According to the rules of the State Tax Inspectorate, this requires that the employee's home is constantly accessible to the company and that essential commercial activities are carried out there, and not only auxiliary or preparatory tasks.
When can a permanent establishment arise?
• Location exclusivity: If the foreign company requires the employee to constantly use his home as an official place of business or customer service.
• Nature of activity: If the employee regularly concludes transactions, signs contracts or makes key decisions on behalf of the company from home.
• Time and continuity criterion: The activity cannot be short-term (usually assessed if it lasts longer than 6 months).
When does a permanent establishment not arise?
• Support functions: If the employee performs only technical, programming, administrative or analytical work that is only a support link to the main business.
• No authority: If the employee cannot independently negotiate and sign contracts on behalf of the foreign company.
• Lack of employer control: If working from home is chosen solely for the employee's personal convenience, and the company itself does not have physical control or ownership of that workplace.
Important tax nuances
• GPM and Sodra: Even if a foreign company does not have a permanent establishment in Lithuania for the purposes of corporate income tax, it is still required to ensure the payment of taxes (GPM and social insurance) in accordance with Lithuanian legislation, often by using a local representative or by registering with Sodra as an insurer.
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