Mexico and Lithuania signed an Income Tax Treaty on 23 February 2012. The treaty has come into force on 29 November 2012, and will be applicable from 1 January 2013.
Under the provisions of the treaty an enterprise will have a permanent establishment in the other contracting state if it performs services there for at least 183 days in a twelve month period. A construction site, installation or assembly project or related supervisory activities will constitute a permanent establishment if continuing for more than six months in the other state.
The maximum withholding tax on dividends is 15%, but is reduced to zero where the recipient has a direct 10% shareholding in the company paying the dividend. Withholding tax on interest and royalties is restricted to 10%. The treaty also contains a limitation of benefits article providing that a resident of a contracting state cannot obtain the tax reductions or exemptions available under the treaty if residence in a contracting state was achieved only for the purposes of obtaining tax relief under the treaty for the resident or a related party.
