Seimas has adopted the amendment to the Republic of Lithuania Law on Corporate Income Tax which essentially consolidates one level of taxation on investments into collective investment undertakings in the “hands” of the end recipient of investment earnings, i.e. the natural person. Under this amendment, all income deriving from eligible undertakings for collective investment are exempt from the income tax, as well as the income received by intermediate structural entities (between the collective investment undertaking and the end investor) in relation to investments into collective investment undertakings. The amendments to the Law on Corporate Income Tax will come into force on 1 January 2018.

This is one of the substantial modifications of the legal acts proposed by the Lithuanian Private Equity and Venture Capital Association (LT VCA) aimed at creation of a competitive fiscal environment, which could contribute to promotion of investment in Lithuania and development of the capital market, which could become an important alternative source of business financing.

“I am happy that the persistent work of the past two years yielded the awaited results – the Association succeeded in opening up a dialogue with competent authorities and proving to them that in order to become attractive, the legislation regulating the private equity and venture capital business must integrate a favourable tax treatment competitive with the neighbouring countries,” said Akvilė Bosaitė (COBALT), Chairman of the LT VCA Legal and Regulatory Committee.

“For the longest time, taxation rules applicable to the undertakings for collective investment were incomprehensive and rather complex, while the return on investment was reduced by a substantial fiscal burden. The gap was finally filled by the adopted amendment allowing to create properly defined competitive taxation rules for operations of collective investment undertakings, which offer favourable conditions for investments in Lithuania,” added Jūratė Zarankienė (TaxLink Baltic), the member of the LT VCA Legal and Regulatory Committee.

More information about LT VCA proposals towards improvement of legal and fiscal environment and private equity market is available here: LT VCA proposals.