Income taxes on HeavyFinance platform
Each jurisdiction has it’s own rules to tax income from the interest earned from investing. It highly depends on where the investment platform is registered and what jurisdiction investor declares.
HeavyFinance works under crowdfunding license that is issued in Lithuania – probably the best regulated market for fintech marketplaces. It provides investors with significantly more security, however, also deducting taxes for for Lithuania-originated loans and/or Lithuania-based investors.
How is non-Lithuania residents’ income taxed?
The income earned at HeavyFinance is taxed for each investor based on the legislation of the Lithuania and of the respective country where the investor is a tax resident.
Interest paid to non-residents is classified as the A-class income and HeavyFinance has a duty to deduct and pay taxes to Lithuanian budget.
HeavyFinance automatically deducts taxes at 15% tax rate from the interest paid out to foreign investors. In other words, if you earn 1000 EUR in interest income, you will be taxed for 150 EUR and you will receive 850 EUR.
Please note that income earned from late payments and penalties are not considered as an object of the income tax in Lithuania. Therefore, non-residents do not have to pay taxes in Lithuania for this income.
How to present the application to reduce the deducted tax
In order to reduce the taxes, foreign investors whose country of residence has a double taxation avoidance agreement with Lithuania should fill in section I through IV of a DAS-1 form and provide a proof of tax residency document in your country then send it to us at firstname.lastname@example.org with email title: “Income Tax”
The withholding tax will be reduced to those people who are residents of the countries that Lithuania has a double tax treaty exemption agreement with:
The tax will be reduced to 0% if you are a resident of:
United Arab Emirates, Cyprus, and Latvia.
The tax will be reduced to 10% if you are a resident of:
Armenia, Austria, Azerbaijan, Belarus, Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Greece, Georgia, India, Iceland, Spain, Italy, Israel, Japan, United Kingdom of Great Britain and Northern Ireland, Canada, Kazakhstan, China, Kyrgyzstan, Korea, Kosovo, Croatia, Kuwait, Poland, Liechtenstein, Luxembourg, Macedonia, Malta, Mexico, Moldova, Norway, The Netherlands, Portugal, France, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, Finland, Sweden, Switzerland, Turkey, Turkmenistan, Ukraine, Uzbekistan, Hungary, and Germany.
The DAS-1 form is valid only in the calendar year indicated by the foreign tax authority on a proof of tax residency document or by confirming the information provided in Part V of this form.
Non-taxable income includes interest income earned through P2P platforms not exceeding EUR 500 per tax period. Foreign country residents can only benefit from this tax relief after the tax period has ended. This means that from the interest paid to non-residents, HeavyFinance automatically deducts income tax, but the person will have the right to apply to the State Tax Inspectorate for a refund of the deducted tax.
Application of the foreign country resident to refund the deducted tax
If the foreign country resident did not exercise their right to submit the DAS-1 form to HeavyFinance, then such investor can apply to the State Tax Inspectorate (hereinafter – STI) with an application of DAS-2 form to refund the deducted tax. Also, the DAS-2 form may be provided for withholding tax on interest received, which did not exceed EUR 500.
HeavyFinance is not a certified tax advisor and therefore we only provide an official interpretation of the legislation of taxes in Lithuania or other countries where the investor is a tax resident. Please note that it is the sole responsibility of the individual investor to ensure that the requirements described apply to him. In addition, the following information is only intended to give an overview of taxation principles and does not constitute advice for individual cases. We therefore ask you to be advised individually by a licensed tax consultant or tax administrator of the respective country where you are a tax resident.