Taking care of taxes, money flow, financial reports, and other bookkeeping activities are a vital part of any business of any scale. Today we’ll discuss accounting in Lithuania — and answer the 10 most frequently asked questions on this topic.
What are the responsibilities of an accountant in Lithuania?
Accounting in Lithuania includes a variety of tasks and duties related to financial management and reporting. All of them are done according to modern standards and encompass bookkeeping, tax compliance, financial reporting, auditing, financial planning, consulting, and representation of clients to government and private financial institutions.
What accounting standards are used in Lithuania?
Companies in Lithuania must follow either the local accounting standards or the International Financial Reporting Standards (IFRS) and Lithuanian accounting laws. The latter include, but are not limited to:
- Law on Accounting
- Law on Audit Activity
- Law on Corporate Income Tax
- Law on Value-Added Tax
- Law on Personal Income Tax
How much taxes do you pay in Lithuania?
The amount of taxes one would pay in Lithuania is not necessarily fixed. The total would depend on various factors, including your taxable income, residency status, and other personal and financial circumstances. You can read more about VAT or salary-related taxes on our website. Here are the approximate numbers:
- Corporate income tax: 15%
- VAT: 21% for most goods and services
- Personal Income Tax: 20%. If the salary exceeds 60 average salaries a year, the PIT tax would rise to 32%
- Employee Social Security contributions: 19.5%
- Employer Social Security contributions: 1.77%
- Employee’s contribution to supplementary pension insurance: 3%
Is a financial statement audit mandatory in Lithuania?
Yes. It depends on whether a company earns more than 3.5 million EUR in sales revenue annually, has an average of more than 50 employees during the financial year, and the value of its balance sheet assets is more than 1.8 million EUR. If at least two of the three mentioned criteria are met, the company must go through an audit. You can read more about mandatory audits and their predicaments here. In Tezaurus we have been providing such services for over 20 years, so don’t hesitate to contact us, if you need an audit.
What is the process for submitting annual financial statements in Lithuania?
Companies must prepare and submit their annual financial statements following IFRS and Lithuanian accounting laws to relevant government agencies such as the Companies Register and State Tax Inspectorate.
What is the deadline for submitting annual financial statements in Lithuania?
The deadline for approving annual financial statements is April 30th. Theyy must be submitted within one month after the approval. It’s important to prepare for an audit in advance so the auditor has sufficient time to assess your company and the process goes smoothly in general. Therefore it’s better to arrange a deal with an audit company at the beginning of a financial year.
What tax obligations do companies in Lithuania have?
Companies in Lithuania have to:
- Pay corporate income tax
- Pay social security contributions
- Pay property tax
- File regular tax returns.
Can a foreign company set up a subsidiary in Lithuania?
Yes. A foreign company can set up a subsidiary in Lithuania by registering a new legal entity with the Lithuanian Companies Register. The process would include choosing a company name, registering with the said Companies Register, obtaining a business license, and opening a bank account. It’s always better to go through this process using professional help.
How does Lithuania tax dividends received from foreign companies?
Dividends received from foreign companies may be subject to withholding tax, depending on the tax treaty between Lithuania and the foreign country. To avoid double taxation of foreign employees, the Lithuanian government has been maintaining corresponding agreements with certain countries. You can walk through the whole list here.
How can I stay up to date on changes and updates in Lithuanian accounting regulations and laws?
The best approach here would be to hire an accountant familiar with local context, laws, and regulations, or to outsource accounting to a local firm altogether. Our professional team of accountants constantly stays in touch with all the changes and updates, so if you need a reliable accounting to outsource, you have already found one: contact us!
Overall, there are quite a lot of things to wrap your head around in terms of taking care of accounting in Lithuania. In case you are planning to open or expand your company to Lithuania, it might be a good idea to hire a local specialist. On the other hand, you could always outsource. Our company has a large history of working with both domestic and foreign companies to ensure their steady development in Lithuania. Read more about our accounting services in Lithuania.