Lithuania: New withholding tax rates
Effective
immediately
a 15% withholding tax rate applies on income paid for Lithuanian securities eligible in Clearstream Banking1.
Eligibility criteria for reduced tax rates
Government bonds:
- 0% for non-Lithuanian residents (both legal entities and individuals);
- 0% for EU pension funds2;
- 0% for Lithuanian legal entities (interest is included in the taxable corporate income subject to a 15% profit tax);
- 0%3 for Lithuanian individuals on the amount of interest (including all interest from other securities acquired after 1 January 2014 and deposits where agreement was concluded after 1 January 2014) that does not exceed LTL 10,000 per tax year;
- 0% for non-Lithuanian individuals if bonds are acquired before 1 January 2014.
Corporate bonds:
- 0% for non-Lithuanian legal entities registered or otherwise established in any state of the European Economic Area (EEA) or in any country with which Lithuania has an effective Double Taxation Treaty (DTT);
- 0% for EU pension funds2;
- 10% for non-Lithuanian legal entities registered or otherwise established in a non-EEA/DTT country;
- Treaty rate for non-Lithuanian individuals registered or otherwise established in any country with which Lithuania has an effective DTT in place;
- 0%3 for individuals (both resident or non-resident of Lithuania) on the amount of interest (including all interest from other securities acquired after 1 January 2014 and deposits where agreement was concluded after 1 January 2014) that does not exceed LTL 10,000 per tax year;
- 0% for individuals (both resident or non-resident of Lithuania) if bonds are acquired before 1 January 2014 where corporate bonds were repurchased not earlier than 366 days from their emission, except in cases where interest is received from a tax haven;
- 0% for Lithuanian legal entities (interest is included in the taxable corporate income subject to a 15% profit tax).
Equities:
- 0% for EU pension funds2;
- 0% for legal entities (both resident or non-resident of Lithuania) that hold 10% or more of the voting shares of its subsidiary for an uninterrupted period of at least 12 months, including the moment of the distribution of dividends, except in cases where the entity paying dividends is registered in a tax haven.
- Treaty rate for non-Lithuanian (both legal entities and individuals) registered or otherwise established in any country with which Lithuania has an effective DTT in place.
Impact on customers
We remind customers that tax relief at source on income paid for Lithuanian securities is not available through Clearstream Banking.
A standard refund of withholding tax on income from Lithuanian securities is available if the beneficial owner is not resident in Lithuania and qualifies for a reduced rate in accordance with:
- Lithuanian domestic legislation; or
- A DTT between their country of residence and Lithuania. The maximum rate of withholding tax is defined in the relevant DTT attached below.
Documentation requirements for standard refund
To apply for a standard refund of withholding tax on income from Lithuanian securities, the following documents must be submitted to CBL:
- DAS-2 Official Claim Form, one per reclaim application completed by each beneficial owner in two originals. The form is available at http://www.teo.lt/gallery/Dokumentai/Investuotojams/DAS-2.pdf.
If the part VI is not completed by the beneficial owner’s local tax authorities, a Certificate of Residence, issued by the beneficial owner’s tax authorities, can be submitted instead. To be accepted by the Lithuanian Tax Authorities, the Certificate of Residence must be translated into the Lithuanian language. - Credit Advice specifying income payment details including the security type, gross amount of the payment, date of the payment and amount of tax withheld. A Credit Advice must be completed for each intermediary financial institution between the beneficial owner and Clearstream Banking. For example, if the only intermediary financial institution between Clearstream Banking and the beneficial owner of the dividend income is the Clearstream Banking customer himself, then both a Clearstream Banking Credit Advice and a Credit Advice issued by the customer are required.
- Letter of Request to Clearstream Banking for Reclaim of Lithuanian Withholding Tax, completed by the customer and authorising Clearstream Banking to reclaim withholding tax from the Lithuanian Tax Authorities on behalf the beneficial owner.
Statutory deadline for receipt of the reclaim documentation
The statutory deadline for reclaiming withholding tax using the standard procedure is five years after the relevant income payment for which tax reclaim is to be made, unless the DTT in place specifies a different deadline. (For example, the DTT between Luxembourg and Lithuania defines a three-year deadline.)
The deadline by which Clearstream Banking must receive the documentation for a standard refund application is, at the latest, two months before the statutory deadline. All standard refund applications received after this deadline will be processed by Clearstream Banking on a “best-efforts” basis. However, in such cases, Clearstream Banking will apply an extra charge and accepts no responsibility for forms that have not reached the Lithuanian Tax Authorities by the date considered being the statute of limitations deadline.
With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer’s responsibility to determine any entitlement to a refund of tax withheld, to complete the forms required correctly and to calculate the amount due.
When are refunds received?
The estimated time for receiving a refund is six months from the date on which Clearstream Banking receives the certified documents, although this can vary depending on when the application is filed and the complexity of the information supplied in the reclaim form.
Capital Gains Tax
There is no capital gains tax withheld through Clearstream Banking on securities held in Clearstream Banking. Capital gains tax may however be payable on specific gains by certain categories of beneficial owners. Clearstream Banking does not assist in this regard. Investors should consult their tax advisor for further information.
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1. Clearstream Banking refers to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
2. An EU pension fund is considered a fund that is not recognised as a legal entity and established to facilitate and organise the investment of natural persons' retirement funds. The pension fund is a common asset pool meant to generate stable growth over the long term and provide pensions for natural persons when they reach the end of their working years and commence retirement. The assets of the fund are managed by a pension fund management company according the fund's rules.
3. Interest is taxed at 15%. Tax reclaim for individuals is possible after the end of the financial year by providing an income tax reclaim form to the Lithuanian Tax Authorities.