Law on Income Tax of individuals, 2 July 2002 No IX-1007 (official translation, excerpt)

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CHAPTER IV. PROCEDURE FOR THE CALCULATION OF TAXABLE INCOME

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Article 16. Procedure for the Calculation of Taxable Income

1. Unless otherwise provided in this Article, for the purpose of calculating taxable income the following shall be deducted from income in accordance with the procedure prescribed by this Law:

1) tax-exempt income;

2) income received from activities conducted under a business certificate;

3) allowable deductions related to the receipt of income from individual activities, in accordance with the procedure prescribed by Article 18 of this Law;

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Article 17. Tax-exempt Income

1. The following income shall be exempt from tax:

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3) benefits by non-profit entities to their members paid out from the funds accumulated from membership fees, with the exception of benefits that are paid to individuals connected with those entities through employment relations or corresponding relations and that are not indicated in the other subparagraphs of this paragraph;

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18) income received as charity in accordance with the procedure prescribed by the Law of the Republic of Lithuania on Charity and Sponsorship (hereinafter referred to as the Law on Charity and Sponsorship);

19) income received by inheritance, which is subject to tax under legal acts of the Republic of Lithuania on estate tax;

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29) scholarships to students and pupils of educational establishments financed from the funds of non-profit entities established in accordance with the procedure prescribed by laws of the Republic of Lithuania and foreign countries, provided the payment of scholarships is provided in legal acts regulating activities of those entities and a recipient of a scholarship is not a member, employee of the entity paying the scholarship or a member of the family of a member or employee of that entity, as well as provided that scholarship is not related to the work carried out or intended to be carried out, or the services provided or intended to be provided for those entities by a recipient of that scholarship;

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37) funds for the maintenance of the clergy, attendants at religious ceremonies and support staff (except for persons carrying out construction, repair and restoration works) of religious communities, denominations and centres (higher church authorities);

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2. The relief laid down in subparagraphs (…) 29, (…) 37 (…) of paragraph 1 of this Article (…) shall not apply if the respective income of an individual is received from foreign entities registered or otherwise organised in target territories, or from individuals whose permanent place of residence is in a target territory.

Article 18. Allowable Deductions Related to the Receipt of Income from Individual Activities

1. Unless otherwise provided by this Article, allowable deductions of a resident of Lithuania engaged in individual activities shall be the expenses incurred by such a resident of Lithuania in the normal course of business and related to the income from individual activities actually received during the tax period. Allowable deductions related to the receipt of income of a resident of Lithuania from individual activities and the procedure for the calculation thereof shall be established by the Government of the Republic of Lithuanian or an institution authorised by it.

2. Unless otherwise provided by this Article, allowable deductions of a non-resident of Lithuania engaged in individual activities through the fixed base shall be the expenses incurred by such a non-resident of Lithuania in the normal course of business and related to the income from individual activities actually received during the tax period. Allowable deductions related to the receipt of income of a non-resident of Lithuania from individual activities through the fixed base and the procedure for the calculation thereof shall be established by the Government of the Republic of Lithuanian or an institution authorised by it.

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4. The amount of allowable deductions shall not exceed the income actually received from individual activities during that tax period.

5. Expenses shall be supported with documents bearing all the obligatory particulars of accounting documents required by the Law of the Republic of Lithuania on Accounting and other legal acts of the Republic of Lithuania, and satisfying the established requirements where appropriate requirements with respect to the forms of documents are established by the Government of the Republic of Lithuania. In addition to the said particulars, the documents supporting the expenses shall indicate:

1) name, surname and personal number of a supplier of goods or services (where a supplier of goods or services is a natural person);

2) name, surname and personal number of a purchaser of goods or services (individual), unless otherwise provided by the Government of the Republic of Lithuania or an institution authorised by it.

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CHAPTER VI. OBLIGATIONS AND LIABILITY

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Article 34. Obligations of the Tax Administrator

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3. Upon a request of a resident of Lithuania, the tax administrator must, at the close of the tax period and in accordance with the procedure established by the Government or an institution authorised by it, transfer up to 2% of the amount of income tax paid on the income of the said resident of Lithuania for the respective tax period to Lithuanian entities which, in accordance with the Law on Charity and Sponsorship, are entitled to support.

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