Beginning of new financial year is a need to review legal requirements applicable to taxation of 2014 year’s income. There were several substantial amendments of Personal income tax law in Lithuania, which concern declaration and taxation of investors and shareholders income received during 2014.

Taxation of capital gains

• Tax advantages related to sale of shares acquired before year 1999 and dividends from such shares were abolished, thus profits from sales of share and dividends from such shares received in 2014 shall be taxed with 15 % Personal income tax. Non-taxable minimum of 3000 EUR is applicable to gains received from sales of financial instruments.
• Tax advantage related to interest received from loans which are repaid after 1 year was abolished. Interest from loans received in 2014 is taxed with 15 % Personal income tax.

Taxation of interest

• Interest from non-equity securities issued by Lithuania and EU Member States acquired after 01/01/2014 and interest for deposits held in EU Member State banks (if contracts entered into force after 01/01/2014 are taxed with 15 % Personal income tax. 3000 EUR non-taxable minimum applicable to gains from all financial instruments.
• Interest from non-equity securities acquired before 2014/01/01, which redemption starts later than 366 days after issue, is tax exempt.
• Interest received during 2014 by foreign person from Lithuanian company, foreign company having permanent establishment in Lithuania or other foreign person acting via permanent base in Lithuania, are held to be Class A income and shall be reported in annual tax return by 2015 May 1^st .

Taxation of income from derivatives

• Income from realization of derivatives and interest received during 2014 is held Class A income in Lithuania. From which date?
• This change puts obligation on companies who pay out profits and interest to natural persons, to calculate and pay attributable personal income tax on recipient’s behalf.
• Calculating taxable profit from realization of derivatives, purchase price and purchase attributed government levies may be deducted from the sales revenue received, non-taxable minimum applies.

Non-taxable minimum

• Minimal monthly salary was increased in 2014/10/01 from 289 EUR to 300 EUR.
• General non-taxable monthly minimum is 166 EUR (if monthly income is less than 290 EUR). When monthly income is higher, non-taxable minimum is calculated under formula given in law. When monthly income is above 925 EUR, non-taxable minimum does not apply. Applicable to work employment/service related income.
• Non-taxable minimum of 3000 EUR per year, applies to gains from derivatives and sales of financial instruments (not applicable for gains received out of sales to persons registered in targeted territories and sales back to the issuing company).

Andrius Apanavičius, attorney at law of the Gencs Valters Law Firm in Vilnius

Practising in fields of  Taxation in Latvia, Lithuania and Estonia

T: +370 52 61 10 00

F: +370 52 61 11 00

andrius.apanavicius@gencs.eu