What income is subject to withholding taxes in Lithuania?

Passive income (dividends, interest, royalties) paid by a Lithuanian entity to a foreign shareholder might be subject to withholding taxes.

Generally, dividends are subject to a 15% withholding tax. Dividends are paid from profits: first, the company calculates taxable profits and pays the corporate income tax (5% or 15%) and then, the company distributes dividends and applies the dividend withholding tax.

The dividend withholding tax is not applied if the foreign shareholder is a legal entity holding more than 10% of the shares of a Lithuanian subsidiary for a period longer than 12 months (certain limitations and exceptions apply).

In case the dividends are paid out to an individual, the standard withholding tax rate is 15% and the forementioned exemption does not apply. However, Lithuania has an extensive network of treaties for avoidance of double taxation which, in certain cases, reduces the applicable withholding tax rates paid out to corporate shareholders and individuals.