Lithuania’s government has approved the ratification of its first double taxation agreement with Pakistan, aimed at preventing dual taxation and strengthening measures against tax evasion and profit shifting.
Lithuania’s government approved the ratification of the income tax treaty with Pakistan on 21 January 2026.
Signed on 23 September 2025, this tax treaty aims to prevent double taxation and strengthen measures against tax evasion and profit shifting, in line with OECD and G20 standards.
The agreement covers profit and income taxes in Lithuania and income tax and super tax in Pakistan. For dual-resident companies, residence will be determined by mutual agreement between the tax authorities, based on factors such as incorporation and effective management.
Withholding tax rates are set at up to 12.5% for dividends (with reduced rates of 5% or 7.5% for substantial shareholdings), and 10% for both interest and royalties.
Both countries use the tax credit method to avoid double taxation, and the treaty includes an anti-abuse rule denying benefits where obtaining them was a principal purpose.
The treaty will take effect after the exchange of ratification instruments and will apply from 1 January in Lithuania and 1 July in Pakistan of the following year.
The treaty still needs to be approved by the parliament (Seimas) before it can take effect.
