Lithuania finalises guidance on foreign company interests

Foreign capital parts can qualify

Letter RTD-144 applies the amendments made by Law XV-488 to Articles 12(15) and 30(2) of Corporate Income Tax Law No. IX-675. From the 2027 tax period, the statutory term for a share can include a part in a foreign limited-liability entity whose capital is formed from parts. The entity must be organised in the European Economic Area or a country with which Lithuania has an applicable double-tax treaty and must be subject to corporate income tax or an equivalent tax.^[1][2]

Holding and transaction tests remain

The Lithuanian seller must ordinarily have held more than 10% of the voting rights continuously for at least two years. A three-year holding period applies where the transfer occurs in a reorganisation or transfer covered by Article 41(2). The exemption does not apply to an asset transfer or where the interest is transferred back to the issuing entity. The commentary also says the holding-period condition is disregarded where disposal is required by law.^[1]

Legal form must be tested

The commentary uses a Ukrainian TOV as an example: its capital is divided into parts rather than shares, while the interests confer governance and profit-distribution rights. The treatment is not automatic for every foreign partnership or membership interest. The investee must satisfy the location, limited-liability, capital-form and tax-liability conditions in the amended provision.^[1]

Evidence will be important

A taxpayer should retain evidence of the foreign entity's legal form, tax status, voting percentage and holding period. The commentary identifies material such as a foreign commercial-register extract and confirmation from the foreign tax authority that the entity is liable to corporate income tax or an equivalent tax. Groups should assemble that evidence before treating a disposal gain as exempt.^[1]

Loss restriction mirrors the exemption

Article 30(2) provides the corresponding downside: where an interest satisfies the relevant participation conditions, a loss on disposal is not deductible and cannot be carried forward. Lithuanian groups planning disposals from 2027 should therefore classify foreign legal forms, document voting rights and holding periods, and model both gain and loss outcomes. Detailed analysis of Article 41(2) reorganisations remains a separate transaction-specific step.^[1][2]