Lithuania – Transfer Pricing (2025)

Legal framework and scope

Lithuania’s domestic transfer pricing regime explicitly incorporates the arm’s length principle as set out in Article 40 of the Law on Corporate Income Tax (CIT Law) and Article 15 of the Law on Income Tax of Individuals (ITI Law), together with the implementing provisions contained in the Rules for Implementation of paragraph 2 of Article 40 of the Republic of Lithuania Law on Corporate Income Tax and paragraph 2 of Article 15 of the Republic of Lithuania Law on Personal Income Tax (hereinafter the TP Rules). These provisions require entities and individuals to recognise for tax purposes income and deductions corresponding to the actual market price of a transaction or economic operation. Where conditions between associated persons differ from those that would exist between non-associated persons, profits that would have been attributed in the absence of such conditions may be included in the taxable income of the relevant person and taxed accordingly (Article 40 of the CIT Law; Article 15 of the ITI Law; Clause 3 of the TP Rules).

Arm’s Length Principle and role of the OECD Guidelines

The TP Rules state that Lithuanian transfer pricing rules are largely in line with the OECD Transfer Pricing Guidelines (OECD TPG) and explicitly recommend the use of the OECD TPG insofar as their provisions do not contradict national TP Rules. The domestic definition of the “Arm’s Length Principle” in the TP Rules mirrors the OECD concept: prices and profits from controlled transactions should not differ from those that would be obtained at market conditions, assessed by comparison with comparable transactions (Article 40 of the CIT Law; Article 15 of the ITI Law; TP Rules).

Definition of related parties

Lithuania uses the concepts of “associated persons” and “related persons” as defined in Article 2 of the CIT Law and Article 2 of the ITI Law. Associated persons encompass individuals or entities where at least one of several criteria is met, including: that they are related persons; that they have influence over each other such that the conditions of mutual transactions differ from those seeking maximum economic benefit; or that one entity directly or indirectly controls more than 25% of the shares of another, holds over 25% of decisive votes, has pledged to coordinate decisions, assumed liability for the other’s obligations, agreed to transfer profits or granted the right to use more than 25% of its assets. The statutes provide extensive and detailed formulations of family relationships and corporate group relationships, specifying degrees of consanguinity and affinity in several scenarios. Related persons include an entity and its members (e.g. shareholders), members of management bodies, spouses and other family relationships up to specified degrees, individuals with specific mutual control thresholds, and the relation between an entity and its permanent establishment (Article 2 of the CIT Law; Article 2 of the ITI Law). These definitions determine which parties fall within the transfer pricing regime.

Methods and application criteria

The TP Rules list the recognised transfer pricing methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), Profit Split and other methods, and permit combining or modifying methods when this produces an arm’s length result. In exceptional circumstances valuation methods can also be applied (Clauses 20 and 25 of the TP Rules). The guiding criterion for method selection is the “most appropriate method”: taxpayers must choose the most appropriate transfer pricing method considering transaction characteristics, data reliability, validity of assumptions and forecasts, and similarity between the tested transaction and comparables (Clauses 21-25 of the TP Rules). There is no strict hierarchy of methods; the choice is facts-and-circumstances driven.

Comparability and ranges

Lithuania follows the comparability analysis approach of Chapter III of the OECD TPG as reflected in Clauses 6–13 of the TP Rules. The TP Rules prescribe a four-step evaluation: (I) evaluation of the controlled transaction; (II) selection of the most suitable uncontrolled transaction(s) as comparable(s); (III) evaluation of the selected uncontrolled transaction(s); and (IV) application of the appropriate transfer pricing method. The analysis rests on five comparability factors: transaction characteristics; functions performed, risks assumed and assets used (functional analysis); contractual terms; economic circumstances; and business strategy.

There is no preference for domestic comparables over foreign ones and secret comparables are not permitted. The TP Rules allow the use of an arm’s length range and statistical measures to determine that range (Clauses 54–57 of the TP Rules). If the taxpayer’s application of a method results in a range, the transaction price or profit is treated as arm’s length if it falls within that range. Statistical methods are used when more reliable techniques for excluding comparables are not available. If not all selected comparables are equally reliable, some must be eliminated so that the arm’s length range is based on equally reliable comparables. Once an arm’s length range is determined, the tax authority generally makes an adjustment to the median of the range unless the taxpayer demonstrates that a different point is more appropriate; if the taxpayer does not cooperate, the tax authority may adjust to any point in the range. No adjustment is made where the transaction price or profit lies within the arm’s length range.

Comparability adjustments are required when significant differences between controlled and comparable transactions exist and adjustments enhance the reliability and accuracy of the comparison. If major adjustments are necessary, this may indicate that a different TP method would be more appropriate, and adjustments that materially change prices must be treated with caution. The tax administration follows OECD TPG guidance on comparability adjustments (Clauses 3.12, 16, 28, 34–35, 40–41 of the TP Rules).

Documentation and reporting

Lithuania requires transfer pricing documentation consistent with the Action 13 framework: Master File, Local File and Country-by-Country (CbC) report, and also specific transfer pricing returns where applicable (Clauses 77–93 of the TP Rules; Article 61 of the Law on Tax Administration of the Republic of Lithuania; Rules implementing obligations related to CbC Report).

Timing and language rules are detailed in the TP Rules. Taxpayers must prepare Master and Local Files by the 15th day of the sixth month of the tax period (i.e., by the 15th day of the sixth month of the fiscal period other than the period in which the controlled transaction took place). Documentation may be held in the form and language chosen by the taxpayer until requested by the tax authority; when requested, documents must be provided in their original language, and if that language differs from Lithuanian the tax administration may require a translation. In practice, documentation prepared in Lithuanian or English is commonly accepted. Upon a special request by the tax authority, documentation must be submitted within 30 days. For CbC reporting, taxpayers must notify the tax administration of the identity and tax residence of the reporting entity no later than the last day of the reporting fiscal year, and the CbC report must be submitted to the Lithuanian tax authorities within 12 months from the last day of the reporting financial year (Clauses 19, 77–93 of the TP Rules; Rules implementing obligations related to CbC Report).

The TP Rules provide exemptions from documentation obligations: the Master File is required for Lithuanian entities and foreign entities operating in Lithuania through a permanent establishment whose income in the preceding tax period exceeded EUR 15 million where the entity belongs to an international group. The Local File obligation applies to Lithuanian entities and PE of foreign entities with turnover in the previous taxable year exceeding EUR 3 million, except that financial undertakings, credit institutions and insurance companies must prepare TP documentation irrespective of turnover. Entities are exempt from Master and Local File requirements where they only transact with other Lithuanian entities and/or foreign entities through a PE or where the value of the controlled transaction is below EUR 90 000 during a tax period, subject to exceptions: several identical transactions with the same associated person that in aggregate exceed EUR 90 000; transactions inextricably linked to others exceeding EUR 90 000; and transactions with persons resident in a “targeted territory” (tax haven). Taxpayers not required to prepare TP documentation are allowed to justify arm’s length pricing freely (Clause 84, 85 and 87 of the TP Rules).

Penalties for documentation non-compliance are set out in the Code of Administrative Offences. Article 188 provides for personal liability of the manager or delegated person, with fines ranging from EUR 1 820 to EUR 5 590 for non-compliance and from EUR 3 770 to EUR 6 000 for repeated offenses (Article 188 of Code of Administrative Offences).

Safe harbours / simplification measures

As of the updated profile, Lithuania does not provide sector-specific safe harbours or other broad simplification measures for transfer pricing beyond the documented de minimis exemptions for reporting. Lithuania is still assessing implementation possibilities for the simplified and streamlined approach for baseline marketing and distribution activities (Annex to Chapter IV of the OECD TPG), but no concrete decisions have been made and therefore no operational safe harbour is available.

APAs and MAP; procedures and timing

Lithuania offers administrative mechanisms to prevent and resolve transfer pricing disputes including tax rulings, Advance Pricing Agreements (APAs) — unilateral, bilateral and multilateral — and Mutual Agreement Procedures (MAPs). Relevant legal instruments include Article 37-1 of the Law on Tax Administration of the Republic of Lithuania, rulings regulation VA-105, APA rules VA-106, the Law on Resolution of Double Taxation Disputes, Double Taxation Treaties, and the rules for initiating and conducting MAPs. For procedural details, applicants should consult VA-105 and VA-106 and Lithuania’s MAP profile in OECD documentation.

Penalties and other considerations

Lithuanian rules permit downward corresponding adjustments in the absence of mutual agreement procedures (i.e., unilateral corresponding adjustments are allowed). Taxpayers are allowed to make year-end adjustments when transfer prices are not compatible with the arm’s length principle; if prices remain within the arm’s length range, adjustments are not appropriate. Year-end adjustments must be supported and formalised by accounting documents (e.g., invoices), and taxpayers must substantiate the reasonableness and relevance of such adjustments. The domestic framework does not provide for secondary adjustments (the profile responds “No” on secondary adjustments).

Attribution of profits to permanent establishments

Lithuanian tax treaties contain versions of Article 7 both as it read before 2010 and as it reads after 2010 depending on the treaty in question. The Authorized OECD Approach (AOA) has not been explicitly implemented in national law. Nevertheless, taxation of the permanent establishment income is aligned with the concept of a functionally separate enterprise insofar as the national rules do not restrict the calculation of taxable profit by attributing appropriate costs to the permanent establishment. The profile indicates that there is no specific domestic guidance implementing the AOA; therefore, No se proporciona guía doméstica específica en el perfil regarding explicit AOA implementation and practitioners should consider OECD reports and commentary when addressing EP attribution issues.

Intangibles and Hard-to-Value Intangibles (HTVI)

Lithuania’s TP Rules contain guidance specific to intangibles and follow Chapter VI of the OECD TPG (Clauses 58–67). The HTVI approach is applied in accordance with the OECD TPG (Clauses 3.12-1 and 671 of the TP Rules). There are no special additional domestic conditions for HTVI; however, the TP Rules require careful documentation of ex ante forecasts and the basis for pricing, including risk assessments and probability evaluations. The statute of limitations for HTVI adjustments is the same as for other transfer pricing adjustments: open year plus the five preceding years (Subparagraph 4 of Article 68(4) of the Law on Tax Administration of the Republic of Lithuania). Taxpayers may request bilateral or multilateral APAs for transactions involving HTVI.

Intra-group services and CCAs

The TP Rules provide guidance in line with Chapter VII of the OECD TPG on intra-group services (Clauses 68–76) and expressly allow the application of a simplified approach for low value-adding intra-group services consistent with Chapter VII (Clauses 3-1 and 76-1). While Lithuania permits Cost Contribution Arrangements (CCAs), domestic legislation does not contain detailed specific guidance on CCAs and tends to rely on the OECD TPG where there is no contradiction with the TP Rules. Accordingly, No se proporciona guía doméstica específica en el perfil on detailed CCA rules and reference to the OECD TPG is appropriate.

Financial transactions

Lithuania’s domestic legislation does not include specific transfer pricing guidance for financial transactions and relies on the OECD TPG (Chapter X) for such matters; therefore, No se proporciona guía doméstica específica en el perfil with respect to financial transaction valuation rules. However, there are separate domestic rules that affect the tax treatment of financial payments: a thin capitalisation rule disallowing interest deduction where debt exceeds a debt/equity ratio of 4:1, and from 2019 an interest limitation rule based on the EU Anti-Tax Avoidance Directive which limits net interest deductibility to interest income or, if interest expense exceeds interest income, to 30% of EBITDA; the 30% EBITDA cap does not apply where the excess net interest of an entity or group is less than EUR 3 million (Paragraph 3 of Article 40 and Article 30-1 of CIT Law).

Other legislative aspects or administrative procedures

The Lithuanian tax administration applies measures to avoid the use of hindsight in transfer pricing cases; uniform administrative and judicial practice generally prevents hindsight except in HTVI cases where specific evidentiary aspects are carefully examined. The TP Rules provide that HTVI conditions require particular attention to ex ante information when determining whether hindsight is permissible. The profile contains no additional domestic measures beyond those already described.

Conclusion

Lithuania’s transfer pricing framework is closely aligned with the OECD Transfer Pricing Guidelines and provides comprehensive TP Rules covering definitions of associated parties, approved methods, comparability analysis, documentation requirements, APAs and MAPs, and specific treatment for intangibles and HTVI. Clear thresholds govern documentation obligations (Master File: EUR 15 million of income in preceding period for entities that are part of an international group; Local File: turnover above EUR 3 million in the preceding year; de minimis threshold for transactions of EUR 90 000), sanctions for non-compliance, and domestic interest limitation rules that interact with TP analyses. Where the domestic law does not develop specific guidance (e.g., for commodities valuation, detailed CCAs rules, or TP rules for financial instruments), the profile indicates reliance on the OECD TPG. Practitioners should consult the TP Rules and the OECD materials for matters where domestic detail is not provided.

References

Information based on the Lithuania country profile updated July 2025. For the OECD transfer pricing country profiles hub see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html