Tax Compliance for Lithuanian Companies

The Lithuanian Tax Compliance Framework

VMI — the State Tax Inspectorate

The State Tax Inspectorate (Valstybinė mokesčių inspekcija — VMI) is the authority responsible for administering all national taxes in Lithuania: corporate income tax, VAT, personal income tax, and real estate tax. VMI operates through the Central Tax Inspectorate and 10 regional offices. All tax filings are submitted electronically through VMI’s EDS (Elektroninė deklaravimo sistema) portal at www.vmi.lt. VMI has direct online access to the company’s filing history and outstanding balances — every late filing or late payment is immediately visible to VMI without any manual reporting.

SoDra — social insurance

The State Social Insurance Fund Board (Valstybinio socialinio draudimo fondo valdyba — SoDra) administers social insurance contributions — the employer’s and employee’s contributions to the pension, sickness, maternity, unemployment, and health insurance funds. Employers must register with SoDra before an employee’s first day of work and report each employee’s earnings and contributions monthly. SoDra reports are submitted through the SoDra electronic system separately from VMI’s EDS portal.

Penalties for late or missing filings

The Law on Tax Administration (Mokesčių administravimo įstatymas — MAĮ) sets out the penalties for non-compliance. Late payment of tax incurs daily interest at 0.03% per day (approximately 10.95% per annum) running from the original due date. Late filing of a tax declaration incurs a fine of 10% of the unpaid tax for each month of delay, capped at 50% of the unpaid tax. Where the under-declaration was intentional, an additional 25% penalty surcharge applies; for deliberate fraud, 50%. VMI has broad powers to conduct automated cross-checks between tax returns, VAT returns, and third-party information — discrepancies trigger follow-up queries. A clean VMI compliance record is one of the most important indicators in bank KYC assessments, licensing applications, and government contract eligibility.

Corporate Income Tax (Pelno Mokestis) Compliance

The annual CIT cycle

Corporate income tax compliance in Lithuania follows an annual cycle with interim advance payment obligations. The cycle for a company with a standard December year-end is:

• Q1 advance payment — due by 15 March: 1/4 of the prior year’s CIT liability (or the company’s estimate if Q1 actual profit is significantly different from the prior year run-rate)
• Q2 advance payment — due by 15 June: 1/4 of the prior year’s CIT liability
• Q3 advance payment — due by 15 September: 1/4 of the prior year’s CIT liability
• Q4 advance payment — due by 15 December: 1/4 of the prior year’s CIT liability
• Annual CIT return (FR0702) — due by 15 June of the following year: declaring the actual taxable profit for the year, applying all deductions and allowances, and paying any balance or claiming any refund of overpaid advances

CIT advance payment basis

The advance payment amount is based on the prior year’s CIT liability divided by four. Companies whose current-year profits are expected to be significantly lower than the prior year may apply to reduce their advance payments by submitting an estimate to VMI. If the actual annual CIT liability exceeds the advances paid, the balance is due by 15 June. If advances exceed the actual liability, the overpayment is credited against future payments or refunded. We monitor advance payment levels against the accounting year-to-date profit and advise on whether applying for a reduction is appropriate.

Key deductions that affect CIT liability

The taxable profit for CIT purposes is adjusted from the accounting profit through the annual CIT return. The most commercially significant adjustments for foreign-owned Lithuanian companies are:

• R&D triple deduction — qualifying research and experimental development expenses deducted at 300% of actual cost under Article 17(1)(1) PMĮ
• Tax loss carry-forward — accumulated tax losses from prior years, applied up to 70% of the current year’s taxable profit
• Non-deductible expenses — expenses not related to business activity; entertainment above statutory limits; fines and penalties; Article 31 PMĮ non-deductible list
• Thin capitalisation — net interest cost exceeding 30% of EBITDA (or €3 million) deferred to future years under Article 30(1) PMĮ / EU ATAD
• Participation exemption — dividends received from qualifying subsidiaries exempt under Article 12(15) PMĮ

Small company reduced rate eligibility — annual confirmation

Companies applying the 5% reduced CIT rate for small companies (≤10 employees, ≤€300,000 revenue under Article 5(2) PMĮ) must confirm their eligibility in the annual CIT return. The eligibility criteria are tested as at the end of the tax period — a company that exceeded either threshold during the year cannot apply the reduced rate for that year. We monitor eligibility thresholds throughout the year and advise clients in advance if they are approaching the boundaries.

VAT (PVM) Compliance

VAT registration and filing frequency

A Lithuanian company must register for VAT when its taxable turnover in any 12-month period exceeds €45,000. Once registered, the company must file VAT returns and pay VAT on the following schedule:

• Monthly VAT return (FR0600) — due by the 25th of the following month; required for all VAT-registered companies with annual turnover above €300,000
• Quarterly VAT return — available for VAT-registered companies with annual turnover below €300,000 upon application to VMI; due by the 25th of the month following the quarter end
• Intra-Community supplies declaration (FR0564) — must be filed by the 25th of the following month whenever the company makes intra-Community supplies (sells goods or services to VAT-registered businesses in other EU member states)
• EC sales list (Europos Sąjungos prekių ir paslaugų teikimo ataskaita) — quarterly summary of intra-EU B2B supplies; due by the 25th of the month following the quarter end

Input VAT recovery

A VAT-registered company may recover input VAT — the VAT paid on goods and services acquired for use in its taxable activities. Input VAT is recovered by deducting it from the output VAT due in the same VAT return. Where input VAT exceeds output VAT in a return period, the company has a VAT refund position. Refunds may be carried forward to offset future output VAT, or the company may apply for a cash refund from VMI. The standard VAT refund processing time is 30 days from the return deadline; accelerated refund (10 days) is available for companies meeting specific criteria.

Common VAT compliance issues

• Correct VAT rate applied — verifying that the 21%, 9%, or 5% rate is correctly applied to each supply category; services that appear similar may be taxed at different rates
• Reverse charge on imported services — services received from non-Lithuanian suppliers must be self-assessed for VAT by the Lithuanian recipient; failure to self-assess is a common error
• VAT on intercompany transactions — management fees, IP licences, and other intercompany services between group entities are generally VAT-able in Lithuania; correct invoicing and VAT treatment must be applied
• VAT on real property — the distinction between exempt and taxable property transactions; the option to tax; VAT recovery on commercial property
• Late VAT filing — VAT is the most frequently late-filed return in Lithuania; the 25th deadline falls in the period when the prior month’s bookkeeping is still being finalised

Payroll Tax Compliance (GPM and SoDra)

Monthly employer obligations

Every Lithuanian employer — including the Lithuanian subsidiary of a foreign company with even a single local employee — has monthly payroll tax obligations that must be met by the 15th of the following month:

• GPM withholding declaration (FR0573) — declaring the personal income tax (GPM) withheld from each employee’s salary during the previous month; filed with VMI via EDS by the 15th
• GPM payment — the withheld GPM amount transferred to VMI by the 15th
• SoDra monthly report (SAM) — declaring each employee’s earnings and the employer’s and employee’s social insurance contributions for the previous month; filed via the SoDra portal by the 15th
• SoDra payment — employer’s social insurance contributions transferred to SoDra by the 15th

GPM rates and the non-taxable income allowance (NPD)

Personal income tax (GPM) is withheld from employee salaries at two rates under Article 6(1) of the Law on Personal Income Tax (GPMĮ): 20% on annual income up to 60 average wages (approximately €84,000 in 2025) and 32% on the excess. Employees earning below the social insurance ceiling are entitled to a non-taxable income allowance (neapmokestinamasis pajamų dydis — NPD), which reduces the taxable income base. The NPD amount varies by earnings level — higher earners receive a reduced NPD. The employer applies the NPD based on the employee’s written declaration. Applying an incorrect NPD amount — over-applying it reduces GPM withheld below the correct amount — creates a tax debt for the employee and a potential penalty for the employer.

SoDra contribution rates (2025)

Social insurance contributions in Lithuania are split between the employer and the employee:

• Employee’s contribution — 19.5% of gross salary (deducted from gross salary before payment): pension insurance 8.72%; health insurance 6.98%; unemployment insurance 1.49%; long-term employment benefit 2.31%
• Employer’s contribution — approximately 4.26% of gross salary (paid in addition to gross salary): health insurance 1.77%; pension insurance guarantee fund 0.16%; pension insurance social risk fund 0.11%; accident at work insurance 0.31%; and the Solidarumo mokestis (Solidarity Fund contribution) 1.91%
• Annual SoDra ceiling — social insurance contributions apply to earnings up to the social insurance ceiling (in 2025, approximately €109,062 per year); earnings above the ceiling are subject only to health insurance contributions

Annual GPM reconciliation — form FR0600

In addition to monthly GPM declarations, employers must file an annual summary of all GPM-withheld amounts (GPM annual declaration) with VMI by 15 February of the following year. This declaration reconciles the total GPM withheld during the year against the annual tax due for each employee, considering the NPD applied throughout the year. Where GPM was over-withheld (possible where NPD was incorrectly applied), the overpayment is credited against the employee’s personal income tax account. We prepare the annual GPM reconciliation as part of our year-end compliance package.

Full Tax Compliance Calendar — December Year-End

The table below maps every recurring tax filing and payment obligation for a Lithuanian company with a standard December financial year-end. All dates are the final deadline — filings and payments should be initiated 2–3 business days before the deadline to allow for processing.

VMI Correspondence and Query Management

A company that is active for any length of time will receive VMI queries — requests for additional information, explanations of specific transactions, or notifications of discrepancies between different returns. How quickly and completely these queries are answered has a direct impact on VMI’s assessment of the company’s compliance quality.

Types of VMI contact

VMI communicates with taxpayers through several channels: notices through the EDS portal (the most common — requiring a response within 5–10 business days); letters by post to the registered address (for formal notifications, audit initiation, and assessments); and telephone contact (informal queries before a formal investigation is opened). All formal VMI correspondence is addressed to the registered address — which is why monitoring the registered address and responding promptly is a compliance obligation, not merely a convenience.

Common VMI queries we manage

• Input VAT verification requests — VMI asks for the original invoices supporting large input VAT claims or refund requests
• CIT advance payment mismatch — where the advance payment does not match the prior year’s CIT, VMI may ask for a forecast explanation
• Related party transaction queries — questions about management fees, intercompany loans, and royalty payments to related parties
• Revenue recognition queries — discrepancies between VAT returns (showing revenue on a cash or invoice basis) and the income statement
• Employee count queries — questions about the number of employees where the payroll declarations suggest a different headcount than the CIT return small company rate claim
• Cross-border supply queries — questions about zero-rated intra-Community supplies and the supporting documentation

VMI inspection readiness

VMI’s desk audit processes are becoming increasingly automated — data analytics identify outliers and discrepancies that trigger queries without any manual reviewer initially involved. The best VMI query management strategy is to ensure that the accounting records, VAT returns, CIT return, and payroll declarations are internally consistent from the outset — so that any VMI query can be answered quickly with reference to existing documentation rather than requiring a retrospective reconstruction. We maintain the accounting records in a way that makes VMI query responses straightforward, and we respond to all VMI portal notifications within 2 business days of receipt.

Tax Compliance Services Pricing

Tax compliance services are included in our accounting retainer for clients on the standard monthly bookkeeping package. Standalone tax compliance engagements for companies that have their own bookkeeping are priced at the rates below.

Frequently Asked Questions