On 5 December 2017, Lithuania has adopted the Budget measures for 2018. The most important changes to the Law on corporate income tax are summarized below:
- An increase in the maximum credit for the investment project incentive from 50% to 100% of taxable income per year through 2023;
- The introduction of a one-year corporate tax exemption for small start-ups with an average number of employees not exceeding 10 and annual turnover of up to EUR 300,000 for the first tax period subject to certain conditions;
- A knowledge box regime is introduced in accordance with the modified nexus approach that provides for a 5% tax rate on income from qualifying IP;
- the holding threshold for application of the participation exemption would be decreased from 25% to 10%;
- An increase in the free economic zone tax exemption period to ten years with a 50% reduction for the following six years (changed from six-year exemption followed by ten-year reduction);
- A change in the 5% corporate tax rate for agricultural companies to limit the reduced rate to cooperative agricultural companies, subject to certain conditions, including that income from -agricultural activities exceeds 50% of total income; and
- The expansion of the scope of the reduced 9% VAT rate to cover hotels and related tourist -accommodation services through 2022.
