VMI has set out rates, exemptions and filing deadlines for income that foreign entities earn from Lithuanian sources, with new clarity on intermediaries, early dividend exemptions and non-cash payments.
Lithuania’s State Tax Inspectorate (VMI) has issued guidance on 20 October 2026, clarifying how income received by foreign entities from Lithuanian sources is taxed.
Income earned through a permanent establishment is taxed at the standard corporate income tax rate of 17 %. Income received without a permanent establishment is taxed by type, across seven categories. Where a Double Taxation Avoidance Agreement (DAIS) is more favourable than domestic law, the treaty prevails, provided the proper documents are held.
Interest
Interest paid to foreign entities registered in the European Economic Area, or in a country with an effective DAIS with Lithuania, is exempt. Other entities face 10% withholding tax on the gross amount. Interest on government securities issued in international financial markets, bank deposit interest and interest on qualifying subordinated loans are outside the tax base.
Where interest passes through an intermediary, the Lithuanian payer must identify the actual recipients and provide their details. If it cannot, 10% withholding tax applies.
Dividends
Dividends are taxed at 17%. They are exempt if the recipient is not registered in a target territory and holds at least 10% of the voting shares for an uninterrupted 12 months. Distributions by a Lithuanian collective investment undertaking to a foreign entity outside target territories are also exempt.
The exemption may be applied before the 12 months have elapsed, provided the shareholder intends to meet the condition. If the shares are sold early, the Lithuanian company must pay the 17% tax with late payment interest. Where the exemption does not apply, reduced treaty rates, such as 5% or 15%, may be used if the payer holds a completed DAS-1 form at the time of payment.
Royalties, know-how and software
Royalties are generally taxed at 10%, unless a treaty lowers the rate or an EU directive exemption applies, which covers shareholding links of at least 25%.
Technical assistance, professional advice and consultancy are generally not royalties where no specific know-how is transferred. Commercially valuable information, methods or experience passed on for use in the recipient’s business may qualify as know-how, and therefore as a royalty. Mixed contracts must be split, with tax applied only to the royalty portion.
Software, site or enterprise licences, subscriptions or database access used only for internal purposes are generally not royalties. Where software is integrated into a public platform and made available to customers, the payment may be treated as a royalty.
Real estate
Income from the sale or lease of real estate in Lithuania is taxed at 17% of the gross amount. On a sale, the foreign recipient may request recalculation so that tax applies only to the net gain, meaning the sale price minus the acquisition cost.
Income can be taxable without a cash payment. Contributing Lithuanian real estate for newly issued shares in a Lithuanian subsidiary is a taxable transfer, calculated on the acquisition value of the shares. Under a loan-for-use (panauda) contract, real estate or land taxes paid by the user for the foreign owner are treated as rental income in kind, subject to 17% withholding tax.
Other income
Compensation for copyright or related rights infringement is taxed at 10%. Income from performing and sports activities is taxed at 17% of gross payments, with an option to recalculate on net profit. A non-profit exemption may apply if the activity is not commercial. Supervisory board fees are taxed at 17%.
Filing and payment
Where a Lithuanian entity, permanent establishment or resident pays the income, the payer must withhold, declare and pay the tax. Where a non-resident pays, the foreign recipient must do so.
Form FR0313 covers general payments to foreign entities, and Form FR0640 covers dividends. Both are due within 15 days after the end of the month of payment. Form DAS-1, the request for reduced treaty rates, must be held by the payer at the moment of payment.
