2020.01.22 17:30

Lithuania introduces ‘exit tax’ as haulage firms threaten to move business to Poland

Irma Janauskaitė, Jūratė Anilionytė, LRT TV, LRT.lt2020.01.22 17:30

Lithuania is introducing an “exit tax” on businesses relocating out of the country to another European Union member state. The measure has been recommended in an EU directive and may hit logistics companies that are moving their businesses to Poland.

Under the new rule, companies relocating or taking their profit-making assets abroad will be treated as selling the business. The value, as revenue, will be subject to property sales tax.

“If ownership does not change, but revenues are filed not in Lithuania, but in another country, this is treated as selling assets to oneself and subject to the exit tax,” says Alina Gaudutytė, a senior adviser at the Legal Department of the State Tax Inspectorate.

The measure, recommended by the EU, is introduced as Lithuania's logistics companies are threatening to relocate to Poland to avoid new regulations.

Lithuania recently decided increase taxes on per-diem allowances paid to truck drivers that make up a significant part of their remuneration – 64 percent, according to a Bank of Lithuania study.

The move was aimed at reducing the share and ensuring better conditions for truck drivers, since per diem allowances do not count towards their social security. Last November, drivers' union staged a protest over working conditions.

Read more: Drivers stage counter-protest against haulage firms to demand living wages

Meanwhile truck companies have called higher taxes a burden on their business and threatened to relocate to Poland.

Being based in Poland would also make it easier to meet new rules in the EU's currently debated Mobility Package under which trucks would be required to return to their country of origin at regular intervals.

Linava, the association of Lithuania's road carrier companies, says the exit tax will not stop the exodus which is already happening.

“Relocations will be done in different ways. This year, for instance, 3,000 trucks that were to be registered in Lithuania will be registered in other countries,” says Mečislavas Atroškevičius, secretary general of Linava. “It won't be moving things out of Lithuania, but simply creating new jobs abroad.”

Linava insists that moving 3,000 trucks out of the country will mean 25 million euros less in tax revenue and 35,000 fewer jobs.

Business consultants say they have been flooded with clients wishing to set up companies in Poland. Savesta Consulting, based in the northern Polish town of Sejny, has already helped 60 carriers to move their business.

“We have been approached by 300–400 [clients],” says Savesta Consulting co-founder Ignas Volbikas. “We are helping businesses to expand into Poland, but the last several months looked like evacuation.”

A recent study by economists of the Bank of Lithuania has suggested that Lithuanian haulage firms have enjoyed above-average profits and could bear higher taxes.