Under Art. 2, part 7 of the Law of the Republic of Lithuania On Income Tax of Individuals (PITL), an individual activity shall mean any independent activity in pursuit whereof individual aims at deriving income or any other economic benefit over a continuous period.
Individuals trading at Forex platform make their decisions and give orders to the brokerage companies independently, hence they are engaged in the spot FX transactions. If individuals are engaged in above-described trading on a continuous basis, it is deemed that they receive individual activity income.
In Lithuania, under Art. 2, part 14 of PITL, an individual income is deemed the remuneration for (i) work performed, (ii) services provided, (iii) rights transferred or provided, (iv) property invested or funds transferred, as well as (v) other benefits received in kind or in cash.
Meanwhile, the profit from FX trade is deemed a difference between the price of currency acquisition and its sale.
On 2020, the personal income tax (PIT) rate applicable in Lithuania on profit received from FX trading is from 5% to 15%.
It is important to mention that for the person engaged in FX trading, the costs of his/her activity may be considered:
a) factual (unlimited) costs incurred in carrying out the activity or
b) 30% fixed amount from all income received from the trading.
The profit received from FX trading is taxed on PIT rate mentioned above.
Also, its necessary to keep in mind, that social security contributions (SSC) due on a profit received by the person, engaged in individual activities. Currently, the SSC rate in Lithuania is 19,5%. Exception for the SSC is applicable if a person is insured in another EU country.
An individual is trading in Forex. An individual forecasts to receive a profit in amount of EUR 50 000 in 2020. He decides to consider the costs of activity at a fixed 30% amount. Therefore, a person’s profit is to be considered EUR 35 000 (50 000×30%). Taking into account the factual situation described here, the trader in Forex is going to pay:
PIT = EUR 35 000 x 15% = EUR 5 250
SSC = EUR 35 000 x 19,5% = EUR 6 825
In total: EUR 12 075 will be deducted for tax purposes
If you have additional questions regarding the aspects of trading in Forex, do not hesitate to contact us.