Lithuania: local rules

Lithuania sets the arm's length rule in article 40 of the Corporate Income Tax Law (Pelno mokesčio įstatymas, PMĮ, No. IX-675). Article 40(1) says income and costs must be booked at the true market price. Article 40(2) lets the tax authority add to an entity's income any profit it lost because an associated person dealt on non-arm's length terms. The Minister of Finance Order No. 1K-123 of 9 April 2004 (the TP Rules, current consolidated text from 1 January 2021) sets the methods and the documentation rules. The Rules follow the OECD Guidelines and tell taxpayers to use them where the Rules are silent (OECD country profile, July 2025). The related-party report FR0528 is set by VMI order VA-27 (as amended by VA-78 of 2025), and the Pillar Two duties by the Minimum Tax Law No. XIV-2680.

There are two files. The master file is for a Lithuanian entity, or a foreign entity with a permanent establishment in Lithuania, that belongs to an international group and had income above EUR 15 million in the year before the year of the controlled transaction (TP Rules cl. 84). The local file is for Lithuanian entities with income above EUR 3 million in that earlier year, and for financial companies, credit institutions and insurers of any size (cl. 85). Neither file is needed if the deals are only with other Lithuanian entities, permanent establishments or residents, or if the controlled transaction is EUR 90,000 or less in the year, except for repeated or linked deals above EUR 90,000 and deals with a target (low tax) territory (cl. 87). The files must be ready by the 15th day of the sixth month of the year after the transaction year, so 15 June for a calendar year (cl. 19). They are not filed with VMI. They are handed over within 30 days of a tax administrator instruction, in the original language, and kept at least 5 calendar years (cl. 91, 94). Separately, the FR0528 report on related-party deals and loans is filed with the corporate income tax return if they reach EUR 90,000 (FR0528 Rules cl. 4).

The Rules list five methods: comparable uncontrolled price, resale price, cost plus, profit split and transactional net margin. They may be combined or modified if that gives an arm's length result (cl. 20). The taxpayer picks the most appropriate method (cl. 21). If a traditional method and a profit method are equally reliable, the traditional method comes first, and the comparable uncontrolled price method comes before the others (cl. 23). A price inside the arm's length range is not adjusted (cl. 54 and 57). If it is outside, the tax administrator adjusts to the median unless a better point is shown, and may pick any point if the taxpayer does not cooperate (cl. 56).

Breaking the transfer pricing documentation rules is an administrative offence under article 188 of the Code of Administrative Offences. Lithuania told the OECD in July 2025 that the fine is EUR 1,820 to EUR 5,590, or EUR 3,770 to EUR 6,000 for a repeat offence. If an audit finds unpaid tax, article 139 of the Law on Tax Administration adds a fine of 20% to 100% of the missing tax, doubled for a repeat breach within the limitation period. The article 139 fine does not apply if the return was filed before the audit order was issued. A late or missing Pillar Two notice is fined under article 188⁵ of the Code of Administrative Offences, but no fine applies for financial years that begin before 31 December 2026 and end by 30 June 2028 if the entity shows it made every effort to comply (Minimum Tax Law art. 16(2)). The amounts for Pillar Two notices and for a late CbC report were not confirmed.

Lithuania has not enacted the full Pillar Two rules. The Minimum Tax Law (No. XIV-2680, adopted 6 June 2024, in force 1 July 2024) only sets information duties. Lithuania uses the Article 50 deferral for up to six years for the income inclusion rule and the undertaxed profits rule (VA-50 cl. 3). There is no QDMTT and no top-up tax is payable in Lithuania. The law covers groups with revenue of EUR 750m or more in two of the four previous years (art. 2(1)). A Lithuanian ultimate parent must appoint a designated filing entity in another EU state, which files the GloBE return 15 months after year end (18 months for the first year in scope). The parent gives VMI three notices: the designated entity (12 months after year end), the data transfer confirmation (15 months, or 18 months in the first year) and, if it applies, the start of the initial phase (15 months). A Lithuanian subsidiary of a foreign group does not file the designated entity or data notices (VA-50 cl. 22 and 35), but it may need to file the initial-phase notice if the group uses that exemption (Minimum Tax Law art. 11).

Groups with consolidated revenue of EUR 750m or more file a country-by-country report with VMI within 12 months of the last day of the reporting year (Law on Tax Administration art. 61, VA-47 cl. 4). Each Lithuanian entity of such a group must tell VMI by the last day of the reporting year which entity will report (VA-47 cl. 12). The annual corporate income tax return and the tax are due by the 15th day of the sixth month after the end of the tax period, so 15 June for a calendar year (PMĮ art. 51(2), 53(1)). The tax period is the calendar year unless the tax authority permits another 12-month period (PMĮ art. 6). No standing extension of the return deadline was found. A time limit that ends on a non-working day or official holiday moves to the next working day (Law on Tax Administration art. 162(6)). Rulings and advance pricing agreements are available (OECD country profile).