Lithuania: Temporary solidarity contribution (“windfall tax”) for credit institutions signed into law
The law is effective as of 15 May 2023—the date the president signed the legislation.
Windfall tax for credit institutions signed into law
A new temporary solidarity contribution (“windfall tax”) aimed at the Lithuanian and European Union (EU) credit institutions operating in Lithuania was approved. The law is effective as of 15 May 2023—the date the president signed the legislation.
Background
Due to the significant strengthening of inflationary processes in the “Eurozone,” the European Central Bank decided to increase the interest rates in 2022 and 2023. As a result, credit institutions, experiencing a direct increase in interest income from loans, have limited incentives to increase interest rates on deposits and receive an atypical amount of interest income for a large surplus of liquid funds.
Summary of temporary solidarity contribution for credit institutions
The so-called solidarity contribution will be payable by the Lithuanian and EU credit institutions operating in Lithuania on the surplus of the interest received in 2023 and 2024 from Lithuanian residents.
The tax base of the solidarity contribution is 50% of the net interest income (calculated by applying a special coefficient) which exceeds the average net interest income of the previous four years (i.e., 2018-2021 for 2023 and 2019-2022 for 2024.). The contribution will be levied at a rate of 60%.
The contribution will be reported annually until the 15th day of the sixth month following the end of the tax year. A quarterly advance solidarity contribution was introduced as well.
For more information, contact a KPMG tax professional in Lithuania:
Birute Petrauskaite | bpetrauskaite@kpmg.com
Ignas Rickus | irickus@kpmg.com
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