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An article "Lithuania will reduce corporate income tax" was published in Äripäev by our partner Priit Lätt.

On December 9, 2009 the Lithuanian parliament decided to reduce the rate of corporate income tax in Lithuania as of 2010. The rate of corporate income tax will be reduced to the level of pre-2009, i.e. 15%, and to 5% for small scale businesses (in 2009 the corporate income tax rate was 20% and 13% for small scale businesses).

Mr Arturas Baksys, a tax consultant of the Law Firm Glimstedt in Lithuania, says that the President will most probably proclaim the law soon, hopefully at the end of this week. Baksys is of the opinion that this is a positive signal for all entrepreneurs and as a result of this change in taxation Lithuania will restore its position among the countries with the lowest level of corporate income tax in the European Union.

The Law Firm Glimstedt Straus & Partners tax expert, attorney-at-law Mr Priit Lätt, says that the decision of the Lithuanian parliament to reduce the corporate income tax will have a positive effect on both the Lithuanian local entrepreneurs as well as foreign investors. This shows a country’s courage to use tax-policy measures with the aim of canalising the economy to a more favourable direction for taxpayers. It can be predicted that the short-term deficit of tax proceeds in the state budget will be compensated by improvements in the business climate and thus the growth of budget proceeds in a long-term perspective.

Mr Lätt added that in comparison with the corporate income tax rates in Estonia and Latvia, the aforementioned decision will make Lithuania again the most attractive to foreign investors and may influence the latter to opt for Lithuania. Accordingly, the corporations acting in the Baltic region may start channelling their profits from mutual transactions to Lithuania.

“Estonia should follow the Lithuania’s example in its tax policy and reduce tax rates - especially in a situation where the reduction in the income tax rate has been stayed for two years already”, says Lätt.

For further information, please contact: partner Priit Lätt (priit.latt@glimstedt.ee)