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 tax payment attracts interest at the rate applicable to the relevant period; from 1 August 2026, the rate is 0.027% per delayed day. Late filing may result in administrative liability. Where a tax inspection identifies an unlawful tax shortfall, a penalty generally ranging from 20% to 100% of that shortfall may apply, subject to the applicable legislation and statutory assessment rules. There is no general monthly late-filing penalty of 10% or automatic intentional-infringement surcharge of 25%. 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 where required. Under the historical-results method, the calculation uses the tax period preceding the previous period, adjusted for the current year’s applicable CIT rate.
• Q2 advance payment — due by 15 June where required, using the same historical reference period as Q1 under the historical-results method.
• 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 (PLN204) — 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

Where advance CIT is calculated using previous years’ results, the first two quarterly payments are based on the CIT calculated for the tax period preceding the previous period, and the last two payments on the immediately preceding period. Each quarterly amount is one-quarter of the relevant CIT liability, recalculated using the current year’s applicable rate. Alternatively, taxpayers may use the estimated current-year CIT method, subject to statutory requirements. 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 17¹ 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
• Interest deduction limitation — Article 30¹ PMĮ generally restricts net borrowing costs to 30% of tax EBITDA, subject to the €3 million exclusion and other statutory exceptions. Separate thin capitalisation rules must also be assessed.
• Dividend exemptions — qualifying dividends received from Lithuanian entities are assessed under Article 33 PMĮ, and dividends received from foreign entities under Article 35 PMĮ, subject to the applicable conditions.

Small company reduced rate eligibility — annual confirmation

From 2026, qualifying small entities with annual income not exceeding €300,000 may apply the reduced 7% CIT rate, subject to Article 5 PMĮ and the applicable related-entity restrictions. The former ten-employee limit no longer applies. Eligibility must be confirmed for the relevant tax period. 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

From 1 May 2025, the €45,000 domestic VAT registration threshold is assessed by reference to the current or preceding calendar year, rather than a rolling 12-month period. Separate registration obligations may arise from intra-EU acquisitions, cross-border services and other statutory circumstances. 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 on application where the previous calendar year’s income does not exceed €300,000 and the company does not acquire goods or services from EU VAT payers for which it must account for Lithuanian VAT. The return and payment are due by the 25th of the month following the quarter.
• 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)
• The Lithuanian EC sales list is form FR0564, filed monthly by the 25th of the following month where reportable transactions occur. It is not a separate quarterly declaration.

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. VAT refund applications are generally processed within 30 calendar days after receipt of the refund request or the additional documents requested by VMI, subject to statutory exceptions and tax inspection procedures. The period does not automatically run from the VAT return deadline.

Common VAT compliance issues

• Correct VAT rate applied — verifying that the 21%, 12%, or 5%, as applicable from 1 January 2026 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 (GPM313) — 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 — generally due by the 15th of the payment month for payments made on or before that date, and by the last day of the same month for later payments. Special rules apply to salary paid in instalments.
• 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 — both employer contributions and employee contributions withheld from salary must generally be transferred by the 15th of the following month.

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

From 2026, progressive annual GPM rates apply to the relevant combined taxable income: 20% up to 36 VDU (€83,237.40), 25% on the portion above 36 VDU and up to 60 VDU (€138,729), and 32% on the portion above 60 VDU. NPD eligibility depends on income and statutory conditions, not on whether earnings fall below the social insurance ceiling. 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 contributions generally total 19.5% of gross salary: pension insurance 8.72%, sickness insurance 1.99%, maternity insurance 1.81%, and compulsory health insurance 6.98%. An additional 3% pension accumulation contribution applies where applicable.
• For an indefinite-term employment contract in the lowest occupational accident risk category, employer contributions generally total 1.77%: unemployment insurance 1.31%, occupational accident insurance 0.14%, Guarantee Fund 0.16%, and Long-Term Employment Benefit Fund 0.16%. Rates vary according to contract type and occupational accident risk category.
• In 2026, the employee VSD contribution ceiling is 60 VDU, or €138,729 annually. Compulsory health insurance contributions are not capped. Employer contributions follow their own applicable rules and do not automatically cease at the employee VSD ceiling.

Annual employer payments and income tax declaration — form GPM312

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. GPM312 reports annual payments to individuals and the related income tax. It does not replace the employee’s annual income tax return or automatically reconcile their final personal tax liability. Annual NPD adjustments and resulting refunds or additional tax are handled through the individual’s applicable annual return. 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