THE LIST OF FREE ECONOMIC ZONE ACTIVITIES HAS BEEN EXTENDED
As from 1 January 2017, amendments to the Law on Free Economic Zones and Corporate Profit Tax Law came into force, on which basis more companies (including service centers) will be entitled to make use of the free economic zone benefits.
The amendments to the Law on Free Economic Zones and Corporate Profit Tax Law came into force allowing companies, whose average number of employees within the tax year concerned was no less than 20 and which have capital investments of at least 100,000 Euros, to be exempted from the corporate profit tax for 6 years’ term, and to be eligible to corporate profit tax rate reduced by 50% for the subsequent 10 years.
Such benefits can be applied to the company only if no less than 75% of the income generated during the tax year concerned is received from the accounting, bookkeeping or consulting services (with exception of audit, invoice examination and veracity verification).
NEW PROCEDURE FOR POSTING OF EMPLOYEES TO/FROM LITHUANIA
In cases established by the Law on Guarantees for Posted Employees, Lithuanian Labour Inspection will have to be notified by the foreign entity about the posting of employees to Lithuania.
As from 1 January 2017, the amendments to the Law on Guarantees for Posted Employees came into force, whereby it was established that foreign companies posting employees in Lithuania for 30 days or longer period or for construction works, will have to inform Lithuanian Labour Inspection.
In cases when Lithuanian companies are posting employees abroad, rules and procedures of the host country will have to be followed. In cases of Lithuanian company’s employees posting to other EU/EEE countries this will, generally, mean that the respective institution of the host country will have to be notified by the Lithuanian company.
POSTPONEMENT AND AMENDMENTS TO THE NEW LABOUR CODE
As the effective date of the New Labour Code has been postponed until 1 July 2017, amendments to the Code are intended to be discussed in the Lithuanian Tripartite Council.
The coming into force of the New Labour Code of the Republic of Lithuania has been postponed until 1 July 2017, aiming to ensure higher level of protection of employees’ rights. In order to meet the expectations both of the employers and employees, further amendments of the New Labour Code are intended to be discussed in the Lithuanian Tripartite Council. Such discussions are likely to take place and the results thereof seen within the coming weeks. Specific amendments to the Code can be expected thereafter.
BONUSES PAID TO MEMBERS OF MANAGEMENT OR SUPERVISORY BOARDS SHALL BE SUBJECT TO SOCIAL SECURITY CONTRIBUTIONS
As from 1 January 2017, pension social security contributions shall be charged on bonuses paid to members of management or supervisory boards.
Amendments to the Law on State Social Insurance became applicable from 1 January 2017, imposing pension social security contributions on bonuses paid to members of management or supervisory boards of the Lithuanian companies. Currently, the tax rate applicable on pension social security is 26,3% (23,3 paid by the company, and 3% by the recipient of the bonuses).
DIFFERENT BONUS PAYMENTS FOR MEMBERS OF MANAGEMENT AND SUPERVISORY BOARD MEMBERS IS IN LINE WITH THE LAW
In its decision dated 30 September 2016, the Supreme Court of Lithuania has decided that different bonus payments for management and supervisory board members is not to be considered as a breach of principle of equality, established by the Civil Code of the Republic of Lithuania.
Supreme Court of Lithuania in its decision has ruled that in cases when bonuses distribution criteria are not established in the company’s documents of incorporation, the distribution of bonuses dedicated to members of management or supervisory board can be done in equal or different portions and the mere fact of different amount of bonuses paid to individual members does not, by itself, constitute the breach of the principle of equality.
According to the principle of equality, when the company’s documents of incorporation do not limit the discretion of the respective corporate body of the company (e.g., shareholders’ meeting) to decide on distribution of bonuses, persons in the same position (i.e., Board/Supervisory Board members) cannot be discriminated or in the other way treated differently. However, this does not restrict the respective corporate body’s ability to choose and establish the criteria, which will be used for allocation and distribution of bonuses to the (individual) Board/Supervisory Board members. Decision on establishment of the allocation criteria is at the sole discretion of the respective corporate body of the company (i.e., shareholders’ meeting and/or Supervisory Board).
FINANCIAL INCENTIVES FOR EMPLOYERS TO EMPLOY YOUNG AND OLDER AGE PEOPLE
The instrument financed by the European social fund “Support for Labour” has been launched allowing companies to received compensation of the part of the salary paid to the employee.
According to the program, the employer may apply for compensation of up to 23,3% of the salary of the employee in cases when:
1) employer has employed a young person, who has no work experience at the age of between 18 to 29. Compensation could be paid for a period of up to 12 months.
2) employer has employed 54 years or older person, who was unemployed for at least 6 months. Compensation could be paid for a period of up to 24 months.
Number of employees, who could be employed in one company, is not limited. During the instrument implementation period, single company may receive compensation of up to 200,000 Euro. Compensations are made quarterly.
15 million Euros is allocated for the first invitation, which has already been announced. Applications will be accepted until 28 February 2019. Second invitation is planned to be announced in the first quarter of the year 2019, where additional 25 million euros is planned to be allocated.