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    Lithuania introduces new transfer pricing documentation guidelines

    After becoming a member of the Organisation for Economic Cooperation and Development (“OECD”), Lithuania has updated its transfer pricing regulations in order to be aligned with the changes made to the OECD Transfer Pricing Guidelines after the Base Erosion and Profit Shifting project.

    On 31 December 2018, the Lithuanian Finance Minister has signed Corporate Tax Amendment Act 1K-470 taking effect from 1 January 2019 (“the Act”). The new set of rules introduce transfer pricing reporting requirements regarding controlled transactions involving intangibles and new transfer pricing documentations requirements for entities operating in Lithuania. The updated transfer pricing rules closely follow Chapters 5 and 6 of the OECD Transfer Pricing Guidelines, i.e. “Documentation” and “Special Considerations for Intangibles” as published on July 2017.

    Entities are required to prepare a Master File and a Local File before 15 June of the following year.

    Transactions involving intangibles

    Section 4 of the Act provides the guidelines for determining arm’s length pricing for transactions involving intangibles. The Act follows the OECD Transfer Pricing Guidelines and requires the identification of the legal owner of the intangible and a description of DEMPE (development, enhancement, maintenance, protection and exploitation) functions regarding the intangible asset. The parties involved in the transaction have to be remunerated according to the contributions made to the intangible. If different entities are considered to be the legal and the economic owners of the intangible asset, the rules require to remunerate an entity according to its contributions made to the asset. The rules also require analysing the commercial reasons of the transaction and the opportunities realistically available to the transaction parties.

    Documentation requirements – Master File

    Section 5 of the Act introduces new transfer pricing documentation requirements in line with the OECD Transfer Pricing Guidelines. Multinationals operating in Lithuania are required to prepare a Master File and a Local File for transfer pricing reporting purposes. The transfer pricing Master File should contain general information about the group, a description about product and/or services, a functional analysis of the group entities, its transfer pricing policy and a description of the group’s intangible assets development strategy. The Master File is created at group level and has to be provided together with the Local File to the local tax authority.

    Local File

    The Local File has to present the controlled transaction in which Lithuanian entity (company, permanent establishment or individual) is engaged in with the related party. The Transfer Pricing Local File should include information about the transaction and the transfer pricing method applied to the analysed transaction. The chosen transfer pricing method should be carefully explained and has to include the reasons why it was chosen in respect of the transaction under review. Any comparable data used should also be validated providing and explaining the quantitative and qualitative selection criteria applied.

    The Act also eliminates a hierarchy of transfer pricing methods, i.e. the most appropriate method has to be selected and it is not required to justify why other methods where not chosen.


    Entities, operating in Lithuania directly or through a permanent establishment, are only required to prepare a Master File if their turnover exceeds EUR 15 million in the year before in which the controlled transaction takes place. A Local File must be prepared by entities operating in Lithuania if the turnover exceeds EUR 3 million.

    There is also the minimis threshold for preparing a Local File. Transactions with a single related party of under EUR 90,000 per year do not have to be documented in the Local File.

    Contact us

    If you have any questions about the new rules or need assistance with your Master File or Local File documentation, please do not hesitate to contact us. As your trusted transfer pricing specialist, Quantera Global is happy to help!