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HMRC internal manual

Double Taxation Relief Manual

Lithuania: Interest and Royalties

In accordance with the agreement, Lithuania is entitled to the following withholding taxes:

a. 10 per cent of the gross amount of interest;

b. 5 per cent of the gross amount of royalties that are for the use of industrial, commercial or scientific equipment;

c. 10 per cent of the gross amount of other royalties

The EC Directive on Interest and Royalties (2003/49EC) (see INTM400010 to 400110) provides for the abolition of source state taxation on interest and royalty payments made between associated companies in different Member States. It also ensures that the payments are subject to tax once in a Member State.

However, Lithuania has obtained a derogation and will be allowed to defer full implementation of the Directive and carry on deducting withholding taxes until the expiry of an six year period commencing 1 July 2005. For the first four years, the Directive allows for a 10 per cent rate to be applied, with 5 per cent being the rate for the remainder of the period.