Lithuanian Citizens Can Now Purchase New Government Defence Bonds

The sale of government defence bonds starts today in Lithuania. Citizens with billions of euros in their accounts will be offered a new way to contribute to the country's defence, Delfi reports.

Defence bonds will mean lending to the government at fixed interest rates. This instrument essentially replaces government savings bonds (VTLs), which have been revived since last summer. The purpose of the borrowing (defence, security) is now specified and the name of the instrument is changed accordingly.

The yield on the October issue will be 2% p.a., while the previous September VTL issue had a 3% yield. Deposit yields are currently even higher. 

The Ministry of Finance comments that only the interest received, not exceeding EUR 500 per year, will be taxable for defence bonds issued on a VTL basis (together with interest on other securities issued by governments or local authorities, as well as other non-equity securities and available deposits).

According to Delfi's calculations, in order to receive tax-free income from government bonds (at 2%), the state would need to borrow no more than EUR 25 thousand. The income would then reach €500. Borrowing 30,000 euros would result in an interest rate of 600 euros, so 15% would have to be paid on the ‘extra’ 100 euros. GPM (15 euros), and there will be 585 euros of net profit left. The same applies to time deposits or shares.

The Ministry reminds us that from January next year, the investment account will start working, which means that if defence bonds are purchased from an investment account, the income received will not be taxed at all until it is reinvested, that is, until the funds are transferred. withdrawn from the investment account for other purposes.

‘Repayment will take place on the last business day of each month. The investor should simply submit an application to the distributor from the 1st to the 15th of that month,’ the statement said.