On 7 December 2021, the Lithuanian Parliament adopted several important amendments to the Law (No.IX-675) on the Corporate Income Tax of the Republic of Lithuania. The law proposed the following measures:
Effective from 1 July 2022, the additional 5% corporate income tax on profits of banks and cooperative banks exceeding EUR 2 million will apply indefinitely. The additional tax is in addition to the corporate income tax rate of 15%.
With effect from 1 January 2023, a rule to eliminate the Hybrid Entity Mismatch rule will be introduced. Under the amended law, the hybrid entity configuration is eliminated by treating the hybrid entity as a Lithuanian taxpayer. In order to avoid double taxation, the Lithuanian tax base of the hybrid entity includes only that part of the income that is not otherwise subject to corporate income tax or equivalent tax under the laws of the Republic of Lithuania or another foreign state is a partner (shareholder) of a hybrid entity, is tax resident.
The law also proposed changing the conditions for applying for a corporate tax exemption for a period of up to 20 years for companies undertaking large investment projects. Under the amended law, the incentives only apply to income from the use of the intellectual property by those corporate taxpayers who actually conduct research and development activities in accordance with the legal requirements. This change will take effect on 1 July 2022.
