Tax Changes in 2011


2010 12 09


Tax changes in 2011 are basically designed for the improvement of business environment or affected by the commitments to the European Union. The following changes fall under the main changes in these laws: the rate of personal income tax applied on income from individual activities is reduced, the validity of the reduced VAT rates is prolonged, the excise duty rates on diesel fuel and tobacco are adjusted in line with the EU commitments. Amendments to the tax laws provided along with the Law on the State Budget for 2011 were adopted by the Seimas (Parliament) of the Republic of Lithuania and signed by the President of the Republic of Lithuania.

Personal Income Tax

In order to encourage individuals to get involved into business activities and to motivate those persons to pay income imposed on business profits instead of fixed amount tax by acquiring business certificate, the personal income tax rate has been reduced from 15 % to 5%. This rate will be applied taxing profits derived from individuals' business activities like production (agriculture included), trade or most of service supplies. The rate of 15%, will continue to be applied on profits from liberal professions (such as: lawyers, notaries, consultants and etc.), and also on real estate sales and lease as well as revenue from the transfer of securities.

Corporate Tax

Taking into account the amendments to the PIT Law introducing the 5% rate on personal income derived from agricultural activity), the corporate income tax rate of 5% will continue to be applied on profits of enterprises, if income derived from the agricultural activity of that enterprise exceeds 50% of the total amount of income received during the taxation period.

The deadline for the payment of the corporate income tax (the first day after of the 10th month of the next taxation period) not having been changed, itis established that the annual corporate income tax return for the taxation periods commencing in 2010and later should be submitted after the end of the taxation period and before the first day of the 6th months of the next taxation.

Excise Duties

In accordance with the EU requirements, since 2011 the excise duty rate for all types of cigarettes is to be at least LTL 221 per 1,000 cigarettes, until now such rate  (at least LTL 221 per 1,000 cigarettes) was applied on the category of the most popular cigarettes and more expensive cigarettes (more expensive than LTL 7.20). Such change in the rate would not affect the category of the most popular and more expensive cigarettes, and, as regards the change in the price for cheaper than LTL 7.20 cigarettes, the weighted average retail price per packet might increase only up to 10 cents, however, the changes in prices for specific price categories will depend upon producer and wholesaler pricing decisions.

Also, since 2011 excise duty rate for cigars and cigarillos will be increased from LTL 38 to  LTL 80 for the kilogram of the product .

One of the phases of the transition period for the excise duty on diesel fuel granted to Lithuania by the EU ends this year. Due to commitments to the European Union, since January next year the rate of excise duty on diesel fuel  will be increased from LTL 947 to LTL 1,043 per 1,000 litres. Due to this reason, the average retail price per litre of diesel fuel might increase by approximately 12 cents.

Since 2011 natural gas, which is used by local (city and suburban transport) regular transport buses as motor fuel, will be exempt from excise duty.  Due to this exemption 1 cubic metre of natural gas might become cheaper by approximately 92 cents, while natural gas costs per mileage might decrease by approximately 70 cents. This would predetermine a lower cost of the aforementioned transport services, enable savings of the state and municipal funds (allocated for carriers to compensate for various passenger privileges), thus the losses incurred by carriers would decrease, and the use of fuels less harmful to environment would be promoted.

VAT Exemptions

With the amendments to the VAT Law, the application of the reduced 9% rate of VAT on heating and hot water, and the reduced 5% rate of VAT on supplies of pharmaceuticals and medical aid was prolonged until the end of 2011. The reduced 9% rate of VAT on books and non-periodical information publications was prolonged for indefinite period. Also, the Parliament fixed the reduced 9% rate of VAT on hotel-type and special accommodation services, which would be applied until the end of 2011.