The Lithuanian State Tax Inspectorate has updated its Corporate Income Tax guidance, clarifying how profits from unlimited liability entities and redistributed dividends are taxed, and confirming exemptions for certain pension and trust funds.
The Lithuanian State Tax Inspectorate (VMI) published updated guidance on 18 March 2026, revising its official commentary on the Corporate Income Tax Law to clarify the taxation of profits distributed by unlimited liability entities and the treatment of redistributed dividends.
The update specifies that profit distributed by Lithuanian partnerships and similar entities is non-taxable for corporate participants only if it stems from income already subject to corporate income tax (CIT). When a distributing entity earns both taxable and non-taxable income, the exemption must be applied proportionally, with any portion attributable to non-taxable income included in the participant’s CIT base.
Redistributed dividends retain their character as dividends at the participant level and are not included in taxable income, provided traceability of the original dividend is maintained. The guidance also confirms that dividends received from foreign unlimited liability entities may be exempt from CIT if taxed abroad and properly documented.
Additional clarifications cover pension and trust funds: Lithuanian and certain foreign pension funds not treated as taxable entities are exempt from CIT on received dividends, and standard CIT withholding is not required. Similarly, dividend payments to trustees under certain trust arrangements are outside the normal CIT rules.
The commentary supplements Articles 12 and 32 of the Corporate Income Tax Law and provides examples illustrating proportional taxation for mixed-income partnerships.
