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12921 Lithuania - Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income


   
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TREATIES AND OTHER INTERNATIONAL ACTS SERIES 12921

 

 

DOUBLE TAXATION

Taxes on Income

 

 

 

 

Convention Between the
UNITED STATES OF AMERICA
and LITHUANIA

 

Signed at Washington January 15, 1998

 

 

 

 



 

 


NOTE BY THE DEPARTMENT OF STATE

Pursuant to Public Law 89—497, approved July 8, 1966
(80 Stat. 271; 1 U.S.C. 113)—

“. . .the Treaties and Other International Acts Series issued
under the authority of the Secretary of State shall be competent
evidence . . . of the treaties, international agreements other than
treaties, and proclamations by the President of such treaties and
international agreements other than treaties, as the case may be,
therein contained, in all the courts of law and equity and of maritime
jurisdiction, and in all the tribunals and public offices of the
United States, and of the several States, without any further proof
or authentication thereof.”


 

 

 

 

LITHUANIA

Double Taxation: Taxes on Income

Convention signed at Washington January 15, 1998;
Transmitted by the President of the United States of America
to the Senate June 26, 1998 (Treaty Doc. 105-56,
105th Congress, 2d Session);
Reported favorably by the Senate Committee on Foreign Relations
November 3, 1999 (Senate Executive Report No. 106-4,
106th Congress, 1st Session);
Advice and consent to ratification by the Senate
November 5, 1999;
Ratified by the President December 28, 1999;
Instruments attesting to completion of entry into force
procedures exchanged December 27 and 30, 1999;
Entered into force December 30, 1999.

CONVENTION
BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF THE REPUBLIC OF LITHUANIA
FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME
The Government of the United States of America and the
Government of the Republic of Lithuania, desiring to
conclude a Convention for the avoidance of double taxation
and the prevention of fiscal evasion with respect to taxes
on income, have agreed as follows:
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Article 1
General Scope
1. This Convention shall apply to persons who are
residents of one or both of the Contracting States, except
as otherwise provided in the Convention.
2. The Convention shall not restrict in any manner
any exclusion, exemption, deduction, credit, or other
allowance now or hereafter accorded:
a) by the laws of either Contracting State; or
b) by any other agreement between the Contracting
States.
3. Notwithstanding the provisions of subparagraph 2b
):
a) the provisions of Article 26 (Mutual Agreement
Procedure) of this Convention exclusively shall apply
to any dispute concerning whether a measure is within
the scope of this Convention, and the procedures under
this Convention exclusively shall apply to that
dispute; and
b) unless the competent authorities determine that
a taxation measure is not within the scope or this
Convention, the nondiscrimination obligations of this
Convention exclusively shall apply with respect to that
measure, except for such national treatment or most-
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favored-nation obligations as may apply to trade in
goods under the General Agreement on Tariffs and Trade.
No national treatment or most-favored-nation obligation
under any other agreement shall apply with respect to
that measure.
c) For the purpose of this paragraph, a "measure"
is a law, regulation, rule, procedure, decision,
administrative action, or any similar provision or
action.
4. Notwithstanding any provision of the Convention
except paragraph 5 of this Article, a Contracting State may
tax its residents (as determined under Article 4
(Resident)), and by reason of citizenship may tax its
citizens, as if the Convention had not come into effect. For
this purpose, the term "citizen" shall include a former
citizen or long-term resident whose loss of such status had
as one of its principal purposes the avoidance of tax, but
only for a period of 10 years following such loss.
5. The provisions of paragraph 4 shall not affect:
a) the benefits conferred by a Contracting State
under paragraph 2 of Article 9 (Associated
Enterprises), under paragraphs 2 and 5 of Article 18
(Pensions, Social Security, Annuities, Alimony, and
Child Support), and under Articles 24 (Relief from
- 4 -
Double Taxation), 25 (Nondiscrimination) and 26 (Mutual
Agreement Procedure); and
b) the benefits conferred by a Contracting State
under Articles 19 (Government Service), 20 (Students,
Trainees and Researchers), and 28 (Members of
Diplomatic Missions and Consular Posts), upon
individuals who are neither citizens of, nor have been
admitted for permanent residence in, that State.
Article 2
Taxes Covered
1. The existing taxes to which the Convention shall
apply are:
a) in the United States: the Federal income taxes
imposed by the Internal Revenue Code (but excluding the
accumulated earnings tax, the personal holding company
tax, and social security taxes), and the excise taxes
imposed with respect to the investment income of
private foundations (hereafter referred to as "United
States tax");
b) in Lithuania: the tax on profits of legal
persons (juridiniu asmenu pelno mokestis), and the tax
on income of natural persons (fiziniu asmenu pajamu
mokestis) (hereafter referred to as
"Lithuanian tax").
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2. The Convention shall apply also to any identical or
substantially similar taxes which are imposed after the date
of signature of the Convention in addition to, or in place
of, the existing taxes. The competent authorities of the
Contracting States shall notify each other of any
significant changes which have been made in their respective
taxation laws or other laws affecting their obligations
under the Convention, and of any official published material
concerning the application of the Convention, including
explanations, regulations, rulings, or judicial decisions.
Article 3
General Definitions
1. For the purposes of this Convention, unless the
context otherwise requires:
a) the term "Contracting State" means the United
States or Lithuania as the context requires;
b) the term "United States" means the United
States of America, but does not include Puerto Rico,
the Virgin Islands, Guam, or any other United States
possession or territory. When used in a geographical
sense, the term "United States" includes any area
adjacent to the territorial waters of the United States
within which under the laws of the United States and in
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accordance with international law, the rights of the
United States may be exercised with respect to the sea
bed and its sub-soil and their natural resources;
c) the term "Lithuania" means the Republic of
Lithuania and, when used in the geographical sense,
means the territory of the Republic of Lithuania and
any other area adjacent to the territorial waters of
the Republic of Lithuania within which under the laws
of the Republic of Lithuania and in accordance with
international law, the rights of Lithuania may be
exercised with respect to the sea bed and its sub-soiI
and their natural resources;
d) the term "person" includes an individual, an
estate, a trust, a partnership, a company, and any
other body of persons;
e) the term "company" means any body corporate or
any entity which is treated as a body corporate for tax
purposes;
f) the terms "enterprise of a Contracting State"
and "enterprise of the other Contracting State" mean,
respectively, an enterprise carried on by a resident of
a Contracting State and an enterprise carried on by a
resident of the other Contracting State;
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g) the term "international traffic" means any
transport by a ship or aircraft operated by an
enterprise of a Contracting State, except when such
transport is solely between places in the other
Contracting State;
h) the term "competent authority" means:
(i) in the United States, the Secretary of
the Treasury or his delegate; and
(ii) in Lithuania, the Minister of Finance or
his authorized representative;

i) the term "national" means:
(i) any individual possessing the nationality
of a Contracting State; and
(ii) any legal person, partnership,
association or, in the case of Lithuania, personal
enterprise without rights of a legal person
deriving its status as such from the laws in force
in a Contracting State.
2. As regards the application of the Convention at
any time by a Contracting State, any term not defined
therein shall, unless the context otherwise requires or the
competent authorities agree to a common meaning pursuant to
the provisions of Article 26 (Mutual Agreement Procedure),
have the meaning which it has at that time under the laws of
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that State for the purposes of the taxes to which the
Convention applies, any meaning under the applicable tax
laws of that State prevailing over a meaning given to the
term under other laws of that State.
Article 4
Resident
1. For the purposes of this Convention, the term
"resident of a Contracting State" means any person who,
under the laws of that State, is liable to tax therein by
reason of his residence, domicile, citizenship, place of
management, place of incorporation, or any other criterion
of a similar nature.
2. a) However, the term "resident of a Contracting
State" does not include any person who is liable to tax
in that State in respect only of income from sources in
that State;
b) in the case of income derived or paid by a
partnership, estate, or trust, this term applies only
to the extent that the income derived by such
partnership, estate, or trust is subject to tax in that
State as the income of a resident, either in its hands
or in the hands of its partners or beneficiaries; and
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c) if an individual is liable to tax as a resident
because the individual is a citizen or permanent
resident of a Contracting State and such resident is
not also a resident of the other Contracting State,
then the other State shall consider that individual to
be a resident of the first-mentioned State only if the
individual has a substantial presence, permanent home
or habitual home in the first-mentioned State. If the
individual is a resident of both Contracting States,
his State of residence shall be determined under
paragraph 4.
3. The term "resident of a Contracting State"
includes:
a) that State, a political subdivision, or a local
authority thereof, and any agency or instrumentality of
any such State, subdivision or authority; and
b) a legal person organized under the laws of a
Contracting State and that is generally exempt from tax
in that State because it is established and maintained
in that State either:
(i) exclusively for a religious, charitable,
educational, scientific, or other similar purpose;
or
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(ii) to provide pensions or other similar
benefits to employees pursuant to a plan.
4. Where by reason of the provisions of paragraph 1 an
individual is a resident of both Contracting States, then
his status shall be determined as follows:
a) he shall be deemed to be a resident of the
State in which he has a permanent home available to
him; if he has a permanent home available to him in
both States, he shall be deemed to be a resident of the
State with which his personal and economic relations
are closer (center of vital interests);
b) if the State in which he has his center of
vital interests cannot be determined, or if he does not
have a permanent home available to him in either State,
he shall be deemed to be a resident of the State in
which he has an habitual abode;
c) if he has an habitual abode in both States or
in neither of them, he shall be deemed to be a resident
of the State of which he is a national;
d) if he is a national of both States or of
neither of them, the competent authorities of the
Contracting States shall settle the question by mutual
agreement.
5. Where by reason of the provisions of paragraph 1 a
company is a resident of both Contracting States, the
competent authorities of the Contracting States shall
endeavor to settle the question by mutual agreement. In the
absence of such agreement, such company shall not be
considered to be a resident of either Contracting State for
the purposes of enjoying benefits under this Convention.
6. Where by reason of the provisions of paragraph 1 a
person other than an individual or a company is a resident
of both Contracting States, the competent authorities of the
Contracting States shall settle the question by mutual
agreement and determine the mode of application of the
Convention to such person.
Article 5
Permanent Establishment
1. For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business
through which the business of an enterprise is wholly or
partly carried on.
2. The term "permanent establishment" includes
especially:
a) a place of management;
b) a branch;
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c) an office;
d) a factory;
e) a workshop; and
f) a mine, an oil or gas well, a quarry, or any
other place of extraction of natural resources.
3. The term "permanent establishment" also includes a
building site or construction or installation project, but
only if it lasts more than 6 months.
4. Notwithstanding the preceding provisions of this
Article, the term "permanent establishment" shall be deemed
not to include:
a) the use of facilities solely for the purpose of
storage, display, or delivery of goods or merchandise
belonging to the enterprise;
b) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the
purpose of storage, display, or delivery;
c) the maintenance of a stock of goods or
merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;
d) the maintenance of a fixed place of business
solely for the purpose of purchasing goods or
merchandise, or of collecting information, for the
enterprise;
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e) the maintenance of a fixed place of business
solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or
auxiliary character;
f) the maintenance of a fixed place of business
solely for any combination of the activities mentioned
in subparagraphs a) to e), provided that the overall
activity of the fixed place of business resulting from
this combination is of a preparatory or auxiliary
character.
5. Notwithstanding the provisions of paragraphs 1 and
2, where a person (other than an agent of an independent
status to whom paragraph 6 applies) is acting on behalf of
an enterprise and has, and habitually exercises, in a
Contracting State an authority to conclude contracts in the
name of the enterprise, that enterprise shall be deemed to
have a permanent establishment in that State in respect of
any activities which that person undertakes for the
enterprise, unless the activities of such person are limited
to those mentioned in paragraph 4 which, if exercised
through a fixed place of business, would not make this fixed
place of business a permanent establishment under the
provisions of that paragraph.
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6. An enterprise shall not be deemed to have a
permanent establishment in a Contracting State merely
because it carries on business in that State through a
broker, general commission agent, or any other agent of an
independent status, provided that such persons are acting in
the ordinary course of their business. however, where the
activities of such an agent are devoted wholly or almost
wholly on behalf of that enterprise, and where the
conditions between the agent and the enterprise differ from
those which would be made between independent persons, such
agent shall not be considered an agent of independent status
within the meaning of this paragraph. In such case the
provisions of paragraph 5 shall apply.
7. The fact that a company which is a resident of a
Contracting State controls or is controlled by a company
which is a resident of the other Contracting State, or which
carries on business in that other State (whether through a
permanent establishment or otherwise), shall not of itself
constitute either company a permanent establishment of the
other.
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Article 6
Income from Immovable (Real) Property
1. Income derived by a resident of a Contracting State
from immovable (real) property (including income from
agriculture or forestry) situated in the other Contracting
State may be taxed in that other State.
2. The term "immovable (real) property" shall have the
meaning which it has under the law of the Contracting State
in which the property in question is situated. The
provisions of this Convention relating to immovable (real)
property shall apply also to property accessory to immovable
(real) property, livestock and equipment used in agriculture
and forestry, rights to which the provisions of general law
respecting landed property apply, any option or similar
right to acquire immovable (real) property, usufruct of
immovable (real) property and rights to variable or fixed
payments relating to the production from, or the right to
work, mineral deposits, sources and other natural resources;
ships, boats and aircraft shall not be regarded as immovable
(real) property. The provisions of this Convention relating
to immovable (real) property shall also apply to rights to
assets to be produced by the exploration or exploitation of
the sea bed and sub-soil and their natural resources in the
- 16 -
Contracting State, including rights to interests in, or to
the benefits of, such assets.
3. The provisions of paragraph 1 shall apply to income
derived from the direct use, letting, or use in any other form of immovable (real) property.
4. Where the ownership of shares or other corporate
rights in a company entitles the owner of such shares or
corporate rights to the enjoyment of immovable (real)
property held by the company, the income from the direct
use, letting, or use in any other form of such right to
enjoyment may be taxed in the Contracting State in which the
immovable (real) property is situated.
5. The provisions of paragraphs 1, 3 and 4 shall also
apply to the income from immovable (real) property of an
enterprise and to income from immovable (real) property used
for the performance of independent personal services.
6. A resident of a Contracting State who is liable to
tax in the other Contracting State on income from immovable
(real) property situated in the other Contracting State may
elect to compute the tax on such income on a net basis. In
the case of the United States tax, an election to apply the
preceding sentence shall be binding for the taxable year of
the election and all subsequent taxable years unless the
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competent authority of the United States agrees to terminate
the election.
Article 7
Business profits
1. The business profits of an enterprise of a
Contracting State shall be taxable only in that State unless
the enterprise carries on business in the other Contracting
State through a permanent establishment situated therein. If
the enterprise carries on business as aforesaid, the
business profits of the enterprise may be taxed in the other
State but only so much of them as is attributable to that
permanent establishment. However, profits derived from the
sale of goods or merchandise of the same or similar kind as
those sold, or from other business activities of the same or
similar kind as those effected, through that permanent
establishment may be considered attributable to that
permanent establishment if it is established that such sales
or activities were structured in a manner intended to avoid
taxation in the State where the permanent establishment is
situated.
2. Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on business in the
other Contracting State through a permanent establishment
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situated therein, there shall in each Contracting State be
attributed to that permanent establishment the business
profits which it might be expected to make if it were a
distinct and independent enterprise engaged in the same or
similar activities under the same or similar conditions.
3. In determining the business profits of a permanent
establishment, there shall be allowed as deductions expenses
that are incurred for the purposes of the permanent
establishment, including a reasonable allocation of research
and development expenses, interest, and other similar
expenses and executive and general administrative expenses,
whether incurred in the State in which the permanent
establishment is situated or elsewhere. A Contracting State
may, consistent with its law, impose limitations on
deductions, so long as these limitations are consistent with
the concept of net income.
4. Nothing in this Article shall affect the
application of any law of a Contracting State relating to
the determination of the tax liability of a person in cases
where the information available to the competent authority
of that State is inadequate to determine the profits to be
attributable to a permanent establishment, provided that, on
the basis of the available information, the determination of
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the profits of the permanent establishment is consistent
with the principles stated in this Article.
5. No business profits shall be attributed to a
permanent establishment by reason of the mere purchase by
that permanent establishment of goods or merchandise for the
enterprise.
6. For the purposes of the Convention, the business
profits to be attributed to the permanent establishment
shall be determined by the same method year by year unless
there is good and sufficient reason to the contrary.
7. For the purposes of the Convention, the term
"business profits" means profits derived from any trade or
business. It includes, for example, profits from
manufacturing, mercantile, fishing, transportation,
communications or extractive activities, and from the
furnishing of personal services of another person, including
the furnishing by a company of the personal services of its
employees. It does not include income received by an
individual for his performance of personal services either
as an employee or in an independent capacity.
8. Where business profits include items of income
which are dealt with separately in other Articles of the
Convention, then the provisions of those Articles shall not
be affected by the provisions of this Article.
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9. In applying paragraphs 1 and 2 of this Article,
paragraph 4 of Article 10 (Dividends), paragraph 5 of
Article 11 (Interest), paragraph 4 of Article 12
(Royalties), paragraph 3 of Article 13 (Capital Gains),
Article 14 (Independent Personal Services) and paragraph 2
of Article 22 (Other Income), income or gain may be
attributable to a permanent establishment or fixed base even
if the income or gain is deferred until after such permanent
establishment or fixed base has ceased to exist.
Article 8
Shipping and Air Transoort
1. Profits of an enterprise of a Contracting State
from the operation of ships or aircraft in international
traffic shall be taxable only in that State.
2. For the purposes of this Article, the term "profits
from the operation of ships or aircraft in international
traffic" includes profits derived from the rental of ships
or aircraft on a full (time or voyage) basis. It also
includes profits from the rental of ships or aircraft on a
bareboat basis by an enterprise engaged in the operation of
ships or aircraft in international traffic, if such rental
activities are incidental to the activities described in
paragraph 1. Profits derived by an enterprise from the
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inland transport of property or passengers within either
Contracting State are treated as profits from the operation
of ships or aircraft in international traffic if such
transport is undertaken as part of international traffic by
the enterprise.
3. Profits of an enterprise of a Contracting State
engaged in the operation of ships or aircraft in
international traffic from the use, maintenance, or rental
of containers (including trailers, barges, and related
equipment for the transport of containers) used in
international traffic shall be taxable only in that State.
4. The provisions of paragraphs 1 and 3 shall also
apply to profits from the participation in a pool, a joint
business, or an international operating agency.
Article 9
Associated Enterprises
1. Where
a) an enterprise of a Contracting State
participates directly or indirectly in the management,
control or capital of an enterprise of the other
Contracting State, or
b) the same persons participate directly or
indirectly in the management, control or capital of an
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enterprise of a Contracting State and an enterprise of
the other Contracting State,
and in either case conditions are made or imposed between
the two enterprises in their commercial or financial
relations which differ from those which would be made
between independent enterprises, then any profits which
would, but for those conditions, have accrued to one of the
enterprises, but, by reason of those conditions, have not so
accrued, may be included in the profits of that enterprise
and taxed accordingly.
2. Where a Contracting State includes in the profits
of an enterprise of that State, and taxes accordingly,
profits on which an enterprise of the other Contracting
State has been charged to tax in that other State, and the
profits so included are profits which would have accrued to
the enterprise of the first-mentioned State if the
conditions made between the two enterprises had been those
which would have been made between independent enterprises,
then that other State shall make an appropriate adjustment
to the amount of the tax charged therein on those profits.
In determining such adjustment, due regard shall be had to
the other provisions of this Convention and the competent
authorities of the Contracting States shall if necessary
consult each other.
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3. The provisions of paragraph 1 shall not limit any
provisions of the law of either Contracting State which
permit the distribution, apportionment, or allocation of
income, deductions, credits, or allowances between persons,
whether or not residents of a Contracting State, owned or
controlled directly or indirectly by the same interests when
necessary in order to prevent evasion of taxes or clearly to
reflect the income of any such of persons.
Article 10
Dividends
1. Dividends paid by a resident of a Contracting State
and beneficially owned by a resident of the other
Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the
Contracting State of which the payor is a resident and
according to the laws of that State, but if the beneficial
owner of the dividends is a resident of the other
Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the dividends
if the beneficial owner is a company which holds
directly at least 10 percent of the voting shares of
the company paying the dividends;
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b) 15 percent of the gross amount of the dividends
in all other cases.
Subparagraph a) shall not apply in the case of dividends
paid by a United States person that is a Regulated
Investment Company or a Real Estate Investment Trust.
Subparagraph b) shall apply in the case of dividends paid by
a Regulated Investment Company. In the case of dividends
paid by a United States person that is a Real Estate
Investment Trust, subparagraph b) shall apply only if the
dividend is beneficially owned by an individual holding a
less than 10 percent interest in the Real Estate Investment
Trust; otherwise, the rate of withholding applicable under
domestic law shall apply.
This paragraph shall not affect the taxation of the company
in respect of the profits out of which the dividends are
paid.
3. The term "dividends" as used in this Article means
income from shares or other rights, not being debt-claims,
participating in profits, as well as income from other
corporate rights which is subjected to the same taxation
treatment as income from shares by the laws of the State of
which the company making the distribution is a resident. The
term "dividends" also includes income from arrangements,
including debt obligations, carrying the right to
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participate in profits, to the extent so characterized under
the law of the Contracting State in which the income arises.
4. The provisions of paragraph 2 shall not apply if
the beneficial owner of the dividends, being a resident of a
Contracting State, carries on business in the other
Contracting State of which the payor is a resident, through
a permanent establishment situated therein, or performs in
that other State independent personal services from a fixed
base situated therein, and the dividends are attributable to
such permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
5. A company that is a resident of one of the
Contracting States and that has a permanent establishment
that is subject to tax on its business profits in the other
Contracting State or that is subject to tax in the other
State on a net basis on its income that may be taxed in the
other State under Article 6 (Income from Immovable (Real)
Property) or under paragraph 1 of Article 13 (Capital Gains)
may be subject in that other State to a tax in addition to
the tax on profits. Such tax, however, may not exceed 5
percent of the portion of the profits of the company subject
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to tax in the other State that represents the dividend
equivalent amount of such profits.
6. Where a resident of a Contracting State derives
profits or income from the other Contracting State, that
other State may not impose any tax on the dividends paid by
that resident, except insofar as such dividends are paid to
a resident of that other State or insofar as the holding in
respect of which the dividends are paid forms part of the
business property of a permanent establishment or a fixed
base situated in that other State, even if the dividends
paid consist wholly or partly of profits or income arising
in such other State.
Article 11
Interest
1. Interest arising in a Contracting State and
beneficially owned by a resident of the other Contracting
State may be taxed in that other State.
2. However, such interest may also be taxed in the
Contracting State in which it arises and according to the
laws of that State, but if the beneficial owner of the
interest is a resident of the other Contracting State, the
tax so charged shall not exceed 10 percent of the gross
amount of the interest.
- 27 -
3. Notwithstanding the provisions of paragraph 2:
a) interest arising in a Contracting State,
derived and beneficially owned by the Government of the
other Contracting State, including political
subdivisions and local authorities thereof, the Central
Bank or any financial institution wholly owned by that
Government, or interest derived on loans guaranteed or
insured by that Government, subdivision, authority or
institution shall be exempt from tax in the first-
mentioned State;
b) interest arising in a Contracting State shall
be exempt from tax in that State if the beneficial
owner of the interest is an enterprise of the other
Contracting State, and the interest is paid with
respect to an indebtedness arising as a consequence of
the sale on credit by an enterprise of that other
State, of any merchandise, or industrial, commercial or
scientific equipment to an enterprise of the first-
mentioned State, except where the sale or indebtedness
is between related persons;
c) the United States may tax an excess inclusion
with respect to a residual interest in a Real Estate
Mortgage Investment Conduit in accordance with its
domestic law; and
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d) interest paid by a resident of a Contracting
State and that is determined with reference to
receipts, sales, income, profits or other cash flow of
the debtor or a related person, to any change in the
value of any property of the debtor or a related person
or to any dividend, partnership distribution or similar
payment made by the debtor to a related person also may
be taxed in that State, and according to its laws, but
if the beneficial owner is a resident of the other
Contracting State, the gross amount of the interest may
be taxed at a rate not exceeding the rate prescribed in
subparagraph b) of paragraph 2 of Article 10
(Dividends).
4. The term "interest" as used in this Convention
means income from debt-claims of every kind, whether or not
secured by mortgage and, subject to paragraph 4 of Article
10 (Dividends), whether or not carrying a right to
Participate in the debtor's profits, and in particular,
income from government securities and income from bonds or
debentures, including premiums or prizes attaching to such
securities, bonds or debentures, as well as all other income
that is treated as interest by the taxation law of the
Contracting State in which the income arises. Penalty
- 29 -
charges for late payment shall not be regarded as interest
for the purpose of this Article.
5. The provisions of paragraphs 2 and 3 shall not
apply if the beneficial owner of the interest, being a
resident of a Contracting State, carries on business in the
other Contracting State in which the interest arises,
through a permanent establishment situated therein, or
performs in that other State independent personal services
from a fixed base situated therein, and the interest is
attributable to such permanent establishment or fixed base.
In such case the provisions of Article 7 (Business Profits)
or Article 14 (Independent Personal Services), as the case
may be, shall apply.
6. Interest shall be deemed to arise in a Contracting
State when the payor is a resident of that State. Where,
however, the person paying the interest, whether he is a
resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base in
connection with which the indebtedness on which the interest
is paid was incurred, and such interest is borne by such
permanent establishment or fixed base, then such interest
shall be deemed to arise in the State in which the permanent
establishment or fixed base is situated.
- 30 -
7. Where, by reason of a special relationship between
the payor and the beneficial owner or between both of them
and some other person, the amount of the interest, having
regard to the debt-claim for which it is paid, exceeds the
amount which would have been agreed upon by the payor and
the beneficial owner in the absence of such relationship,
the provisions of this Article shall apply only to the last-
mentioned amount. In such case, the excess part of the
payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other
provisions of the Convention.
8. A resident of a Contracting State may be subject to
tax in the other Contracting State in respect of interest
expenses allocable to its profits attributable to a
permanent establishment in the other Contracting State or
subject to tax in the other Contracting State under Article
6 (Income from Immovable (Real) Property) or paragraph 1 of
Article 13 (Capital Gains) over the interest paid by or from
that permanent establishment or trade or business. In this
case, the allocable interest expense in excess of interest
paid shall be deemed to be interest arising in the other
Contracting State and be beneficially owned by a resident of
the first-mentioned Contracting State.
- 31 -
Article 12
Royalties
1. Royalties arising in a Contracting State and
beneficially owned by a resident of the other Contracting
State may be taxed in that other State.
2. However, such royalties may also be taxed in the
Contracting State in which they arise and according to the
laws of that State, but if the beneficial owner of the
royalties is a resident of the other Contracting State, the
tax so charged shall not exceed:
a) 5 percent of the gross amount of the royalties
paid for the use of industrial, commercial or
scientific equipment;
b) 10 percent of the gross amount of the royalties
in all other cases.
3. The term "royalties" as used in this Convention
means payments of any kind received as a consideration for
the use of, or the right to use, any copyright of literary,
artistic or scientific work, including computer software,
cinematographic films and films or tapes and other means of
image or sound reproduction for radio or television
broadcasting, any patent, trademark, design or model, plan,
secret formula or process, or other like right or property,
or for the use of, or-the right to use, industrial,
- 32 -
commercial or scientific equipment, or for information
concerning industrial, commercial or scientific experience.
The term "royalties" also includes payments derived from the
disposition of any such right or property which are
contingent on the productivity, use or further disposition
thereof.
4. The provisions of paragraphs 1 and 2 shall not
apply if the beneficial owner of the royalties, being a
resident of a Contracting State, carries on business in the
other Contracting State in which the royalties arise,
through a permanent establishment situated therein, or
performs in that other State independent personal services
from a fixed base situated therein, and the royalties are
attributable to such permanent establishment or fixed base.
In such case the provisions of Article 7 (Business Profits)
or Article 14 (Independent Personal Services), as the case
may be, shall apply.
5. Where, by reason of a special relationship between
the payor and the beneficial owner or between both of them
and some other person, the amount of the royalties, having
regard to the use, right, or information for which they are
paid, exceeds the amount which would have been agreed upon
by the payor and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply
- 33 -
only to the last-mentioned amount. In such case, the excess
part of the payments shall remain taxable according to the
laws of each Contracting State, due regard being had to the
other provisions of the Convention.
6. For purposes of this Article:
a) Royalties shall be treated as arising in a
Contracting State when the payor is a resident of that
State. Where, however, the person paying the royalties,
whether he is a resident of a Contracting State or not,
has in a Contracting State a permanent establishment or
a fixed base in connection with which the liability to
pay the royalties was incurred, and such royalties are
borne by such permanent establishment or fixed base,
then such royalties shall be deemed to arise in the
State in which the permanent establishment or fixed
base is situated.
b) Where subparagraph a) does not operate to treat
royalties as arising in a Contracting State, and the
royalties are for the use of, or the right to use, in a
Contracting State any property or right described in
paragraph 3, then such royalties shall be deemed to
arise in that State and not in the State of which the
payor is resident.
- 34 -
c) Notwithstanding the preceding provisions of
this paragraph, payments received as consideration for
the use of containers (including trailers, barges, and
related equipment for the transport of containers) used
in transportation of passengers or property (other than
transportation solely between places in a Contracting
State), not dealt with in Article 8 (Shipping and Air
Transport) shall be deemed to arise in neither
Contracting State.
Article 13
Capital Gains
1. Gains or income derived by a resident of a
Contracting State from the alienation of immovable (real)
property situated in the other Contracting State may be
taxed in that other State.
2. For the purposes of this Article, the term
"immovable (real) property situated in the other Contracting
State" includes immovable (real) property referred to in
Article 6 (Income from Immovable (Real) Property) which is
situated in that other State. It also includes shares of
stock of a company the property of which consists at least
50 percent of immovable (real) property situated in that
other State, and an interest in a partnership, trust or
- 35 -
estate to the extent that its assets consist of immovable
(real) property situated in that other State. In the United
States the term includes a "United States real property
interest."
3. Gains from the alienation of movable property
forming part of the business property of a permanent
establishment which an enterprise of a Contracting State has
in the other Contracting State, or of movable property
pertaining to a fixed base which is available to a resident
of a Contracting State in the other Contracting State for
the purpose of performing independent personal services,
including such gains from the alienation of such a permanent
establishment (alone or with the whole enterprise) or fixed
base, may be taxed in that other State.
4. Gains derived by an enterprise of a Contracting
State operating ships or aircraft in international traffic
from the alienation of ships, aircraft or containers
operated or used in international traffic or movable
property pertaining to the operation or use of such ships,
aircraft or containers shall be taxable only in that State.5
. Payments described in paragraph 3 of Article 12
(Royalties) shall be taxable only in accordance with the
provisions of Article 12.
- 36 -
6. Gains from the alienation of any property other
than property referred to in paragraphs 1 through 5 shall be
taxable only in the Contracting State of which the alienator
is a resident.
Article 14
Independent personal Services
1. Income derived by an individual who is a resident
of a Contracting State in respect of professional services
or other activities of an independent character shall be
taxable only in that State unless such services are
performed in the other Contracting State and he has a fixed
base regularly available to him in the other Contracting
State for the purpose of performing his activities. In such
case, the income may be taxed in the other State, but only
so much of it as is attributable to that fixed base. For
this purpose, where an individual who is a resident of a
Contracting State stays in the other Contracting State for a
period or periods exceeding in the aggregate 183 days in any
twelve-month period commencing or ending in the taxable year
concerned, he shall be deemed to have a fixed base regularly
available to him in that other State and the income that is
derived from his activities referred to in the first
- 37 -
sentence of this paragraph shall be attributable to that
fixed base.
2. For the purposes of paragraph 1, the income that is
taxable in the other Contracting State shall be determined
in the same way as income of a resident of that other State
derived in respect of professional services or other
activities of an independent character. However, nothing in
this paragraph shall be construed as obliging a Contracting
State to grant to residents of the other Contracting State
any personal allowances, reliefs and reductions for taxation
purposes on account of civil status or family
responsibilities that it grants to its own residents.
3. The term "professional services" includes
especially independent scientific, literary, artistic,
educational or teaching activities as well as the
independent activities of physicians, lawyers, engineers,
architects, dentists and accountants.
Article 15
Dependent Personal Services
1. Subject to the provisions of Articles 17
(Directors' Fees), 18 (Pensions, Social Security, Annuities,
Alimony, and Child Support), 19 (Government Service) and 20
(Students, Trainees and Researchers), salaries, wages and
- 38 -
other remuneration derived by a resident of a Contracting
State in respect of an employment shall be taxable only in
that State unless the employment is exercised in the other
Contracting State. If the employment is so exercised, such
remuneration as is derived therefrom may be taxed in that
other State.
2. Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting State in
respect of an employment exercised in the other Contracting
State shall be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for
a period or periods not exceeding in the aggregate 183
days in any twelve-month period commencing or ending in
the taxable year concerned, and
b) the remuneration is paid by, or on behalf of,
an employer who is not a resident of the other State,
and
c) the remuneration is not borne by a permanent
establishment or a fixed base which the employer has in
the other State.
3. Notwithstanding the preceding provisions of this
Article, remuneration in respect of an employment as a
member of the regular complement of a ship or aircraft
operated by an enterprise of a Contracting State in
- 39 -
international traffic may be taxed in that Contracting
State.
Article 16
Directors' Fees
Directors' fees and other compensation derived by a
resident of a Contracting State in his capacity as a member
of the board of directors or any similar organ of a company
that is a resident of the other Contracting State may be
taxed in that other State.
Article 17
Artistes and Sportsmen
1. Notwithstanding the provisions of Articles 14
(Independent Personal Services) and 15 (Dependent Personal
Services), income derived by a resident of a Contracting
State as an entertainer, such as a theater, motion picture,
radio or television artiste, or a musician, or as a
sportsman, from his personal activities as such exercised in
the other Contracting State, may be taxed in that other
State, except where the amount of the gross receipts derived
by such entertainer or sportsman, including expenses
reimbursed to him or borne on his behalf, from such
activities does not exceed twenty thousand United States
- 40 -
dollars (S20,000) or its equivalent in Lithuanian litas for
the taxable year concerned.
2. Where income in respect of activities exercised by
an entertainer or a sportsman in his capacity as such
accrues not to the entertainer or sportsman but to another
person, that income of that other person may,
notwithstanding the provisions of Articles. 7 (Business
Profits), 14 (Independent Personal Services) and 15
(Dependent Personal Services), be taxed in the Contracting
State in which the activities of the entertainer or
sportsman are exercised, unless it is established that
neither the entertainer or sportsman nor persons related
thereto participate directly or indirectly in the profits of
that other person in any manner, including the receipt of
deferred remuneration, bonuses, fees, dividends, partnership
distributions, or other distributions.
3. The provisions of paragraphs 1 and 2 shall not
apply to income derived from activities exercised in a
Contracting State by a resident of the other Contracting
State as an entertainer or sportsman if the visit to the
first-mentioned State is wholly or mainly supported by
public funds of the other State or a political subdivision
or local authority thereof. In such a case, the income shall
- 41 -
be taxable only in the Contracting State of which the
entertainer or sportsman is a resident.
Article 18
Pensions, Social Security, Annuities, Alimony,
and Child Support
1. Subject to the provisions of Article 19
(Government Service), pensions and other similar
remuneration derived and beneficially owned by a resident of
a Contracting State in consideration of past employment,
whether paid periodically or as a single sum, shall be
taxable only in that State, but the amount of any such
pension or remuneration that would be excluded from taxable
income in the other Contracting State if the recipient were
a resident thereof shall be exempt from taxation in the
first-mentioned State.
2. Notwithstanding the provisions of paragraph 1,
payments made by a Contracting State under the provisions of
the social security or similar legislation of that State to
a resident of the other Contracting State or to a citizen of
the United States shall be taxable only in the first-
mentioned State.
3. Annuities derived and beneficially owned by a
resident of a Contracting State shall be taxable only in
- 42 -
that State. The term "annuities" as used in this paragraph
means a stated sum (other than a pension) paid periodically
at stated times during a specified number of years, under an
obligation to make the payments in return for adequate and
full consideration (other than services rendered).
4. Alimony paid by a resident of a Contracting State,
and deductible therein, to a resident of the other
Contracting State shall be taxable only in that other State.
The term "alimony" as used in this paragraph means periodic
payments made pursuant to a written separation agreement or
a decree of divorce, separate maintenance, or compulsory
support, which payments are taxable to the recipient under
the laws of the State of which he is a resident.
5. Periodic payments, not dealt with in paragraph 4,
for the support of a minor child made pursuant to a written
separation agreement or a decree of divorce, separate
maintenance, or compulsory support, paid by a resident of a
Contracting State to a resident of the other Contracting
State, shall not be taxable in that other State.
Article 19
Government Service
1. Notwithstanding the provisions of Articles 15
(Dependent Personal Services) and 17 (Artistes and
- 43 -
Sportsmen):
a) remuneration, other than a pension, paid by, or
out of the public funds of a Contracting State or a
political subdivision or a local authority thereof to
an individual in respect of dependent personal services
rendered to that State or subdivision or authority in the discharge of functions of a governmental nature
shall, subject to the provisions of subparagraph b), be
taxable only in that State;
b) such remuneration, however, shall be taxable
only in the other Contracting State if the services are
rendered in that State and the individual is a resident
of that State who:
(i) is a national of that State; or
(ii) did not become a resident of that State
solely for the purpose of rendering the services.
2. Subject to the provisions of paragraph 2 of
Article 18 (Pensions, Social Security, Annuities, Alimony,
and Child Support):
a) any pension paid by, or out of the public funds
of a Contracting State or a political subdivision or a
local authority thereof to an individual in respect of
services rendered to that State or subdivision or
authority in the discharge of functions of a
- 44 -
governmental nature shall, subject to the provisions of
subparagraph b), be taxable only in that State;
b) such pension, however, shall be taxable only in
the other Contracting State if the individual is a
resident of, and a national of, that State.
Article 20
Students, Trainees and Researchers
1. a) An individual who is a resident of a
Contracting State at the beginning of his visit to the
other Contracting State and who is temporarily present
in that other Contracting State for the primary purpose
of:
(i) studying at a university or other
accredited educational institution in that other
Contracting State; or
(ii) securing training required to qualify him
to practice a profession or professional
speciality; or
(iii) studying or doing research as a recipient
of a grant, allowance, or award from a
governmental, religious, charitable, scientific,
literary, or educational organization, shall be
exempt from tax by that other Contracting State
- 45 -
with respect to the amounts described in
subparagraph b) of this paragraph for a period not
exceeding five years from the date of his arrival
in that other Contracting State.
b) The amounts referred to in subparagraph a) of
this paragraph are:
(i) payments from abroad, other than
compensation for personal services, for the
purpose of his maintenance, education, study,
research, or training;
(ii) the grant, allowance, or award; and
(iii) income from personal services performed
in that other Contracting State in an aggregate
amount not in excess of five thousand United
States dollars ($5,000) or its equivalent in
Lithuanian litas for any taxable year.
2. An individual who is a resident of a Contracting
State at the beginning of his visit to the other Contracting
State and who is temporarily present in that other
Contracting State as an employee of, or under contract with,
a resident of the. first-mentioned Contracting State, for the
primary purpose of:
- 46 -
a) acquiring technical, professional, or business
experience from a person other than that resident of
the first-mentioned Contracting State, or
b) studying at a university or other accredited
educational institution in that other Contracting
State,
shall be exempt from tax by that other Contracting State for
a period of 12 consecutive months with respect to his income
from personal services in an aggregate amount not in excess
of eight thousand United States dollars ($8,000) or its
equivalent in Lithuanian litas.
3. An individual who is a resident of one of the
Contracting States at the time he becomes temporarily
present in the other Contracting State and who is
temporarily present in the other Contracting State for a
period not exceeding one year, as a participant in a program
sponsored by the Government of that other Contracting State,
for the primary purpose of training, research, or study,
shall be exempt from tax by that other Contracting State
with respect to his income from personal services in respect
of such training, research, or study performed in that other
Contracting State in an aggregate amount not in excess of
ten thousand United States dollars ($10,000) or its
equivalent in Lithuanian litas.
- 47 -
4. This Article shall not apply to income from
research if such research is undertaken not in the public
interest but primarily for the private benefit of a specific
person or persons.
Article 21
Offshore Activities
1. The provisions of this Article shall apply
notwithstanding the provisions of Articles 4 to 20 of this
Convention.
2. A person who is a resident of a Contracting State
and carries on activities offshore in the other Contracting
State in connection with the exploration or exploitation of
the sea bed and sub-soil and their natural resources
situated in that other State shall, subject to paragraphs 3
and 4, be deemed in relation to those activities to be
carrying on business in that other State through a permanent
establishment or a fixed base situated therein.
3. The provisions of paragraph 2 shall not apply,
where the activities are carried on for a period or periods
not exceeding in the aggregate 30 days in any twelve-month
period. However, for the purposes of this paragraph:
a) activities carried on by a person who is
associated with another person shall be regarded as
- 48 -
carried on by the other person if the activities in
question are substantially the same as those carried on
by the first-mentioned person, except to the extent
that those activities are carried on at the same time
as its own activities;
b) a person shall be deemed to be associated with
another person if one is controlled directly or
indirectly by the other, or both are controlled
directly or indirectly by a third person or third
persons.
4. However, the provisions of this Article shall not
apply to:
a) one or any combination of the activities
mentioned in paragraph 4 of Article 5 (Permanent
Establishment);
b) towing or anchor handling by ships primarily
designed for that purpose and any other activities
performed by such ships; or
c) the transport of supplies-or personnel by ships
or aircraft in international traffic.
5. a) Subject to subparagraph b) of this paragraph,
salaries, wages and similar remuneration derived by a
resident of a Contracting State in respect of an
employment connected with the exploration or
- 49 -
exploitation of the sea bed and sub-soil and their
natural resources situated in the other Contracting
State may, to the extent that the duties are performed
offshore in that other State, be taxed in that other
State. however, such remuneration shall be taxable only
in the first-mentioned State if the employment is
carried on offshore for an employer who is not a
resident of the other State and for a period or periods
not exceeding in the aggregate 30 days in any twelve-
month period.
b) Salaries, wages and similar remuneration
derived by a resident of a Contracting State in respect
of an employment exercised aboard .a ship or aircraft
engaged in the transportation of supplies or personnel
to a location, or between locations, where activities
connected with the exploration or exploitation of the
sea bed and sub-soil and their natural resources are
being carried on in a Contracting State, or in respect
of an employment exercised aboard tugboats or other
vessels operated auxiliary to such activities, may be
taxed in the Contracting State of which the employer is
a resident.
- 50 -
Article 22
Other Income
1. Items of income beneficially owned by a resident
of a Contracting State, wherever arising, not dealt with in
the foregoing Articles of this Convention shall be taxable
only in that State.
2. The provisions of paragraph 1 shall not apply to
income, other than income from immovable (real)' property as
defined in paragraph 2 of Article 6 (Income from Immovable
(Real) Property), if the beneficial owner of the income,
being a resident of a Contracting State, carries on business
in the other Contracting State through a permanent
establishment situated therein, or performs in that other
State independent personal services from a fixed base
situated therein, and the income is attributable to such
permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
Article 23
Limitation of Benefits
1. A resident of a Contracting State shall be
entitled to all the benefits of this Convention only if it
- 51 -
is a "qualified resident" as defined in this Article.
2. A resident of a Contracting State is a qualified
resident for a taxable year only if it is either:
a) an individual;
b) a Contracting State, a political subdivision or
a local authority thereof, or an agency or
instrumentality of such State, subdivision or
authority;
c) a company, if:
(i) on at least half the days of the taxable
year the beneficial owners of at least 50 percent
of each class of the company's shares are
qualified residents by reason of subparagraphs a),
b), e), or f) of this paragraph, or U.S. citizens,
provided that in the case of indirect ownership,
each intermediate owner is a person entitled to
benefits of the Convention under this paragraph;
and
(ii) amounts paid or accrued by the company
during its taxable year:
A) to persons that are neither
qualified residents nor U.S. citizens,
and
- 52 -
B) that are deductible for income
tax purposes in the company's State of
residence (but not including arm's
length payments in the ordinary course
of business for services or tangible
property),
do not exceed 50 percent of the gross income
of the company for that year;
d) a trust or estate, if the ownership of its
beneficial interests satisfies the requirement of
subparagraph c)(i) and its payments to persons who are
not qualified residents or U.S. citizens satisfy the
requirement of subparagraph c) (ii);
e) a person, if:
(i) beneficial interests representing at
least 50 percent of the value of each class of
interests in that person are substantially and
regularly traded on a recognized stock exchange;
or
(ii) the direct or indirect owners of at least
50 percent of each class of interests in that
person are persons entitled to benefits under
clause (i), provided that in the case of indirect
ownership, each intermediate owner is a person
- 53 -
entitled to benefits of the Convention under this
paragraph;
f) a person described in subparagraph 3 b) of
Article 4 (Resident) provided that more than half of
the beneficiaries, members or participants, if any, in
such person are qualified residents; or
g) a United States Regulated Investment Company,
or a similar entity in Lithuania as may be agreed by
the competent authorities of the Contracting States.
3. a) A resident of a Contracting State that is
not a qualified resident shall be entitled to the
benefits of this Convention with respect to an item of
income derived from the other State, if:
(i) the resident is engaged in the active
conduct of a trade or business in the first-
mentioned State,
(ii) the income is connected with or
incidental to the trade or business, and
(iii) the trade or business is substantial in
relation to the activity in the other State
generating the income.
b) For purposes of this paragraph, the business of
making or managing investments will not be considered
an active trade or business unless the activity is
- 54 -
banking, insurance or securities activity conducted by
a bank, insurance company or registered securities
dealer.
c) Whether a trade or business is substantial for
purposes of this paragraph will be determined based on
all facts and circumstances. In any case, however, a
trade or business will be deemed substantial if, for
the preceding taxable year, or for the average of the
three preceding taxable years, the asset value, the
gross income, and the payroll expense that are related
to the trade or business in the first-mentioned State
equal at least 7.5 percent of the resident's (and any
related parties') proportionate share of the asset
value, gross income and payroll expense, respectively,
that are related to the activity that generated the
income in the other State, and the average of the three
ratios exceeds 10 percent.
d) Income is derived in connection with a trade or
business if the activity in the other State generating
the income is a line of business. that forms a part of
or is complementary to the trade or business. Income is
incidental to a trade or business if it facilitates the
conduct of the trade or business in the other State.
- 55 -
4. A resident of a Contracting State that is not a
qualified resident pursuant to the provisions of paragraph 2
may, nevertheless, be granted benefits of the Convention
with respect to income arising in the other Contracting
State if the competent authority of that other Contracting
State so determines.
5. For the purposes of this Article, the term
"recognized stock exchange" means:
a) the NASDAQ System owned by the National
Association of Securities Dealers, Inc. and any stock
exchange registered with the U.S. Securities and
Exchange Commission as a national securities exchange
under the U.S. Securities Exchange Act of 1934;
b) the National Stock Exchange of Lithuania
(Nacionaline vertybiniu popieriu birza); and
c) any other stock exchange agreed upon by the
competent authorities of the Contracting States.
6. The competent authorities of the Contracting
States shall consult together with a view to developing a
commonly agreed application of the provisions of this
Article, including the publication of public guidance. The
competent authorities shall, in accordance with the
provisions of Article 27 (Exchange of Information and
- 56 -
Administrative Assistance), exchange such information as is
necessary for carrying out the provisions of this Article.
Article 24
Relief From Double Taxation
1. In accordance with the provisions and subject to
the limitations of the law of the United States (as it may
be amended from time to time without changing the general
principle hereof), the United States shall allow to a
resident, or citizen of the United States as a credit against
the United States tax on income:
a) the Lithuanian tax paid by or on behalf of such
resident or citizen; and
b) in the case of a United States company owning
at least 10 percent of the voting stock of a company
which is a resident of Lithuania and from which the
United States company receives dividends, the
Lithuanian tax paid by or on behalf of the distributing
company with respect to the profits out of which the
dividends are paid.
2. In Lithuania double taxation shall be avoided as
follows:
a) where a resident of Lithuania derives income
which, in accordance with this Convention, may be taxed
- 57 -
in the United States, unless a more favorable treatment
is provided in its domestic law, Lithuania shall allow
as a deduction from the tax on the income of that
resident, an amount equal to the income tax paid
thereon in the United States (other than any such tax
imposed by reason of citizenship of the United States);
such deduction shall not, however, exceed that part of
the income tax in Lithuania, as computed before the
deduction is given, which is attributable to the income
which may be taxed in the United States;
b) for the purposes of subparagraph a), where a
company that is a resident of Lithuania receives a
dividend from a company that is a resident of the
United States in which it owns at least 10 percent of
its shares having full voting rights, the tax paid in
the United States shall include not only the tax paid
_on the dividend, but also the appropriate portion of
the tax paid on the underlying profits of the company
out of which the dividend was paid.
3. For the purposes of allowing relief from double
taxation pursuant to this Article, and subject to such
source rules in the domestic laws of the Contracting States
as apply for purposes of limiting the foreign tax credit,
income derived by a resident of a Contracting State which
- 58 -
may be taxed in the other Contracting State in accordance
with this Convention (other than solely by reason of
citizenship in accordance with paragraph 4 of Article 1
(General Scope)) shall be deemed to arise in that other
State.
Article 25
Nondiscrimination
1. Nationals of a Contracting State shall not be
subjected in the other Contracting State to any taxation or
any requirement connected therewith, which is other or more
burdensome than the taxation and connected requirements to
which nationals of that other State in the same
circumstances, in particular with respect to residence, are
or may be subjected. This provision shall apply to persons
who are not residents of one or both of the Contracting
States. However, for the purposes of United States taxation,
United States nationals who are subject to tax on a
worldwide basis are not in the same circumstances as
nationals of Lithuania who are not residents of the United
States.
2. The taxation on a permanent establishment which an
enterprise of a Contracting State, or a fixed base which an
individual who is a resident of a Contracting State, has in
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the other Contracting State shall not be less favorably
levied in that other State than the taxation levied on
enterprises or individuals who are residents of that other
State carrying on the same activities. The provisions of
this paragraph shall not be construed as obliging a
Contracting State to grant to residents of the other
Contracting State any personal allowances, reliefs and
reductions for taxation purposes on account of civil status
or family responsibilities that it grants to its own
residents.
3. Except where the provisions of paragraph 1 of
Article 9 (Associated Enterprises), Paragraph 7 of Article
11 (Interest), or paragraph 5 of Article 12 (Royalties)
apply, interest, royalties and other disbursements paid by a
resident of a Contracting State to a resident of the other
Contracting State shall, for the purpose of determining the
taxable profits of the first-mentioned resident, be
deductible under the same conditions as if they had been
paid to a resident of the first-mentioned State. Similarly,
any debts of a resident of a Contracting State to a resident
of the other Contracting State shall, for the purpose of
determining the taxable capital of the first-mentioned
resident, be deductible under the same conditions as if they
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had been contracted to a resident of the first-mentioned
State.
4. Enterprises of a Contracting State, the capital of
which is wholly or partly owned or controlled, directly or
indirectly, by one or more residents of the other
Contracting State, shall not be subjected in the first-
mentioned State to any taxation or any requirement connected
therewith which is other or more burdensome than the
taxation and connected requirements to which other similar
enterprises of the first-mentioned State are or may be
subjected.
5. Nothing in this Article shall be construed as
preventing either Contracting State from imposing a tax as
described in paragraph 5 of Article 10 (Dividends).
6. The provisions of this Article shall,
notwithstanding the provisions of Article 2 (Taxes Covered),
apply to taxes of every kind and description imposed by a
Contracting State or a political subdivision or local
authority thereof.
Article 26
Mutual Agreement Procedure
Where a person considers that the actions of one
or both of the Contracting States result or will result for
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him in taxation not in accordance with the provisions of
this Convention, he may, irrespective of the remedies
provided by the domestic law of those States, present his
case to the competent authority of either -Contracting State.
The case must be presented within three years from the first
notification of the action resulting in taxation not in
accordance with the provisions of the Convention.
2. The competent authority shall endeavor, if the
objection appears to it to be justified and if it is not
itself able to arrive at a satisfactory solution, to resolve
the case by mutual agreement with the competent authority of
the other Contracting State, with a view to the avoidance of
taxation which is not in accordance with the Convention. Any
agreement reached shall be implemented notwithstanding any
time limits or other procedural limitations in the domestic
law of the Contracting States.
3. The competent authorities of the Contracting
States shall endeavor to resolve by mutual agreement any
difficulties or doubts arising as to the interpretation or
application of the Convention. In particular the competent
authorities of the Contracting States may agree:
a) to the same attribution of income, deductions,
credits, or allowances of an enterprise of a
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Contracting State to its permanent establishment
situated in the other Contracting State;
b) to the same allocation of income, deductions,
credits, or allowances between persons;
c) to the same characterization of particular
items of income;
d) to the same characterization of persons;
e) to the same application of source rules with
respect to particular items of income;
f) to a common meaning of a term;
g) to increases in any specific dollar amounts
referred to in the Convention to reflect economic or
monetary developments;
h) to advance pricing arrangements; and
i) to the application of the provisions of
domestic law regarding penalties, fines, and interest
in a manner consistent with the purposes of the
Convention.
They may also consult together for the elimination of double
taxation in cases not provided for in the Convention.
4. The competent authorities of the Contracting
States may communicate with each other directly for the
purpose of reaching an agreement in the sense of the
preceding paragraphs.
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Article 27
Exchange Of Information And Administrative Assistance.
1. The competent authorities of the Contracting
States shall exchange such information as is relevant for
carrying out the provisions of this Convention or of the
domestic laws of the Contracting States concerning taxes
covered by the Convention insofar as the taxation thereunder
is not contrary to the Convention, including the assessment
of, collection of, the enforcement or prosecution in respect
of or the determination of appeals in relation to the taxes
covered by the Convention. The exchange of information is
not restricted by Article 1 (General Scope). Any information
received by a Contracting State shall be treated as secret
in the same manner as information obtained under the
domestic laws of that State and shall be disclosed only to
persons or authorities (including courts and administrative
bodies) involved in the assessment, collection or
administration of, the enforcement or prosecution in respect
of, or the determination of appeals in relation to, the
taxes covered by the Convention or the oversight of the
above. Such persons or authorities shall use the information
only for such purposes. They may disclose the information in
public court proceedings or in judicial decisions.
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2. In no case shall the provisions of paragraph 1 be
construed so as to impose on a Contracting State the
obligation:
a) to carry out administrative measures at
variance with the laws and administrative practice of
that or of the other Contracting State;
b) to supply information which is not obtainable
under the laws or in the normal course of the
administration of that or of the other Contracting
State;
c) to supply information which would disclose any
trade, business, industrial, commercial or professional
secret or trade process, or information, the disclosure
of which would be contrary to public policy (ordre
public).
3. Notwithstanding paragraph 2, laws or practices of
the requested State pertaining to the disclosure of
information by financial institutions, nominees or persons
acting in an agency or fiduciary capacity, or respecting
ownership of debt instruments or interests in a person shall
not affect the authority of the requested State. The
competent authorities shall have the authority to obtain and
provide information notwithstanding such disclosure laws and
practices. If information is requested by a Contracting
- 65 -
State in accordance with this Article, the other Contracting
State shall obtain the information to which the request
relates in the same manner and to the same extent as if the
tax of the first-mentioned State were the tax of that other
State and were being imposed by that other State. If
specifically requested by the competent authority of a
Contracting State, the competent authority of the other
Contracting State shall provide information under this
Article in the form of depositions of witnesses and
authenticated copies of unedited original documents
(including books, papers, statements, records, accounts, and
writings), to the same extent such depositions and documents
can be obtained under the laws and administrative practices
of that other State with respect to its own taxes.
4. Each of the Contracting States shall endeavor to
collect on behalf of the other Contracting State such
amounts as may be necessary to ensure that relief granted by
the Convention from taxation imposed by that other State
does not inure to the benefit of persons not entitled
thereto.
5. Paragraph 4 shall not impose upon either of the
Contracting States the obligation to carry out
administrative measures which are of a different nature from
those used in the collection of its own taxes, or which
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would be contrary to its sovereignty, security, or public
policy.
6. For the purposes of this Article, the Convention
shall apply, notwithstanding the provisions of Article 2
(Taxes Covered), to taxes of every kind imposed by a
Contracting State.
7. The competent authority of the requested State
shall allow representatives of the applicant State to enter
the requested State to interview individuals and examine
books and records with the consent of the persons contacted,
and in the presence of competent authority of the requested
State.
Article 28
Members Of Diplomatic Missions And Consular Posts
Nothing in this Convention shall affect the fiscal
privileges of members of diplomatic missions or consular
posts under the general rules of international law or under
the provisions of special agreements.
Article 29
Entry Into Force
1. The Governments of the Contracting States shall
notify each other through diplomatic channels when the
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constitutional requirements for the entry into force of the
Convention have been complied with.
2. The Convention shall enter into force on the date
of the later of the notifications referred to in paragraph
1, and its provisions shall have effect in both Contracting
States:
a) in respect of taxes withheld at source, for
amounts paid or credited on or after the first day of
January of the calendar year next following the year in
which the Convention enters into force;
b) in respect of other taxes on income, for
taxable years beginning on or after the first day of
January of the calendar year next following the year in
which the Convention enters into force.
3. The appropriate authorities of the Contracting
States shall consult within a five-year period from the date
on which this Convention enters into force with respect to
the application of the Convention, including the negotiation
of an amendment to the Convention by mean of a protocol (if
appropriate), to income derived from new technologies (such
as payments received for transmission by satellite, cable,
optic fibre or similar technology).
- 68 -
Article 30
Termination
This Convention shall remain in force until terminated
by a Contracting State. Either Contracting State may
terminate the Convention by giving written notice of
termination, through diplomatic channels, at least 6 months
before the end of any calendar year. In such event, the
Convention shall cease to have effect in both Contracting
States:
a) in respect of taxes withheld at source, for
amounts paid or credited on or after the first day of
January of the calendar year next following the year in
which the notice has been given;
b) in respect of other taxes on income, for
taxable years beginning on or after the first day of
January of the calendar year next following the year in
which the notice has been given.
IN WITNESS WHEREOF, the undersigned, being duly
authorized thereto, have signed this Convention.
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Done at Washington in duplicate, in the English and
Lithuanian languages, both texts being equally authentic,
this 15th day of January 1998.
FOR THE GOVERNMENT OF THE FOR THE GOVERNMENT OF THE
UNITED STATES OF AMERICA: REPUBLIC OF LITHUANIA:

 

 



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