The Double Taxation Agreement (DTA) between the United Kingdom and Lithuania was signed on the 23rd of February 1998. The agreement aims to eliminate the double taxation of income and ensure that taxpayers do not pay more than once for the same income in the two countries. The DTA applies to individuals and companies in both countries who are subject to taxation on their income in both nations.
The UK and Lithuania`s DTA covers various forms of income, which include business profits, dividends, royalties, interest and pensions from personal services. The agreement ensures that residents of either country will not be subject to double taxation on these forms of income. The DTA also provides rules for determining the residence of an individual and company for tax purposes.
Under the DTA, businesses and individuals can apply for reduced rates of withholding tax on dividends, royalties, and interest. The agreement states that withholding tax will be levied at a maximum rate of 5% for dividends paid to a company that owns more than 10% of the paying company`s capital. For other dividends, the maximum withholding tax rate is 15%. The rate of withholding tax on royalties and interest is restricted to 10%.
The DTA also provides for the elimination of double taxation on capital gains. In the UK, residents are not subject to capital gains tax on the disposal of shares in a Lithuanian company unless the shares account for more than 50% of the company`s value and have been held for less than six months. In Lithuania, gains from the disposal of shares in the UK company are exempt from taxation unless the company`s assets consist primarily of immovable property in the UK.
The DTA also contains provisions to resolve disputes between the two countries` tax authorities. The agreement establishes a Joint Commission, comprising representatives from both countries, to resolve any disputes that may arise. The Commission helps taxpayers to avoid double taxation and provides guidance on compliance with the agreement`s provisions.
In conclusion, the Double Taxation Agreement between the UK and Lithuania aims to eliminate double taxation of income and ensure that taxpayers are not subject to unfair taxation. The agreement provides for reduced rates of withholding tax on dividends, royalties, and interest and eliminates double taxation on capital gains. The Joint Commission established under the DTA is responsible for resolving any disputes between the two countries` tax authorities. The agreement provides a clear framework for businesses and individuals to manage their tax affairs in both countries, creating certainty and stability for taxpayers.