Assets to shareholders on liquidation in Lithuania: when, how much, tax

A company in liquidation first settles with its creditors. Only then is the remaining property split among the shareholders, in proportion to the nominal value of their shares. Distribution may not start before a waiting period set by law has passed, and not while court disputes over the company’s debts are pending. What a shareholder receives is not a dividend: the law treats it as a separate shareholder right. The Law on Corporate Income Tax treats the transfer as a sale of the company’s property, and the Law on Personal Income Tax as a sale of the shareholder’s shares, so income may arise both for the company and for the shareholder.

This article covers private limited companies (UAB) and public limited companies (AB). Other legal forms are governed by their own laws.

When property may be distributed to shareholders

Article 73(13) of the Law on Companies of the Republic of Lithuania (ABĮ) sets the order. First the company settles with its creditors, following the order of satisfying creditors’ claims set by the Civil Code. How that order works is described in our article UAB liquidation process: employees, creditors, audit and bank account.

Two more rules limit the timing.

First, the liquidator must announce the liquidation publicly in the source named in the articles of association: three times at intervals of not less than 30 days, or once while also notifying all creditors in writing (Article 73(10) ABĮ). Property may be distributed to shareholders no earlier than 2 months after all these steps have been taken (Article 73(14) ABĮ). The period runs from the last of these steps, not from the day of the decision to liquidate.

Second, if court disputes arise over the payment of the company’s debts, property may not be distributed to shareholders until the court has resolved those disputes and the creditors have been paid (Article 73(15) ABĮ). So before distributing, check whether any claims or other cases over the company’s debts are pending.

The law lets shareholders liquidate only a solvent company by their own decision. The general meeting of shareholders cannot decide to liquidate an insolvent company (Article 73(3) ABĮ). A company is liquidated for bankruptcy under the procedure of the Law on Insolvency of Legal Entities (Article 73(4) ABĮ).

In what proportion property is split

After the creditors, the accumulated dividend is paid first to holders of preference shares with a cumulative dividend. The remaining property is split among the shareholders in proportion to the nominal value of the shares they own. If the shares carry different rights, those rights must be taken into account when the property is split (Article 73(13) ABĮ).

This means the share depends on the nominal value of the shares, not on what the shareholder paid to acquire them. If all shares are ordinary shares, a shareholder whose shares make up half of the total nominal value receives half of the remaining property.

The same rule applies to property discovered later: it is split in the same way (Article 73(13) ABĮ). What to do if property comes to light after the company has been deregistered is covered in Assets left after company deregistration.

Distribution also has a procedural effect. The decision to liquidate cannot be revoked if at least one shareholder has received a part of the company’s property (Article 73(16) ABĮ). So if you are still considering revoking the liquidation, do not distribute anything. When a liquidation can be revoked is covered in Do you have to liquidate a dormant company?.

Is what the shareholder receives a dividend?

No. Article 15(1) ABĮ lists a shareholder’s property rights in separate points. The right to receive a share of the company’s profit (a dividend) is one right (Article 15(1)(1) ABĮ). The right to receive funds when the authorised capital is reduced is another (Article 15(1)(2) ABĮ). The right to receive a share of the property of a company in liquidation is a third, separate right (Article 15(1)(6) ABĮ).

The Law on Personal Income Tax makes the same distinction. Income received on the liquidation of an entity is dealt with in Article 11 of the Law on Personal Income Tax of the Republic of Lithuania (GPMĮ). Income from distributed profit, which includes dividends, is dealt with separately (Article 12(1) GPMĮ).

Conclusion: in a liquidation, property is transferred to shareholders under the rules of Article 73 ABĮ, not by a dividend decision.

Tax consequences for the company

Article 45(1) of the Law on Corporate Income Tax of the Republic of Lithuania (PMĮ) provides that where an entity in liquidation distributes property to its participants, the distribution is treated as a sale of that property at its fair market price, set on the day ownership is transferred. The difference between the acquisition price of the property and that fair market price is treated as the entity’s capital gain, unless the law provides otherwise. Losses the entity incurs on transferring property are treated as losses of the entity in liquidation.

The acquisition price of property means the expenses incurred in acquiring it (Article 14(1) PMĮ). Where the property was depreciated or amortised for corporate income tax purposes, the acquisition price is reduced by the depreciation or amortisation deducted (Article 16(2) PMĮ). So if the fair market price of the property on the day of transfer is higher than the acquisition price calculated this way, the company has income even though it receives no money. Therefore:

• before transferring property, establish the fair market price of each item on the day of transfer and its acquisition price;
• record the transfer in a dated written document, because the day ownership is transferred decides the valuation;
• take this income or loss into account when calculating the company’s corporate income tax.

Tax consequences for the shareholder

A shareholder that is itself a legal entity recognises the capital gain (or loss) at the moment it receives the property of the entity in liquidation. The gain is the difference between the acquisition price of its shares and the market price of the property received. For the shareholder, the acquisition price of the property received is its fair market price (Article 45(2) PMĮ). This matters when the shareholder later sells that property.

For a shareholder who is an individual, Article 11(1) GPMĮ applies: on the liquidation of an entity, the individual is treated as selling the shares held. If property is transferred to the individual, the income is the fair market price of that property on the day ownership is transferred (Article 11(2) GPMĮ). Because this is treated as a sale of shares, the acquisition price of the shares may be deducted from the income (Article 19(1) GPMĮ). On liquidation, the acquisition price of the shares equals the value of the contributions the individual made to the company’s capital for those shares, at the time they were made, or, where the shares were bought on the secondary market, their acquisition price on that market (Article 19(4) GPMĮ). Only amounts supported by documents may be deducted (Article 19(3) GPMĮ), so keep the documents for the contribution or the purchase of the shares.

We do not discuss rates here. Whether a relief applies to a particular shareholder, at what rate the income is taxed and how to declare it may depend on whether the shareholder is an individual or a legal entity, on how long the shares were held and on other circumstances. Article 45(1) PMĮ itself provides that the law may provide otherwise. The tax consequences of a particular case should be checked before property is distributed, with a tax adviser or the State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI).

Does anything change in 2027?

We compared the PMĮ and GPMĮ versions now in force with the versions that take effect on 1 January 2027. The wording of Articles 14, 16 and 45 PMĮ and Articles 11, 12 and 19 GPMĮ cited in this article does not change. The ABĮ version taking effect on 1 November 2026 does not change Article 73(3), (4), (10) and (13)–(16) or Article 15(1) ABĮ either.

More on liquidation

• Liquidation of companies: service page
• Liquidation initiated by the Centre of Registers
• Debtor company in liquidation: how a creditor claims the debt in Lithuania
• Liquidation or bankruptcy: what to do when a company runs short of assets
• Does bankruptcy need shareholder consent? How insolvency is established
• Closing a Lithuanian company: liquidation, bankruptcy, merger or share sale
• The company no longer trades – do you have to liquidate it?
• Liquidating a UAB with a shareholder abroad: what can be done remotely
• Liquidation in Lithuania: archive certificate and state land lease tax
• Liquidation in Lithuania: annual financial statements and the AGM
• Shares in other companies during liquidation: act before deregistration
• After bankruptcy opens: CEO duties and what shareholders can still do

How to start

Send us the decision to liquidate the company, the latest balance sheet, a list of the property you plan to transfer to shareholders and a list of shareholders (say which are individuals and which are legal entities). From these we will assess when property may be distributed and which documents need to be prepared.

Phone +370 5 212 1506, email info@linden.lt

More about this service: Liquidation of companies.