State Tax Inspectorate Clarifies Rules on Share Transfers and Loss Carry-Forwards

The State Tax Inspectorate (VMI) has published a draft update to the official commentary on Articles 12(15) and 30(2) of the Republic of Lithuania Law on Corporate Income Tax (CIT). The draft provides detailed guidance on the criteria for non-taxable share transfer gains and reinforces restrictions on deducting and carrying forward losses incurred in qualifying transactions.

Under Article 12(15) of the CIT Law, capital gains from the transfer of shares in an entity registered in Lithuania, the European Economic Area (EEA), or a country with an effective Double Taxation Treaty (DTT) are exempt from CIT, provided the entity is subject to corporate income tax or an equivalent levy. Additionally, the transferring company must have continuously held more than 10 percent of the voting shares for at least two years (or at least three years in cases of reorganization under CIT Law Article 41(2)). The draft commentary stresses that companies must verify the foreign entity's legal form under relevant European Union directives as well as its actual tax status.

A key clarification concerns Article 30(2) of the CIT Law: when a share sale meets all conditions for tax-exempt treatment, any loss incurred on that sale is entirely non-deductible against general securities transfer gains and cannot be carried forward to subsequent tax years. Consequently, such negative outcomes cannot offset taxable capital gains on corporate income tax return PLN204.

The draft also supplements point 4 of the Article 30(2) commentary with sub-point 4.5, establishing explicit loss non-deductibility and carry-forward prohibitions for tax calculations and reporting in 2027 and subsequent fiscal years when transferring rights or shares in limited liability entities established in EEA or DTT jurisdictions.

For practical corporate compliance, finance teams executing cross-border share divestments must obtain advance tax residency certificates, tax compliance documentation, and official corporate registry excerpts for target entities. Public consultations on the draft commentary remain open, and comments may be submitted to komentaru.projektai@vmi.lt until October 16, 2026.