Lithuania taxes permanent-establishment profit at 17%

Foreign entities operating in Lithuania through a permanent establishment (nuolatinė buveinė) now face a 17 per cent tax rate on the establishment's taxable profit.VMI The State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI) updated its guidance on how permanent-establishment profit is calculated and taxed, replacing the previous 16 per cent rate.VMI The change mirrors the standard corporate rate move VMI records elsewhere: a standard 17 per cent profit-tax rate now, with 16 per cent for the 2025 tax period.

The computation itself is unchanged. A permanent establishment's taxable profit for a tax period equals income minus non-taxable income minus allowable deductions minus limited-amount allowable deductions. Income attributed to the establishment is what the foreign entity earned through that establishment's activity. Allowable deductions cover the establishment's own actual ordinary costs necessary to earn its income or economic benefit, plus the foreign entity's off-establishment costs directly connected with the activity through the establishment, or a proportional share based on the ratio of the entity's total income to the establishment's income.

Limited-amount deductions span depreciation and amortisation of fixed assets, operation of tangible fixed assets, repairs and reconstruction, business trips, advertising and representation, natural-loss shortfalls, taxes, bad debts, spending for employees and family members, special credit-institution and insurer provisions, donations, membership fees and contributions, tax-period losses, and interest. The resulting taxable profit is declared on the annual profit-tax return form PLN204U, filed with the tax administrator with the tax paid by the 15th day of the sixth month of the following tax period.

The rate rise matters for foreign groups with Lithuanian branches and their advisers: profit earned through the establishment is taxed at 17 per cent under the updated guidance, one point above the rate previously statedVMI. Practitioners should apply the new rate to current-period profit and keep the PLN204U filing and payment deadline in view. Legal basis: VMI guidance on permanent-establishment profit calculation and taxation and Lietuvos Respublikos pelno mokesčio įstatymas.