The world becomes more global, companies more often carry out activities in several countries, so it is very important to assess whether such activities do not create tax obligations in other countries. A foreign entity that has started business in Lithuania has to assess the tax consequences related to such activities in both jurisdictions.
We have developed a free tool - PwC Permanent establishment tracker© - which offers a prompt and hassle-free tentative evaluation of the risk that Your company has tax obligations in Lithuania.
In general, there are 3 main criteria that help to evaluate if a foreign company can be deemed as acting through a PE in Lithuania. If Your company’s activities in Lithuania meet at least one criterion, You should consider registering a PE:
Fixed place of business criterion: a foreign company has a fixed place of business in Lithuania through which the business of an enterprise is carried on. The criterion may be satisfied if You use premises in Lithuania, employ local personnel, duration of activities exceeds 6 months, etc.
Dependent agent criterion: a foreign company has a dependent agent (i.e. an agent who works solely for the foreign company) which concludes contracts on behalf of the foreign company or plays a principal role in concluding contracts with customers in Lithuania.
Construction project criterion: a foreign company has a building site or construction or installation project in Lithuania that lasts more than 6 months (term might be extended to 9 or 12 months in double tax treaties with some countries).
What if Your company creates a PE in Lithuania? In such case:
it has to register as a corporate income taxpayer (more information - here)
it has to calculate taxable profit according to Lithuanian legislation (standard tax rate - 15%)
it has to submit annual corporate income tax return within 5,5 months after the end of the fiscal year
it may have obligations related to other taxes as well (personal income tax, VAT)
We can help to assess the permanent establishment risks in Lithuania, to analyze the consequences and to recommend an appropriate structure of the activity.
Director, Tax & Legal Services, PwC Lithuania
Tel: +370 686 25488
Manager, Tax & Legal Services, PwC Lithuania
Tel: +370 610 69518