Permanent establishment in Lithuania for tax purposes
Lithuanian rules on Permanent Establishment stipulate requirements on a company acting through agent/representative, construction sites or using natural resources. Contradictions between DTA’s and Lithuanian rules on PE are dealt with in according manner. In this article, you can find further specific conditions determining whether or not a foreign entity performs its activities in the Republic of Lithuania through its permanent establishment:
Foreign entity is considered to be performing activities through its permanent establishment in the Republic of Lithuania if it performs its activities in the Republic of Lithuania through the dependent agent/representative. (Order No. 54 , Concerning Definition of Permanent Activities of a Foreign Entity and Approval of Criteria for Dependence/Independence of a Representative/Agent of a Foreign Entity; issued on 27th February 2002)
A representative or agent of a foreign entity can be natural or legal entity through which the foreign entity performs the whole or the part of its activities in Lithuanian. It is indifferent how the representative or agent is referred to (a broker, trade commissioner, business consultant or another type of agent). A representative/ agent may be a Lithuanian entity, another foreign entity, a permanent or non- permanent resident of Lithuania.
A foreign entity is considered to be performing its activities through a dependent representative/agent, thus constituting permanent establishment if the independent representative/agent complies with at least one of the following criteria:
- it is legally independent from a foreign entity it represents, and
- it is economically independent from the foreign entity it represents, and
- it performs activities in its name, and
- its ordinary activities correspond to the activities performed by the foreign entity through it.
A representative/agent is considered to be legally independent from the foreign entity it represents if it has its own customers. Furthermore, she/he should be linked to the foreign entity by a representation, task performance or another type of agreement stating representative’s economic independence.
A representative/agent is considered to be economically independent from the foreign entity if it obtains remuneration for intermediation services and covers its own expenses.
When representative/agent of a foreign entity complies with the above mentioned criteria but it represents only one foreign entity and its income from such activity makes up a substantial part of the represented foreign entity and/or the representative/agent, it is still considered that the foreign entity acts through the permanent establishment in Lithuania.
Foreign entity is considered to be performing activities through its permanent establishment in the Republic of Lithuania if it uses the construction site, a construction, assembly or equipment facility in the Republic of Lithuania.
Foreign entity is considered to be performing activities through its permanent establishment in the Republic of Lithuania if it uses equipment or structures for prospecting or extraction of natural resources, including the wells or vessels used for that purpose, in the Republic of Lithuania.
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