Lithuania is rapidly becoming a popular destination for entrepreneurs looking to start a crypto business (VASPs). With its highly educated workforce, low taxes, and favorable business climate, it’s no surprise that the country is attracting both domestic and foreign investors.
With the increasing popularity of cryptocurrencies, many businesses are exploring how they can incorporate these digital assets into their operations. However, navigating the tax implications of crypto can be complicated. In Lithuania, crypto is subject to corporate taxation, and businesses should be aware of the rules and regulations in order to stay compliant. Please see below a general overview of Lithuania’s tax environment.
Personal taxation matters
Firstly, it’s important to note that the Lithuanian State Tax Inspectorate (STI) treats cryptocurrencies as assets, rather than currency. This means that any gains from the sale of crypto are subject to personal income tax at the standard rate of 15%. Losses from the sale of crypto can be offset against other taxable income, subject to certain limitations.
Corporate taxation matters
Meanwhile, businesses are taxed from 5% to 15% corporate tax from the generated profits (after deducting business expenses) on crypto asset service provider (CASP) services. It shall be noted that the STI requires that all transactions involving cryptocurrencies be properly documented and recorded in the company’s accounting records. This includes purchases, sales, and transfers of crypto. Failure to properly document these transactions can result in fines or penalties.
Additionally, businesses that receive payment in crypto must also record the value of the payment in euros, as the euro is the official currency of Lithuania. This means that businesses must use the exchange rate at the time of the transaction to calculate the value of the payment in euros.
Finally, businesses should also be aware of the value-added tax (VAT) implications of crypto transactions. According to the STI all the crypto asset service providers (CASP) services are treated as financial services. Therefore, all crypto related services fall under VAT exempt rule. Nevertheless, Lithuanian regulation allows to register as a VAT payer under the voluntarily basis and obtain the possibility to deduct purchase VAT.
In summary, businesses operating in the crypto space in Lithuania should be aware of the tax implications of their activities. This includes properly documenting all transactions involving crypto, calculating the value of crypto payments in euros, and understanding the VAT treatment of crypto sales. By staying informed and compliant with the regulations, businesses can successfully incorporate crypto into their operations in Lithuania.
Key takeaways of Lithuanian tax regime:
- Crytpo asset service providers (CASP) crypto related services are treated as VAT exempt
- CASPs shall pay corporate tax of 5% to 15% depending on the size of the company;
- Personal income tax on dividends (for shareholders) – 15%
NB: please note that in order to reach maximum tax efficiency specific corporate structure may be established.
If you have any questions related to the crypto asset service provider (CASP) taxation matters, do not hesitate to contact us, we would be happy to assist you @Fintech Balance.