Company in Lithuania
email

Taxes in Lithuania 2025

On 1 January 2025, amendments to the Income Tax Law will come into force in Lithuania, which will affect the operations of many companies in Lithuania. These amendments not only change the corporate tax rates, but also establish new requirements for the acquisition cost of passenger cars and their attribution to allowable deductions.

Major changes from 2025

Changes in corporate tax rates

  • The standard rate of corporation tax will be increased to 16 per cent . (currently at 15 per cent).
  • The preferential corporate tax rate will be raised to 6 per cent. (currently at 5 per cent).
  • Eligible small companies will be able to use 0% for the first year after the start of their operations. corporate tax rate.

Limitations on the cost of acquiring cars

From 2025 1 January New limits on the attribution of car purchase costs to allowable deductions will come into force on 1 January , which will depend on the car’s CO2 emissions and purchase price.

  • Cars with higher CO2 emissions will have stricter deduction limits.
  • These restrictions do not apply to rental, driver training and transport services activities.

The portion of the purchase price not exceeding the limits will be considered an allowable deduction and the portion exceeding it is not deductible.

Amendments to the Income Tax Law

The Seimas of the Republic of Lithuania adopted amendments to the Law on Income Tax, which will enter into force from 2025. 1 January and will be applied to the calculation and declaration of corporate tax for 2025 and subsequent tax periods.

Commencement of application of the new provision

From 2025, new provisions relating to corporation tax rates and the deduction of expenses for the purchase and lease of passenger cars will come into force on 1 January. These provisions will apply to the calculation and the 2025 return. and income tax for subsequent tax periods.

Business requirements and preparation for change

The corporate income tax rate in Lithuania remains one of the lowest in the EU, but in 2025 The changes may affect companies’ tax accounting and financial performance. Businesses need to carefully assess how these changes will affect their corporate tax calculations, especially in light of the restrictions on car purchases.

Limited deductions are allowed

From 2025 1 January New restrictions will apply to the deduction of car purchase and rental costs from taxable income. These limits will depend on the vehicle’s carbon dioxide (CO2) emissions and will only apply to newly purchased passenger cars (category M1).

Even electric cars will be limited in the allowable deductions for depreciation and rental expenses. However, these limitations will not apply to vehicles that are used only for hire, driver training or transport services.

These restrictions will be in effect from 2025. 1 January and will remain in force until amended or repealed. They will apply to all companies purchasing or leasing passenger cars, regardless of their size or area of activity.

These changes are aimed at encouraging companies to choose less polluting vehicles to contribute to the overall goal of reducing pollution in the transport sector.

Regulation of value added tax by EU directives

The VAT law has been amended to take into account the VAT directives adopted at the EU level. For example, the draft of the so-called ViDA (“VAT in the Digital Age“) directive is now being actively discussed. It contains proposals to change some VAT registration rules. For example, the ViDA proposal aims to provide greater opportunities for companies trading across borders in the EU to report their transactions through a single VAT registration and to apply reverse taxation for business-to-business transactions.

However, as the aforementioned draft directive is still under discussion, let us consider another addition to the VAT directive for “small entrepreneurs”, which will change the rules for calculating VAT in Lithuania. This is relevant when charging VAT for the supply of goods and services. In addition, a European Council directive will come into force in 2025, which will set the maximum VAT registration threshold at 85,000 euros.

VAT rules and rates

When does VAT apply and when do I need to register as a VAT payer?

VAT applies to all goods and services bought and sold for use and consumption in the European Union (EU). Value Added Tax (VAT) applies to all stages of the production process of goods and services, including sales to the final consumer. VAT is paid to the budget when goods, work or services are sold. This means that every business that supplies goods and services must pay VAT on sales.

National VAT rules

VAT rules may be applied differently in each EU country. Therefore, it is important to learn more about the legislation of the country in which your company operates. The Law of the Republic of Lithuania on Value Added Tax (Zin., 2002, No. 35-1271, 04.05.2002) sets out the VAT rules in Lithuania. This law regulates the procedure for calculating, paying and declaring VAT in Lithuania, ensuring that businesses comply with the national VAT rules. Amendments to the Law on Value Added Tax provide for an increase in the VAT registration threshold from EUR 45,000 to EUR 55,000.

in 2024, the applicable VAT calculation rule

The current VAT law provides that a person must register as a VAT payer if their income exceeds €45,000 in the last 12 months. The Ministry of Finance is also considering a proposal to increase the VAT payer limit to 55,000 euros, which would allow small businesses to avoid registering as VAT payers as long as their income does not exceed this limit.

Thus, a taxpayer of the Republic of Lithuania is not obliged to submit an application for registration as a VAT payer, calculate VAT on goods supplied (except for new vehicles supplied to other Member States) and/or services rendered and pay it to the budget if the total amount of remuneration for performing economic activities in the territory of the country, the amount of goods supplied and/or services rendered for the year (last 12 months) did not exceed EUR 45,000.

Therefore, VAT should be calculated from the month in which the specified limit is exceeded. VAT is not chargeable on goods and services supplied for which remuneration has not exceeded the specified amount of €45,000.

The standard rate of VAT is 21 per cent .

VAT threshold changes from 2025 to 55 thousand euros

The amendment increases the mandatory registration amount to €55,000. The regulation is also amended and the rule that the amount is assessed during the last 12 months is no longer valid. Instead, the basic principle is that the amount is assessed during the previous calendar year and calculated in the current year. This means that a taxable person in the Republic of Lithuania may apply the so-called “Lithuanian small business scheme”. It means that a taxpayer in Lithuania is not obliged to register as a VAT payer and to calculate and pay VAT on supplied goods (except for new vehicles supplied to other Member States) and/or services according to the procedure established by the Law. of the VAT Act, if the total remuneration for the performance of economic activities in the country, the amount of goods and/or services provided in the territory during the previous calendar year did not exceed EUR 55,000 and is not expected to exceed this limit in the current year. year calendar year. year. Thus, the provision that the calculation is made for the last 12 months no longer exists. This change is significant as the country’s small businesses seek to reduce their tax burden.

Of course, this provision applies to newly established taxpayers of the Republic of Lithuania if this limit is not expected to be exceeded in the current calendar year. Thus, in case of establishing a new company, the mandatory VAT registration threshold of EUR 55,000 will be calculated for the current calendar year.

Under the new limits, VAT will have to be calculated from the month in which the limit is exceeded. VAT is not chargeable on goods and services supplied for which the remuneration did not exceed the specified amount of €55,000.

Thus, the income of a small business such as a small partnership will be calculated for the current calendar year, for example, in December 2025 it will be calculated whether the amount during that year did not exceed €55,000. If it did not, it will also be assessed whether it exceeded €55,000 during the previous calendar year.

VAT rates and payment in Lithuania 2025

VAT rates depend on the product or service of the transaction. Different VAT rates are applied in EU countries. The following VAT rates apply in Lithuania:

  • Standard rate: 21%
  • Reduced rate: 9%
  • Super reduced rate: 5%
  • Nil rate: 0%

VAT rates may vary depending on the type of goods or services. For example, reduced rates may apply to certain goods or services, such as medical goods or educational services. This allows businesses and consumers to take advantage of lower taxes in certain areas, incentivising the consumption of certain goods and services.

Application of VAT to the supply and purchase of goods from other Member States

Application of VAT on the exchange and purchase of goods from other Member States.

During the year, a small Lithuanian company that was not a VAT payer and sold goods in another EU Member State was obliged to register as a VAT payer in the other Member State from the date of the first sale in euros.

However, from 2025, such a company will be able not to register as a VAT payer in this country and not pay VAT. In addition, if the turnover of a small company exceeds €55,000, it must register as a VAT payer.

Thus, a taxpayer in Lithuania and a taxpayer established in another EU Member State who have registered or are required to register as a VAT payer under the VAT Law for the purpose of purchasing goods in other EU Member States or services from other EU Member States. and/or providing services in other Member States may apply the Lithuanian small business scheme.

What are the conditions for applying the Lithuanian small business scheme for a taxpayer registered in another EU Member State?

  • The amendment to the VAT law, which will come into force in 2025, provides that a taxpayer registered in another EU Member State does not need to register as a VAT payer from the day of establishment and can apply the small business scheme in Lithuania. Therefore, VAT must be calculated from the month in which the €55,000 limit is exceeded. VAT is not charged for supplied goods and services for which remuneration has not exceeded the limit of EUR 55,000 if the following conditions are met:

1) the total remuneration of that taxpayer for goods and/or services rendered in the course of economic activity in the territory during the previous calendar year did not exceed €55,000 and is not expected to exceed this limit in the current calendar year (for newly established taxpayers registered in another Member State, this provision applies if it is not expected to exceed this limit in the current calendar year) and

2) the total remuneration of that taxpayer for goods and/or services provided in the course of business activities in the European Union during the previous calendar year did not exceed €100,000, recalculated by applying the 2018 European Central System. Bank. 18 January published exchange rates, and is not expected to exceed this limit in the current calendar year (for newly established taxpayers registered in another Member State, this provision applies if it is not expected to exceed this limit in the current calendar year), and

3) this taxpayer has a VAT payer identification number assigned by the Member State of establishment with the symbol “EX” at the end of this number, which entitles it to apply the small business scheme in Lithuania.

Register for value added tax payment

Value Added Tax (VAT) registration is an important step for any business that wants to operate legally and transparently. VAT registration means that a company or individual becomes a VAT payer and must pay VAT on its sales and services. This process is compulsory if the annual turnover exceeds the set limit, which from 2025 will be 55 thousand. euros. This means that any business with an annual income above this amount must register as a VAT payer and comply with all relevant requirements.

Registering as a VAT payer not only helps to comply with legislation, but also enables businesses to reclaim VAT on business-related purchases. This can be particularly useful for small businesses looking to optimise their costs and increase profitability. It is therefore important to keep a close eye on your annual turnover and to register as a VAT payer in time if it exceeds the €55,000. limit.

VAT and trade in the EU with a VAT identification number

  • With regard to VAT and trade on the supply of EU goods from 2025, it should be noted that the tax administrator will provide a VAT identification number with “EX” at the end of the number to a person who registers for the purpose of applying the small business scheme in other Member States.
  • According to the amendment, a person who registers for the purpose of applying small business schemes in other Member States, in order to obtain a VAT payer identification number, will have to submit a preliminary notification to the tax administrator. The tax administrator will provide the VAT payer identification number no later than within 35 working days from the date of receipt of the preliminary notification. If it is necessary to conduct an additional investigation to verify the possibility of preliminary notification and assignment of the VAT identification number, the deadline for issuing the VAT identification number set by the decision of the tax administrator may be extended. The VAT identification number will take effect from the date specified in the tax administrator’s decision to assign a VAT identification number to a person who registers for the purpose of applying small business schemes in other Member States.
  • In addition, it should be noted that it is also relevant to keep up to date with news on VAT and trade, VAT rates in the EU, tax schemes applicable to this tax, how to pay VAT, etc. on the EU Commission’s website.

Changes in the composition of VAT payers

From 2025, important changes for VAT payers will come into force that will have a significant impact on small businesses. One of the main changes is the increase of the VAT payer limit to 55 thousand. euros. This means that individuals or companies whose annual turnover exceeds this limit will have to register as VAT payers. This change will allow small businesses whose income does not exceed this limit to avoid additional administrative burden and taxes.

In addition, new companies will be given the option not to register as VAT payers if they do not plan to exceed 55 thousand euros during the current calendar year. This will give newly established businesses more flexibility and allow them to focus on business development without the burden of additional fees.

These changes are part of a broader tax reform proposed by the Ministry of Finance. The proposal to increase the annual turnover limit to 55 thousand. Euro is part of an amendment to the Value Added Tax Act, which must be approved by the government and the Seimas. The Budget and Finance Committee presented data showing that by increasing the limit to 55 thousand 6.4 million euros, budget revenues from VAT would decrease annually by about 6.4 million euros. euros. However, such a reduction is considered acceptable in order to promote the development and competitiveness of small businesses.

It is important to note that these changes are also linked to a European Council directive that will set the maximum limit of VAT payers at 85 thousand euros from 2025. This means that small businesses in the country will have more opportunities to grow and expand without the burden of additional taxes. Therefore, businesses should closely monitor their annual turnover and register as VAT payers in time in case they exceed the limit.

Menu