Part II Developments in the Member States

At 1.9 % of GDP, revenue from environmental taxation is the third lowest in the EU, due in particular to transport
taxes which are the lowest in the EU-27. Compared to the 2000 level, environmental revenue declined in 2010 by
L 21 % from 2.4 % to 1.9 % in GDP terms. The Lithuanian ITR on energy (116.4 %) is the seventh lowest in the EU-
i 27 accounting for less than 70 % of the EU-27 average (166.5) in 2009.
t
h Current topics and prospects; policy orientation

u After significant reforms in 2006, 2008 and 2009 Lithuania introduced some tax policy changes during 2011. From
1 January 2012 the VAT registration threshold was increased from 100 000 LTL (€ 29 000) to 155 000 LTL
a (€ 45 000). The application of a 5 % reduced VAT rate on medicines was prolonged until the end of 2012;
n similarly, the 9 % reduced rate for residential heating is extended to 31 December 2012 (see VAT). With effect
i from 1 January 2011 the excise duty applicable to gas oil used as motor fuel was increased from € 274.27 to
€ 302.07 per 1000 l. Likewise, from 1 March 2012 the excise duty for cigarettes was increased from € 64 to 67.19
a per 1000 cigarettes and for cigars and cigarillos from € 23.16 to 24.32 per kilogram of the product.

As from 1 January 2012 Lithuania broadened the immovable properties tax base and introduced an annual property
tax of 1 % on properties whose value exceeds LTL 1 000 000 (€ 290 000). Regarding corporate taxation, the
threshold of the maximum annual income of small companies with up to 10 employees subject to a lower rate of
5 % was increased from LTL 500 000 (€ 145 000) to LTL 1 000 000 (€ 290 000).

Main features of the tax system

Personal income tax
In the Lithuanian tax system, income tax is imposed separately on different categories of income. The taxpayer
may however elect to group the income across different categories (with the exception of business income taxed
under lump-sum taxation) in order to apply personal deductions or allowances. Several categories of income
(various types of pensions, certain insurance benefits, inheritance and gifts, some interest income, mariners'
income, small agricultural income, scholarships etc.) are exempt from taxation under specific conditions. Capital
income is taxed at 15 % of gross receipts. Capital gains are in principle subject to the general 15 % rate; however,
various exemptions exist for capital gains on shares. Gains on disposal of immovable property are exempt if the
owner has held the property for at least three years (two if the sale relates to the main dwelling of the taxpayer or if
the proceeds are used within one year to acquire residential property in Lithuania or another EEA country).
Dividend income is taxed at a 20 % (instead of 15 %) rate, but royalties continue to be taxed at 15 %. Rental
income from immovable property is taxed at a rate of 15 % on the gross amount.

The 2009 reform restructured tax allowances. The basic tax exempt amount is LTL 5 640 (€ 1 633) per year, if the
annual taxable income of individuals does not exceed LTL 9 600 (€ 2 780) and applies to employment income
only; it is determined on a sliding scale, declining as income increases. No basic personal allowance is granted to
employees earning more than LTL 3 150 (€ 910) monthly. An additional personal allowance applies to taxpayers
with minor children. For the first child the monthly amount is LTL 100 and for the second and each additional
child LTL 200. If both parents raise the child(ren), the allowance is divided evenly between the parents.

A taxpayer may obtain a "business certificate" for certain types of independent activities (e.g. private
accommodation services, barber and beauty shop services, handicrafts, translation). The income earned in this way
is subject to a lump-sum tax, the amount of which depends upon the type of activity. By the end of 2010 the
Lithuanian Parliament adopted changes in the tax low concerning the rate of personal income tax applied on self-
employed income excluding professional occupations. This rate was reduced from 15 % to 5 % and is applied on
profits derived from individuals' business activities like production (agriculture included), trade or various services.

Corporate taxation
The CIT rate was progressively reduced from 29 % in 1995 to 15 % now, although there was a temporary increase
in 2009. Small companies with up to 10 employees and taxable income not exceeding LTL 1 000 000 —
approximately € 290 000 (as from 1 January 2012) — benefit from a lower 5 % rate.

118 Taxation trends in the European Union