We would like to inform that on 30th of June 2020 the Lithuanian Government adopted amendments in the Law on Corporate Income Tax that establish a Corporate Income Tax relief for investors implementing a major project under a major project investment agreement.
In the context of the mentioned amendments, a major project is considered as an investment project related to data processing, internet server services (hosting) and related activities or manufacturing, for the implementation of which a major project investment agreement has been concluded.
Major project investment agreement - an investment agreement concluded between an institution authorized by Lithuanian Government and an investor, which establishes the rights and obligations of the parties related to the implementation of a major project and other relevant terms.
According to the mentioned amendments in the Law on Corporate Income Tax, from 1 January 2021 a legal entity does not pay Corporate Income Tax on income received from implementation of a major project if the following conditions are met:
- the legal entity implements a major project in accordance with a valid major project investment agreement;
- the average number of employees required for the implementation of a major project in Lithuania during taxable year is not less than 150 (in Vilnius or Vilnius district - not less than 200);
- private capital investments in a major project in Lithuania have reached at least 20 million euros (in Vilnius or Vilnius district - at least 30 million euros);
- the legal entity does not use other CIT relief established by Point 1 and 2 of Part 16 of Article 58 and 16³ Part of Article 58 from the Lithuanian Law on Corporate Income Tax;
- at least 75 percent of the income for the relevant taxable period consists of income from data processing, Internet server services (hosting) and related activities or income from manufacturing;
- the legal entity has an auditor's report confirming the required amount of private capital investment of the legal entity.
The mentioned Corporate Income Tax relief shall be applied from the taxable period in which the investment amount and the average number of employees were reached. The tax relief could be applied for a maximum of 20 years from the date of entry into force of the major project investment agreement.
If the investment in a major project has reached at least 100 million euros, the Corporate Income Tax relief would be subject to the approval of the European Commission. In this case additional conditions shall also be met.
The above mentioned Corporate Income Tax relief could be applied to major project investment agreements concluded until 31 December 2025.
Should you have any questions, please do not hesitate to contact Leinonen tax team. We would be happy to provide further information regarding the mentioned Corporate Income Tax relief and advise if it would be relevant to your business.
The information above was prepared by the Leinonen’s tax team.
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