Ministry of Finance Issues Four New Defense Bonds: Accounting and Tax Rules for Lithuanian Companies

The Ministry of Finance of the Republic of Lithuania is offering four new issues of Government savings notes (defense bonds) from September 15 to September 28, 2026, available to both legal entities and private individuals. The offering includes maturities of 6 months, 1 year, 2 years, and 3 years, with annual yields ranging from 2.6% to 2.9%. The proceeds are earmarked directly for national defense capabilities under the Ministry of National Defence.

The current placement features the following bond tranches:
- 6-month bonds (ISIN LT0000138570): 2.6% annual interest rate (1.3% semi-annual), redemption date March 30, 2027;
- 1-year bonds (ISIN LT0000138554): 2.7% annual interest rate, redemption date September 29, 2027;
- 2-year bonds (ISIN LT0000138562): 2.8% annual interest rate, redemption date September 29, 2028;
- 3-year bonds (ISIN LT0000138547): 2.9% annual interest rate, redemption date September 29, 2029.

The nominal value per bond is EUR 100, and the issue size is not capped. Settlement is scheduled for September 29, 2026. The bonds are distributed through designated intermediaries: Swedbank, SEB bankas, and Orion Securities. These intermediaries apply zero fees for purchasing and custody of these defense bonds.

For companies allocating liquidity into these instruments, specific accounting and corporate tax standards apply under Lithuanian statutory requirements:

1. Initial Recognition under BAS 18.
In accordance with Business Accounting Standard 18 (Financial Assets and Financial Liabilities), purchased defense bonds are recognized at acquisition cost. Classification depends on maturity: 6-month and 1-year tranches are classified as short-term financial assets (Account 263X 'Short-term investments in debt securities'), whereas 2-year and 3-year tranches are classified as long-term financial assets (Account 163X 'Long-term investments in debt securities').

2. Accrual of Interest Income.
Under the accrual principle, interest income must be recognized over the relevant reporting periods and at the close of the financial year, regardless of the actual cash payment dates. Accruals are posted by debiting Account 244X ('Accrued interest receivable') and crediting Account 535X ('Interest income').

3. Corporate Income Tax Treatment.
Pursuant to the Law on Corporate Income Tax, interest income received by Lithuanian companies from government securities constitutes taxable operating/financial income subject to the standard corporate income tax rate. The EUR 500 tax-exempt interest threshold provided under personal income tax legislation applies strictly to individual residents, not corporate entities.

4. Early Redemption Provisions.
Bondholders may exercise early redemption on the final business day of any calendar month. However, early redemption forfeits accrued interest, and any interest previously disbursed is deducted from the nominal principal refunded. In corporate bookkeeping, this requires reversing or adjusting previously recognized accrued interest income.