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  • Writer's pictureKotryna Grigentė

Investment account: significant change for investors. New opportunities and challenges for financial institutions



We are excited to congratulate and share the joy with all current and future investors on the Personal income tax (GPM) law amendments introducing the investment account in Lithuania! The goal of these changes is to encourage private individuals to invest and put to work the funds currently held in deposits (currently over €22 billion). 


The essence of the investment account is that investment returns (profits) are taxed only when funds are withdrawn from the investment account. Profits and losses from different investments are aggregated, with the possibility of carrying them forward. 

  


Important information for investors: 


- No limits on contribution amounts and number of accounts: you can have any number of investment accounts without any contribution limits, and there are no geographical restrictions on the accounts. 


- Notification to the State Tax Inspectorate (VMI): to use the investment account, you must inform the State Tax Inspectorate (VMI) that your account is considered an investment account (if you have more than one, inform VMI about all investment accounts you hold). 


- Investment opportunities: the investment account regime includes investments in stocks, bonds, investment funds, crowdfunding and peer-to-peer lending platforms, and derivatives. 


- Effective date: the new provisions take effect from the beginning of 2025. 


- Transition period: investments made until 2025 will also be subject to the new provisions if you inform the VMI about these investments by the end of 2025. 


- Inheritance and gifting: financial instruments received through inheritance or gifts can also be included in the investment account, provided that the VMI is informed. 


- Changes to Personal income tax (GPM) incentives: the GPM incentive for newly concluded life insurance and third-pillar pension accumulation contracts is being eliminated, but it will still apply for 10 years to contracts concluded before the end of 2024. The GPM incentive for second-pillar pension funds is not being eliminated. 



Opportunities for financial institutions offering investment products: 


- Attracting new investors: The possibility to attract new investors to existing and newly created financial products since there are no contribution limits for investors. 


- Creating new products: A great opportunity to develop new products that meet investor needs. 


- Investor education: By educating investors about the reform, financial institutions can increase their competitive advantage. 


- Increasing market share: An opportunity to increase market share by offering competitive and attractive conditions to investment account holders. 


  

Challenges for financial institutions: 


- Adapting IT systems: Resources will be needed to adapt IT systems to accurately report data to the VMI according to the new requirements. Currently, there are no clear instructions on how detailed information about financial instrument transactions, acquisition prices, etc., should be provided. 


- Compliance with legal and regulatory requirements: Financial institutions will need to ensure compliance with new legal acts and regulatory requirements. 


More information about the Investment account can be found at the Ministry of Finance of Lithuania website. Implementing regulations for this law will be adopted by the end of this year, so answers to practical questions are still on the way. 


At ExpertLAB, we can assist financial institutions in ensuring compliance with legal requirements, as well as in developing and presenting new products and opportunities to investors. 


We hope that these changes will encourage residents to more boldly invest the funds held in deposits and wish everyone successful investments! 



Investments
Investment account



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