Taxation of dividends. The Lithuanian Government proposed a draft amendment to the Corporate Tax Income Law following an infringement procedure started against the country. Currently dividends paid to foreign recipients are taxed more heavily than dividends paid to domestic recipients and therefore Lithuania does not comply with the principle of free capital movement.
The legislation now in place states that a Lithuanian entity paying dividends to another Lithuanian entity is allowed to reduce its taxable base by the tax withheld on dividends while this option is not granted to a foreign entity.

According to the proposed amendment, a 15% tax rate will be levied on dividends paid both to foreign and Lithuanian companies (if the participation exemption rule is not applicable) and the Lithuanian entity paying the dividend in both cases would not be allowed to reduce the due corporate income tax by the tax withheld on dividend.

The draft amendments establishes that tax withheld on dividends paid by a Lithuanian entity to another Lithuanian entity may reduce the amount of the corporate income tax payable by the receiving entity. The new proposals provide that dividends received from foreign companies, which are subject to corporate income tax and are registered in a member state of the European Economic Area, are not subject to taxation in Lithuania. Furthermore, the tax paid on such dividends in a foreign country should be deducted from the tax base by the Lithuanian entity receiving the dividends.
Declaration of revenues. An order has come in force regarding the declaration of revenues paid to foreign taxable units according to which a foreign unit, which has received revenue from sales or some other kind of transfer of an immovable property or from rent thereof located on the territory of the Republic of Lithuania will have to submit tax returns, provided that the unit generates this revenue not through a permanent establishment and such revenue is received from a non-permanent resident of the Republic of Lithuania or from another foreign unit not through its permanent establishment in Lithuania.