EN  ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 16 December  2019  
on  
taxes on asset s of certain financial market participants and additional corporate income  taxes 
on certain credit institutions  
(CON/2019/ 44) 
 
Introduction and legal basis  
On 11 October 2019, a draft legislative proposal on taxes on assets of certain  financial market 
participants  was introduced into the Lithuanian Parliament  (the ‘draft law on financial market participants ’ 
asset tax’).  
On 6 December 2019,  a draft legislative proposal amend ing the Law on corporate income tax imposing  
an additional tax on profit s of banks and credit unions  was introduced into the Lithuanian Parliament  (the 
‘draft law  on credit institutions ’ income tax’). The draft law on financial market participants’ asset tax and 
the draft law on credit institutions’ income tax are collectively referred to as the ‘draft laws’ .  
The ECB has decided to deliver an own initiative opinion on the dr aft law s, since it has not been formally 
consulted on the draft law s by the Lithuanian authorities.  
The ECB’s competence to deliver an opinion is based on the second subparagraph of Article 127(4) of 
the Treaty  on the Functioning of the European Union in conjunction with the sixth  indent of Article 2(1) of 
Council Decision 98/415/EC1, as the draft law s concern rules applicable to financial institutions insofar as 
they materially influence the stability of financial institutions and markets . In accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion.  
 
1. Purpose of the draft law s  
Draft law on financial market participants’  asset tax  
1.1. The draft law on financial market participants ’ asset  tax would  impose an obligation on certain 
financial market participants  to pay a monthly tax of 0.03 % of the value of financial market 
participants ’ assets , subject to certain exemptions, deductions and exceeding a certain threshold.  
1.2. Under the draft law, the tax applies to banks, branches of foreign banks licensed in Member 
States of the European Union (EU) and the European Economic Area (EEA)  that are established 
                                                           
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42).  
ECB -PUBLIC  
2 in Lithuania,  branches of foreign banks licensed in non- EU/EEA countries that are established in 
Lithuania, credit unions, central credit unions, consumer credit lenders and credit lenders.  
1.3. According to the draft law , the tax base for  banks, branches of foreign banks , central credit 
unions  and credit unions will be the average annual assets excluding funds at the 
Lietuvos  bankas , funds lent to the State, cash, tangible and intangible assets, own funds 
calculated as the simple average of the value of assets at the end of four quarters of the 
preceding calendar year, in excess of EUR 300 million.  
1.4. The tax base of the consumer credit lenders and credit lenders  will be the average annual 
amount of disbursed consumer credit or credit related to real estate,  which remains to be repaid, 
calculated as the simple average of the annual amount of disbursed consumer credit or credit 
related to real estate, as the case may be, which remains to be repaid at the end of four quarters 
of the preceding calendar year, in excess of EUR 300 million.  
1.5. The draft law  provides a series of exemptions from the tax , as follows : (1) for a one- year period 
following the application to  banks (including banks licenced in EU /EEA Member States, which 
have establis hed branches in Lithuania) or central credit unions of measures provided for in a 
recovery plan, or adoption of a decision to reorganise such banks or central credit unions, 
(2) during the period of a moratorium declared with respect to a bank (including a branch of a 
bank licenced in a country other than an EU/EEA Member State), central credit union,  credit 
union, or a bank licenced in an EU/EEA Member State, which has established a branch in 
Lithuania, and (3) if a taxpayer is subject to bankruptcy or re structuring, or bankruptcy 
proceedings are initiated against a foreign bank, which has established a branch in Lithuania.  
1.6. As noted in the explanatory memorandum to the draft law, the purpose of this draft law is to 
enable the financial market participants  referred to in the draft law to increase their contribution to 
the State budget revenue, needed to finance public services and meet public obligations.  
Draft law on credit institutions ’ income tax  
1.7. The draft law on credit institutions ’ income tax  would impose an obligation on certain credit 
institutions, namely, commercial banks, branches of foreign commercial banks, credit unions and 
central credit unions ( collectively  referred to as  ‘credit institutions ’), to pay an additional profit tax 
at the rate of 5  % of the taxable profits of the credit institution . 
1.8. The base for the additional profit tax  shall be the taxable profit of the credit institutions, calculated 
by deducting from the taxable income of the credit institution the allowable deductions, non-
taxable income, deferred tax assets  and other amounts prescribed by the draft law , in excess of 2 
million euros . 
1.9. Credit institutions ’ annual  profit s of up to 2 million e uros shall not be subject to additional profit 
tax. 
1.10.  The additional profit tax  shall apply as of 1 January 2020 and be in effect for a three year period.  
1.11.  As explained in the draft law, the main purpose of the draft law is to ensure that the financial 
sector contributes to a greater extent to the fulfilment of social and other public obligations, 
whereas currently credit institutions are subject to a favourable tax treatment  compared to other  
corporates in Lithuania.  
 
ECB -PUBLIC  
3 2. General observations  
2.1. The ECB has consistently advised that taxes on financial institutions should be considered in 
relation to the dual objective of: (a) ensuring a more equitable distribution of the costs arising 
from the financial institutions’  potential failure between taxpayers and the financial sector; and 
(b) addressing the risks that the failure of financial institutions  would pose2. Using the proceeds of 
any ad hoc taxes imposed on banks for general budgetary purposes  would be undesirable to the 
extent that such tax es would place undue burdens on banks,  hampering the provision of credit 
with a knock -on effect on growth in the real economy3. The proceeds from taxes on financial 
institutions should be ring- fenced to avoid using them  for general fiscal consolidation pur poses4. 
2.2. In addition, i mposing any ad hoc taxes on banks for general budgetary purposes should be 
preceded by a thorough analysis of potential negative consequences for the banking sector to 
ensure that such taxes do not pose risks to financial stability an d the provision of credit, which 
could eventually adversely affect growth in the real economy. This might in turn result in banks 
offering less favourable terms to their customers when providing loans and other services and 
may also induce certain banks to cut back on their activities, leading to a reduction in the 
availability of credit and creating uncertainty for these banks5. 
2.3. The introduction of the tax should be carefully considered with regard to its impact on the 
profitability of affected financial i nstitutions, and thereby on their internal capital generation 
capacity  which in turn affects both their  resilience to adverse shocks  and the ability to extend 
credit and support the real economy . In this context, the differences in the situation of individual 
banks must  be taken into account, as must  the potential impact of other relevant regulations that 
are being introduced in Lithuania and in the Union. In particular, the situation of weaker banks 
and banks that may  be disproportionally affected and  record losses as a result of the proposed 
tax should be fully analysed.  
2.4. In the light of the foregoing, and in line with its previous opinions6, the ECB has concerns that the 
draft law on financial market participants’ asset tax  could have a material adver se effect on the 
Lithuanian financial system  and trigger potential undesired distortions with respect to bank 
business models . The ECB urges the Lithuanian authorities  to assess the impact that the 
introduction of this tax would have on the stability of the Lithuanian financial system.     
                                                           
2   See paragraph 2.1 of Opinion CON/2019/40, paragraph 2.1 of Opinion CON/2016 /01, paragraph 3.1.1 of 
Opinion CON/2015/43, paragraph 2.1 of Opinion CON/2013/44, paragraph 2.1 of Opinion CON/2011/29 and 
paragraph 3.2.1 of Opinion CON/2010/62. All ECB opinions are published on the ECB’s website at 
www.ecb.europa.eu . 
3   See p aragraph 2.1 of Opinion CON/2019/40, paragraph 3.1.1 of Opinion CON/2015/43.  
4  See paragraph 2.1 of Opinion CON/2019/40, paragraph 3.2.1 of Opinion CON/2010/62.  
5   See paragraph 2.1 of Opinion CON/2016/01, paragraph 3.1.1 of Opinion CON/20 15/43, paragraph 2.1 of 
Opinion CON/2011/29 and paragraph 3.2.2 of Opinion CON/2010/62.  
6   See paragraph 3.2 of Opinion CON/2019/29, paragraph 2.4 of Opinion CON/20 19/40, paragraph 2.4 of 
Opinion CON/2016/01, paragraph 2.2 of Opinion CON/2013/44, paragraph 2.2 of Opinion CON/2011/29 and 
paragraph 3.2.2 of Opinion CON/2010/62.  
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4 2.5. Regarding the draft law on credit institutions’ income tax , it is recommended that the draft law is 
accompanied by  a comprehensive impact assessment regarding the introduction of this tax . 
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 16 December 2019 . 
 
[signed]  
 
The President of the ECB  
Christine LAGARDE