I.       Newly established entities which fulfills the conditions detailed below may apply 0% CIT rate for the first year of the activity. The conditions are:
a.     average number of employees does not exceed 10;
b.     annual income does not exceed EUR 300 000;
c.     the shareholders of the entity are natural persons;
d.     in the three tax periods (including the first one) the activity of the entity is not stopped, the entity is not liquidated or reorganized and the shares of the entity is not transferred to new shareholders.

II.     5% CIT rate is applied to the profits earned from the use, sale or other transfer (including royalties and compensations for violated intellectual property rights) of assets created while executing scientific research and experimental development activity.

III.   The restrictions to deduct representation expenses are changed – from 1 January 2018 the tax payers will be allowed to deduct only 50% of representation expenses (till 01.01.2018 – 75%) and the total value of deductible representation expenses cannot exceed 2% of the entity’s income. We would like to note that related to the changes mentioned above, the entities will be able to deduct only 50% of the input VAT from representation expenses, instead of currently deducted 75% of input VAT.

IV.   From 1 January 2018 only gambling expenses will not be considered as representation expenses (even if they fulfil other requirements to representation expenses), while before 1 January 2018 more types of expenses were not considered as representation expenses (hunting, fishing, yachting, golf, gambling, camping).

V.     Taxable profits may be reduced by the investment project expenses up to 100% (till 01.01.2018 – the taxable profits may have been reduced up to 50%). Taxable profits may be reduced by the expenses incurred during 2009-2023 tax periods. The requirement to inform the tax authority about the investment project was abolished.

VI.   The list of activities which entities may execute in free economic zones and be entitled to use CIT incentives is abolished. However, we would like to note that trade companies may not use CIT incentives.

If you would like to know more about the tax changes, please contact us.

Lina Lapytė
+370 5 262 4835
lina.lapyte@leinonen.lt