Lithuania

Taxable Event: A taxable event occurs when you:

Sell cryptocurrency for fiat currency.

Exchange one cryptocurrency for another.

Use cryptocurrency to purchase goods or services.

Calculating Profit: The taxable profit is calculated as the selling price minus the acquisition cost (and any directly related costs, e.g., transaction fees). If you sell only a portion of your holdings, the "First-In, First-Out" (FIFO) method is generally recommended for calculating the acquisition cost, though other consistent methods might be acceptable.

If the total annual income from the sale of "other property" (including crypto) does not exceed €500, then the profit is generally tax-exempt. This threshold applies to the profit, not the total turnover.

This exemption generally applies to non-business activities. If crypto trading is considered a systematic business activity, different rules apply.

15% PIT rate applies to taxable income up to a certain threshold. For 2024, this threshold is €120,408 (120 average national wages).

20% PIT rate applies to taxable income exceeding this threshold (€120,408 for 2024).

These rates apply to the total taxable income from all sources (employment, business, capital gains, etc.), not just crypto.

Losses: Losses from the sale of cryptocurrencies can generally be offset against profits from the sale of other similar property (including other cryptocurrencies) in the same tax year. They cannot be carried forward to future years or offset against other types of income.

Staking, Lending, Yield Farming Rewards: Income derived from staking, lending, or yield farming (i.e., new crypto generated from holding/locking existing crypto) is generally considered "other income" and is subject to PIT at the 15% or 20% progressive rates. The taxable event is usually when the rewards are received and their value can be reliably determined.

Companies engaging in cryptocurrency-related activities (e.g., trading, mining as a business, providing crypto services, operating exchanges) are subject to Corporate Income Tax (CIT) on their profits.

A reduced rate of 0% or 5% may apply to small entities meeting specific criteria (e.g., small number of employees, limited annual income).

All profits from crypto activities are aggregated with other business income for CIT purposes. Proper accounting records must be maintained, and the value of crypto assets needs to be reported in financial statements.

Exemption: The exchange of conventional currency for units of the "Bitcoin" virtual currency and vice versa, or the exchange of different virtual currencies, is considered a supply of services for consideration and is exempt from VAT. This also generally applies to transactions involving buying, selling, or exchanging other cryptocurrencies.

Subject to VAT: Services that are not the direct exchange of cryptocurrency but facilitate or are related to crypto activities may still be subject to VAT. Examples include:

The sale of hardware specifically for mining.

Consultancy services related to blockchain or cryptocurrency (if not directly involving the exchange of crypto).

Software development for crypto platforms.

Fees for custodial services (if these are not seen as part of the exempt financial transaction).

Annual Income Tax Declaration (GPM308): Individuals must declare all taxable income, including capital gains from cryptocurrency sales and other crypto-related income, in their annual personal income tax return (GPM308 form).

Declaration Deadline: Typically by May 1st of the year following the tax year.

Reporting Foreign Accounts: If individuals hold crypto assets in foreign exchanges or wallets that are considered financial accounts, they might also have reporting obligations regarding foreign bank accounts/assets.

Record Keeping: It is crucial for individuals to keep detailed records of all cryptocurrency transactions, including:

Dates of acquisition and disposal.

Corporate Income Tax Declaration: Companies must report their crypto-related profits and losses in their annual corporate income tax declaration.

Accounting Records: Businesses must maintain comprehensive accounting records in accordance with Lithuanian accounting standards. Cryptocurrencies are typically recognized as intangible assets or inventory, depending on the business model.

AML/KYC Compliance: Crypto service providers (exchanges, custodians, wallet providers) operating in Lithuania are subject to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, requiring them to collect and report certain customer data and suspicious transactions to the Financial Crime Investigation Service (FCIS). This indirectly contributes to tax oversight.

VMI Information on Cryptocurrencies (General Page):

Often, the VMI provides specific Q&A or informational pages on topics like cryptocurrencies. You would typically find this by searching their site. An example of where such information might reside (the direct link can change as they update their site):

Look for a section titled "Informacija apie kriptovaliutas" or "Mokesčiai už kriptovaliutų prekybą" or similar under their "Information for Residents" or "Information for Businesses" sections.

GPM Įstatymas ir jo taikymas kriptovaliutoms (GPM Law and its application to cryptocurrencies - This is a direct link to a VMI page specifically on this topic as of my last update, but always verify).

E-money Tokens (EMTs): These are crypto-assets that purport to maintain a stable value by referencing the value of one single official currency (e.g., a Euro-backed stablecoin).

Classification: EMTs are classified as electronic money under the Electronic Money Directive 2009/110/EC (EMD2), with additional specific requirements imposed by MiCA.

Lithuanian Reference: The Law on Electronic Money and Payment Institutions of the Republic of Lithuania (Lietuvos Respublikos elektroninių pinigų ir mokėjimo įstaigų įstatymas) transposes EMD2 into national law and regulates electronic money institutions (EMIs) in Lithuania.

URL: https://www.e-tar.lt/portal/legalAct.html?id=TAR.5D3306EF3A7D (Lithuanian only, but official source)

Asset-Referenced Tokens (ARTs): These are crypto-assets that are not EMTs and purport to maintain a stable value by referencing any other value or right, or a combination thereof, including one or several official currencies (if more than one), one or several commodities, or one or several crypto-assets, or a combination of such assets.

Classification: ARTs are a new category specifically defined and regulated by MiCA. They are not generally classified as e-money or securities, although a specific ART could still potentially fall under securities law if it meets the definition of a "transferable security" under MiFID II (Directive 2014/65/EU) – though MiCA generally aims to carve out ARTs that aren't securities.

Lithuanian Reference: MiCA is directly applicable, so no separate national transposition is required for ART classification itself.

Payment Tokens: Stablecoins, by their nature, generally fall under ARTs or EMTs in MiCA. Other "payment tokens" (i.e., crypto-assets primarily intended for payment, not ARTs/EMTs, nor securities) are a broader category under MiCA.

Securities: If a crypto-asset, even if it purports to be "stable," meets the definition of a "financial instrument" (which includes securities) under MiFID II, then it would fall under existing securities regulations, not MiCA. The Law on Securities of the Republic of Lithuania (Lietuvos Respublikos vertybinių popierių įstatymas) would apply. However, MiCA aims to provide regulatory clarity for stablecoins not classified as securities.

Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA)

URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114 (See Articles 3, 43, 48)

Must be backed 1:1 by fiat currency (e.g., Euros).

Funds received in exchange for EMTs must be placed in a separate account at a credit institution or invested in secure, low-risk assets.

Issuers must hold at least 30% of the reserve assets in deposits at credit institutions. The remaining part can be invested in highly liquid, low-risk financial instruments with minimal market risk.

Assets must be segregated from the issuer's own assets and held in custody by an independent third party (credit institution).

Issuers must have robust liquidity management policies.

Must be backed by a reserve of assets that are segregated from the issuer's own assets.

The reserve assets must be held in custody by a third party that is independent from the issuer.

The reserve must be managed in a way that minimises market risk and credit risk.

Issuers must have a clear and detailed policy for the stabilisation mechanism, including the type of assets, composition, and allocation of the reserve.

The reserve assets must be sufficiently liquid, and issuers must have a liquidity management policy.

For ARTs that aim for stability by reference to a single fiat currency, similar strict requirements as EMTs apply regarding the composition and custody of the reserve.

An issuer of EMTs must be authorized as a credit institution (bank) or an electronic money institution (EMI) under the Electronic Money Directive 2009/110/EC (transposed by the Lithuanian Law on Electronic Money and Payment Institutions).

Additionally, they must obtain authorization under MiCA specifically for the issuance of EMTs. The Bank of Lithuania is the competent authority for granting these licenses.

Lithuanian Context: Lithuania is known for being a hub for EMIs due to its relatively streamlined licensing process for compliant entities. Many crypto firms have sought EMI licenses there.

An issuer of ARTs must be a legal entity established in the EU and obtain specific authorization under MiCA from their national competent authority (the Bank of Lithuania for Lithuanian-based issuers).

The authorization process requires a detailed application including a programme of operations, governance arrangements, prudential safeguards, IT systems, and a white paper.

Law on Electronic Money and Payment Institutions of the Republic of Lithuania

Bank of Lithuania official information on licensing:

URL: https://www.lb.lt/en/our-activities/licensing (General licensing information for financial institutions)

Holders of EMTs have a right to redeem their tokens at par value (1:1) against the issuer at any moment, free of charge (unless fair and proportionate fees are explicitly agreed upon).

The redemption must be executed without undue delay.

Important: EMTs are not covered by deposit guarantee schemes (like those under Directive 2014/49/EU) or investor compensation schemes. This must be clearly disclosed.

Holders of ARTs have a right to redeem their tokens at their market value against the issuer or directly against the reserve assets, without undue delay, and free of charge (unless fair and proportionate fees are explicitly agreed upon).

The redemption policy must be clearly outlined in the white paper.

MiCA's Stance: MiCA explicitly states that it does not apply to crypto-assets that aim to maintain a stable value through an algorithm, which means they are not regulated as ARTs or EMTs under MiCA.

Implication: Algorithmic stablecoins without a true reserve of underlying assets (or where the stability mechanism is purely algorithmic) fall outside the specific stablecoin regime of MiCA. This means they are not subject to the stringent reserve, custody, and redemption requirements of MiCA's ART/EMT framework.

Regulatory Gap/Alternative Classification: While not regulated as stablecoins under MiCA, they might still be subject to other regulations if they meet different definitions (e.g., if they are deemed a security, or if they facilitate payments and fall under payment services laws). However, for the specific purpose of "stablecoin" regulation, MiCA excludes them.

No National CBDC: Lithuania, as part of the Eurozone, does not have its own national CBDC. Any future CBDC interaction would be in the context of a Digital Euro issued by the European Central Bank (ECB).

A Digital Euro would be a central bank liability, offering superior settlement finality, zero credit risk, and potentially universal accessibility compared to private stablecoins.

It could significantly impact the market for private EMTs, potentially reducing their appeal, especially for retail payments, as the Digital Euro would fulfill many of the same functions with greater safety and trust.

Private stablecoins might still find niches in wholesale markets, specific enterprise applications, or cross-border payments where a CBDC might not be the optimal solution.

ECB Position: The ECB is actively exploring and progressing with the Digital Euro project.

European Central Bank (ECB) Digital Euro project:

EU Framework: These obligations stem from the EU Anti-Money Laundering Directives (AMLDs), particularly the 5th and upcoming 6th AMLD.

Lithuanian Legislation: Transposed into the Law on the Prevention of Money Laundering and Terrorist Financing of the Republic of Lithuania (Lietuvos Respublikos pinigų plovimo ir teroristų finansavimo prevencijos įstatymas).

This law requires crypto-asset service providers to implement know-your-customer (KYC) procedures, monitor transactions, report suspicious activities to the Financial Crime Investigation Service (FCIS), and have robust internal controls.

Supervision: The Bank of Lithuania and the Financial Crime Investigation Service (FCIS) supervise compliance with AML/CTF rules.

Stablecoins are largely classified as E-money Tokens (EMTs) or Asset-Referenced Tokens (ARTs), falling under MiCA's specific regimes.

Issuers require MiCA authorization (and an EMI license for EMTs), primarily from the Bank of Lithuania.

Strict reserve requirements (1:1 backing, segregation, custody) and redemption rights are mandated.

Algorithmic stablecoins are explicitly excluded from the MiCA stablecoin regime.

Any CBDC interaction would be with a Digital Euro from the ECB.

All stablecoin activities remain subject to comprehensive AML/CTF regulations under Lithuanian law.

URL: https://www.e-tar.lt/portal/legalAct.html?id=TAR.D64F6ED6D12C (Lithuanian only, official source)

URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114 (See Articles 46-47 for EMTs, and Articles 35-42 for ARTs)

URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114 (See Articles 19-21 for ARTs, and Article 49 for EMTs)

URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114 (See Article 48 for EMTs and Article 42 for ARTs)

URL: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1114 (See Recital 11, which clarifies this exclusion from the definition of ARTs)

URL: https://www.e-tar.lt/portal/legalAct.html?id=TAR.5CEB6D55CDDC (Lithuanian only, official source)