Taxation of Foreign Workers in a Lithuanian Company
Foreign employees working in Lithuania are generally subject to the same employment-related tax rules as Lithuanian citizens, provided that Lithuania has the right to tax their income and its social security legislation applies. From 1 January 2026, employment income subject to the general progressive Personal Income Tax regime is taxed at 20%, 25% or 32%, depending on the applicable annual income thresholds. Employees generally pay 19.5% in mandatory social security and health insurance contributions, with an additional 3% for participants in supplementary second-pillar pension accumulation. Employer contributions generally range from 1.77% to 3.03% for indefinite-term employment contracts and from 2.49% to 3.75% for fixed-term contracts, depending on the occupational accident risk category and applicable statutory exemptions. Lithuanian tax residents are generally subject to Personal Income Tax on their worldwide taxable income, subject to applicable exemptions, foreign tax credits and double taxation agreements. Non-residents are generally taxed only on specified categories of Lithuanian-source income, including remuneration for employment physically performed in Lithuania. The taxation of foreign employment income depends on the individual’s tax residence, the location where the work is performed and the applicable double taxation agreement.
Foreign nationals may qualify as Lithuanian tax residents if they satisfy at least one of the statutory tax residence criteria. These include having a permanent place of residence in Lithuania, maintaining stronger personal, social or economic interests in Lithuania than abroad, spending at least 183 days in Lithuania during a tax year, or spending at least 280 days in Lithuania over two consecutive tax years while being present for at least 90 days in one of those years. Additional statutory rules and exceptions may apply. Where an individual is considered a tax resident of more than one country, the applicable double taxation agreement may determine their treaty residence.
- An individual is present in Lithuania for a period or periods in the aggregate of 183 days or more during the tax period.
- An individual is present in Lithuania for a period or periods in the aggregate of 280 days or more during two successive tax periods and who stays in Lithuania for a period or periods in the aggregate of 90 days or more in any of such tax periods.
Non-residents are generally subject to Lithuanian Personal Income Tax on specified Lithuanian-source income, including remuneration for work physically performed in Lithuania, subject to applicable double taxation agreements. Social security obligations are determined separately under EU coordination regulations, bilateral agreements or Lithuanian national legislation. A valid A1 certificate may confirm that an employee remains insured in another EU or EEA Member State or Switzerland and is therefore not required to pay Lithuanian social security contributions for the certified period. For qualifying temporary postings, the applicable period is generally limited to 24 months, although different rules or exceptions may apply depending on the circumstances.
Under Regulations (EC) No 883/2004 and No 987/2009, a person is generally subject to the social security legislation of only one EU Member State at a time. An A1 certificate confirms which country’s social security legislation applies during cross-border employment, temporary posting or work performed in multiple Member States. The applicable country is not necessarily the employee’s country of residence. Employers and employees should obtain or request the relevant A1 certificate in accordance with the applicable procedures and ensure that the conditions for remaining insured in another Member State are satisfied. The taxable period coincides with the calendar year.
Non-residents receiving Lithuanian-source employment income from a foreign employer that does not have a permanent establishment in Lithuania are generally responsible for declaring the relevant Class B income and paying Lithuanian Personal Income Tax within 25 days of receiving the income, using the applicable FR0459 declaration. This obligation arises in relation to the relevant income payments and should not be described as a universal monthly filing requirement. Where income is classified as Class A, the payer is generally responsible for withholding and remitting the tax. Applicable double taxation agreements may affect whether the income is taxable in Lithuania.
Non-residents may be required to submit an annual Lithuanian Personal Income Tax return (GPM314) where their income is subject to annual recalculation under the applicable progressive tax rates or where they claim eligible tax allowances or refunds. From 2026, employment income subject to the general progressive regime is taxed at 20% up to EUR 83,237.40, 25% on the portion between EUR 83,237.40 and EUR 138,729, and 32% on the portion exceeding EUR 138,729. Annual declarations are generally due by 1 May of the following year, subject to statutory deadline adjustments when that date falls on a non-working day.
Tax Allowances in Lithuania
A standard tax allowance is applied after the calculation of the taxable employment income of permanent residents. The size of the annual tax-exempt amount depends on the total amount of annual taxable income before taxes and all allowances. Current standard non-taxable amounts are set to be the following:
In 2026, the standard monthly non-taxable income allowance (NPD) is EUR 747 for qualifying employment income not exceeding the statutory minimum monthly wage of EUR 1,153. For monthly employment income exceeding EUR 1,153, the applicable allowance is generally calculated as follows: NPD = EUR 747 – 0.49 × (monthly employment income – EUR 1,153). The allowance is reduced to zero when monthly employment income reaches EUR 2,677.49. Different allowances may apply to individuals with disabilities. Lithuanian tax non-residents may generally claim an applicable annual non-taxable income allowance only after the end of the tax year by submitting the required annual tax declaration and supporting documentation.
Lithuanian tax residents may qualify for Personal Income Tax deductions for certain eligible pension contributions and life insurance premiums, subject to statutory conditions and deduction limits. From 1 January 2025, contributions under newly concluded third-pillar pension accumulation and qualifying life insurance contracts generally no longer qualify for the previous tax relief. Transitional deductions may remain available for eligible contracts concluded before that date. Ordinary compulsory health insurance contributions do not automatically qualify for an additional Personal Income Tax deduction. Furthermore, a number of the following expenses incurred by a resident of Lithuania during the tax period may be deducted from his/her annual income:
- The 2nd pillar pension contributions, paid by employees, exceeding 3% of taxable wage related income.
- Contributions paid under qualifying life insurance contracts concluded before 1 January 2025 may remain eligible for Personal Income Tax relief, subject to the applicable transitional provisions, beneficiary requirements, statutory limits and other conditions. Contributions under newly concluded contracts from 1 January 2025 generally do not qualify for the former deduction.
- Lithuanian tax residents may deduct qualifying payments for eligible vocational training or higher education studies, including repayments of qualifying education loans, subject to statutory requirements. In certain circumstances, eligible payments may be deducted by a spouse or qualifying family member where the student cannot use the deduction. The deduction is not universally unlimited, and the applicable rules depend on the nature of the studies, the person making the payment and the relevant statutory conditions.
- The former temporary Personal Income Tax deduction for qualifying home renovation, building repair, passenger car repair and childcare services is no longer available for expenses incurred in 2026. These historical deductions should not be presented as current tax benefits. Any available Personal Income Tax relief must be assessed under the deductions expressly permitted by Lithuanian legislation for the relevant tax year.
In 2026, Lithuania provides increased monthly non-taxable income allowances (NPD) for qualifying individuals with disabilities. An allowance of EUR 1,127 generally applies to individuals with a participation level of 0-25% or an equivalent qualifying disability classification, while an allowance of EUR 1,057 generally applies to individuals with a participation level of 30-55% or an equivalent classification. Eligibility depends on the applicable disability assessment and Lithuanian Personal Income Tax legislation. These allowances replace the outdated EUR 645 and EUR 600 amounts and the former general terminology based solely on working capacity.
Company in Lithuania UAB offers private tax advice for permanent and non-permanent foreign residents planning to declare their income in Lithuania. If you wish to learn more about the taxation of foreign residents in Lithuania, our dedicated team will be glad to provide an individualised consultation. We guarantee confidentiality and efficiency. Contact our specialist now to receive the best offer.
