taxed residents-individuals shall pay 20% total tax on dividends. Wherewith, in respect of dividends paid to non-residents 20% withholding tax will be applied if the double tax treaty will not set differently.
Tax-free dividends in Lithuania
Regarding tax free dividends, Dividends paid by a Lithuanian entity to a foreign entity will not be taxed if:
- Foreign entity controls for 12 months more than 10% of voting shares in Lithuanian entity; and
- Is not registered or organized in target territories (for instance Ecuador).
- Foreign entity is registered in the EEA state and its profit is taxed by corporate income tax or identical tax.