Down with double taxation

  • 1998-10-22
  • Paul Beckman
VILNIUS - For many businesses, the only thing more annoying than paying taxes is figuring them out.

German Embassy officials and Lithuanian government representatives took a final step Oct. 12 to create an agreement that will make paying taxes a clearer undertaking for German and Lithuanian business people operating in both countries.

Following the ratification and exchange of documents, an agreement between Germany and Lithuania on the "avoidance of double taxation" was sealed and set to come into force around the middle of November.

The taxation of business profits, dividends, interest and capital gains were among the subjects which the agreement clarified. An enterprise's profits, for example, will only be taxable in the country which it considers its permanent residence. This, however, does not apply to an enterprise's activity in the other country if it is carried out through a "permanent establishment," like branch offices and factories.

Lithuanian Foreign Vice Minister Rokas Bernotas, who represented the Lithuanian side in the exchange of documents, told TBT that the agreement with Germany is part of a continuing government policy which aims to make similar deals with other countries.

"It is a basic international agreement which the [Lithuanian] government wants to make with all of its major economic partners," said Bernotas. "We have already come to similar agreements with a number of our other partners."

Despite the "basic" nature of the agreement, Bernotas described the process of arriving at such a deal as a task which is not an especially easy undertaking. While the agreement had been signed more than a year ago, Bernotas stated that it will only go into force this year because the process involves a significant amount of time.

"These types of treaties in regard to avoiding double taxation are tricky to negotiate," said Bernotas. "The experts which are involved need to compare the tax systems of both countries."

Helga Weber, a German Embassy official, stated that other obstacles involved logistics. By stating that experts needed to meet two to four times a year, the official regarded the action of simply getting together and writing as the most time consuming.

"These types of things get easier," said Weber. "[The main driving point] was that both governments did not want double taxation."

While Weber refrained from claiming that the new agreement will cause a huge boom of extra activity among the business community which operates in both countries, both she and Bernotas agreed enterprises will recognize the benefits.

"The agreement will make it easier to count and pay taxes," said Weber.