Tax Reform in Lithuania

Tax Reform in Lithuania had been adopted in 2005. The government started the reform program by introducing three tax laws. These are discussed below.

Reform in Social Tax:
The government introduced a new law on social tax in 2006. According to this an extra 4% tax would be imposed on the gain of legal entities. The government aimed to reduce the negative effects of lowering the individual income tax through this new law. Moreover, the purpose of this tax was to finance the social programs and minimize poverty level.

All the profit tax payers had to pay this social tax. The tax was collected on the profit that had been measured according to the Law on Profit Tax.

Tax had to be paid in advance and it was based on the profit of the taxation period, that is, the calendar year. According to the new tax law, within the third month of a taxation period one third of the total amount of tax must be paid in advance. The annual tax report had to be submitted together with the profit tax report, but the social tax report’s form would be different.

Tax on Immovable Properties:
Another law regarding the taxation on immovable properties was introduced by the Lithuanian government. According to this law, the responsibility of the immovable property tax had been imposed on all the citizens.

The government aimed to determine a transparent law for immovable property tax so that it could extend immovable property tax base and abstain the habit of avoiding tax by giving the properties to any common man and then leasing it. The government also attempted to provide fair competition by dividing the tax burden evenly.

The immovable property tax was calculated by taking the mean of the immovable properties’ market value and value determined according to the Reproducible Value Method. Moreover, the law said that the immovable properties’ individual valuation might be regarded as its taxable value.
Individual Income Tax:
The law on individual income tax had been introduced by the Lithuanian government to minimize the personal income tax rate. However, this law was mainly concerned about the employment related earnings. Another aim of this rule was to attract the foreign investors by balancing the capital taxation and work.

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Last Updated on : 26th June 2013

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