Taxes in Lithuania 2024
In 2023, the Government of the Republic of Lithuania approved amendments to the Resolution «On the Implementation of the Law on the Financing of the Road Maintenance and Development Program», which set new rates for road users tax (vignettes) for heavy goods vehicles. From 2024 on January 1 Lithuanian road charges will increase most for polluting, transit transport through the territory of Lithuania – commercial freight transport and buses.
In implementing the European Union Directives and in order to ensure the principle of «polluter pays» the amount of taxes applied to buses and trucks will depend on the category of vehicle, the number of axles and the amount of emissions. At least the road user tax will increase for the newest Euro VI compliant vehicles and will increase significantly for polluters.
The Lithuanian Transport Association (LVS) has proposed not to increase the user tax rates for cars of emission classes EURO V and EURO VI, as these are currently the most environmentally friendly and least polluting vehicles, and the tax burden of their users should not increase. Unfortunately, the Government has not considered our proposal.
LVS drew attention to the fact that third country carriers transit particularly polluting trucks to or through Lithuania, so they should bear a greater burden of pollution and infrastructure taxes. At the same time, we have proposed the establishment of a mechanism to monitor how the environmental class of vehicles registered in third countries will be determined so that their users cannot abuse the vignettes.
LVS also proposed to the government to abolish the tax on trucks registered in Lithuania. This tax does not fully implement the principles of «user pays» and «polluter pays» and is charged simply for ownership of the vehicle, even if it is not in motion. There are also relevant EU recommendations for member States to waive such taxes.
Minimum monthly wage in 2024
We inform you that the Government of the Republic of Lithuania in 2023 on June 28 by resolution . 516 «On the minimum wage applicable in 2024» was approved in 2024. MMA1 – 924 euros (2023 MMA – 840 euros) and MVA2 – 5.65 euros (2023 MVA – 5.14 euros). Thus, the government by decision, from 2024, January MMA will grow by 10 percent. or 84 euros, and VAT – about 10 percent. or 0.51 euros.
The modified MMA and MBA values are, among other things, relevant for the calculation of GPM-3.
Daily subsistence allowance for travel abroad, referred to as non-taxable income in paragraph 5, which is defined in the rules for deduction of travel expenses from income approved by Lithuania.
The Government of the Republic in 2003 by the resolution nr. 99 «On expenses for business trips».
approval of rules of retention from income.
According to Article 17 of the General Labour Code 1 d. The provisions of paragraph 5 refer to non-taxable income. There is no change in the calculation of DSA for overseas travel due to changes in MMA and MBA. The calculation of per diem exempted from income tax is based on DU5 (VTA 6) and MMA (MBA) x with a factor of 1.65.
Since 2024, on January 1, all that in the Rules is exempt from income tax the amount of daily subsistence allowance, established for business trips abroad, if:
- DE of worker equals or exceeds EUR 1,524.60 (MMA (EUR 924) x from 1.65;
before change – EUR 1,386) or
- VAT applied to an employee is equal to or greater than 9.3225 euros (MVA (5.65 euros) x
1.65; before the change of 8.481 euros).
If the DM or WTA determined for the employee is lower than these amounts, he is taxed by income tax the daily subsistence allowance in the amount determined by the Rules of travel abroad, is not taxed, the total amount of which per month is equal to or less than 50% of the employee’s DE (DM calculated with the BTA).
Changes in individual performance and social guarantees
According to the Ministry, 75% of the self-employed will not change fundamentally – changes in taxation should only affect those with higher incomes. In addition, changes in the rate of income tax (NDFL) and tax credit will not affect up to 10 thousand. people. Persons who receive taxable income in euros.
However, some changes will also affect all self-employed residents: they are proposed to be taxed at a rate of 20 per cent. the rate of income tax on the population (NDFL), gradually increasing it over the next three years. In 2024 the tariff will not change, in 2025 will increase from 15 to 17 per cent, and in 2026 – up to 20 per cent From 2025 Tariffs will be applied in full to those residents, who earn at least 3,000 a month. euro.
Arguing that this increases social guarantees for self-employed residents, it is proposed to unify the contributions «Sodra», which will be calculated from 90 percent. taxable income, and now they are paid from 50 to 100 percent. Income. The so-called ceiling «sodra», that is, the maximum amount with which the contributions are paid, will reach 60 VDU (about 101 thousand. euros) instead of the current 43 VDU (64.7 thousand. euros). Self-employed workers, farmers and family members will also pay 1.31 per cent. Unemployment insurance premiums.
Special account for the self-employed
Simplifying the system of tax declaration for the population, the accounting of small entrepreneurs is introduced – a project prepared jointly by the Ministry of Finance and the Ministry of Economy and Innovation, which will not experience administrative burden when conducting individual activities.
Self-employed citizens will only need to voluntarily open a small entrepreneur’s account with a financial institution, and its data will be automatically transferred to the DMS. According to the account data, the Tax Inspectorate will register the account holder in the Register of Taxpayers, and the income from the account will be automatically attributed to operating income.
In the Ministry’s view, this will significantly reduce the administrative burden on individuals carrying out individual activities, and the LCA will also prepare an annual declaration based on the account data, Taxes and social security contributions can be paid at the click of a button.
Losing your business license?
It is planned to gradually limit the income received from work under business licenses. Such employees are offered more than twice – from 45 thousand. up to 20,000 euros – to reduce the annual income limit, and those who earn more than 20,000 should register certain activities. It is noted that currently up to 20 thousand. 84 percent now receive euros per year. residents working on business certificates. Once the proposals came into effect, such persons would no longer be able to provide services or sell goods to companies but only to individuals.
Tenants of apartments want to apply a fixed income tax to the income from renting residential premises – at the moment the limit is up to 45 thousand. the euro, and from 2024. It is proposed to abandon the fixed GPM rate and apply 15 percent. GPM rate from 80 percent. turnover.
Real estate taxation
After lengthy discussions on the taxation of resident real estate, the Ministry of Finance finally submitted proposals for changes in this area from 2026.
It is proposed to move to a traditional property tax (NT) for real estate, rather than tax the full amount of their value, as it has been so far. Housing will be subject to preferential taxation: half of the population will not have to pay property tax, and the average tax will be about 14 euros per year.
If the cost of housing in a municipality were between one and two median values, such housing would be taxed at a rate of 0.06 per cent. tariff. If more than 2 median – 0.1 percent. tariff. If a person had more than one dwelling, the municipality itself could decide and apply the tariff for the second and subsequent dwellings. The tariff may range from 0.1 to 1 per cent.
According to preliminary calculations, the average tax on the main residence in the country will be about 14 euros per year. For example, a standard apartment of 50 sq. meter of housing, the tax cost of which will be about 55 thousand. euro, will not be taxed because the cost does not reach the median in Vilnius (60.1 thousand. euros).
Attention is drawn to the fact that contributions to the resident are calculated from the value of the mass valuation of the real estate of the Centre of Registries, and not from the possible commercial value of the facility. It is also noted that revenues from the tax will go to the municipalities, which will increase the financial independence of the self-government and strengthen the ability to invest in public infrastructure.
Life insurance benefits replaced by investment account
The Ministry of Finance would like to abolish PSM benefits for those who have investment life insurance or storage on the III stage, and from 2024. leave benefits only to those who accumulate at the second level.
However, the GPM will continue to apply to life insurance contracts and level III contracts concluded before 2023. December 31, but not more than 10 years. In this case, people will be offered a neutral investment instrument – an investment account, which will not be taxed until the account holder withdraws funds from it. It is expected to contribute up to 10 thousand per year to the investment account.
Whoever makes the most money pays the state the most
Perhaps the most significant change will affect those with high incomes. The package notes that it is proposed to aggregate all types of income and to apply special additional taxation to high incomes instead of the current progressive rates.
Twice as many people will pay special additional rates as those who previously paid progressive rates (from 8,000 now to 16,000 after the changes (i.e. 0.8% of all taxpayers), thereby narrowing the gap between taxation of employment and income tax on capital).
So far, 15 percent has been applied to passive income from dividends, rental of real estate and other income. Rates or progressive 20 per cent. The rate of rental of real estate and other income, if it exceeded 120 WDU. At the same time, from next year it is proposed to maintain the basic rates, but to apply 5% to the part of income that exceeds 60 VDU and reaches 120 VDU (202 188 euros in 2023). tariff, and if it exceeds 120 UEU – apply 7 percent. tariff on the share of income more than 120 UHF. The proposals reflect international trends in the fight against income inequality and also provide consistency in the taxation of passive income. The ability of a person to pay taxes depends not on the type of income, but on the amount, so it is proposed to sum all income and apply new rates.
Small business taxation
New tax changes promise to improve conditions for small businesses: the current threshold for registration as a VAT payer will be increased from 45 to 55 thousand. Euro. At the same time it is planned to allow the use of a reduced 5 percent. profit tax rate when the turnover of the company does not exceed 300 thousand. rub. It is proposed to discontinue the 10-person limit. This proposal will take effect as early as 2024.
It is also proposed to change the principle of accelerated depreciation of fixed assets, which now applies to companies with a staff of no more than 10 and up to 150 thousand people. It is proposed to apply annual turnover to enterprises whose annual turnover does not exceed 300 thousand and to abolish the requirement on the number of employees.
Also, companies will not be required to pay advance income tax unless the income exceeds 500 thousand. Euro (now 300 thousand. Euro), and from 2024. it is proposed to introduce an account of a small entrepreneur, which would allow not to experience administrative burden when conducting individual activities.
Expert assessment of tax reforms
In the presentation of the Ministry of Finance, experts see the package of tax proposals as both positive and negative sides, and it includes both proposals that improve and worsen the economic environment.
President of the Lithuanian Free Market Institute (LLRI) Elena Leontieva welcomes the initiative of the Ministry of Finance to stimulate investment and the proposal to introduce instantaneous depreciation of fixed assets.
“We have been proposing for some time to introduce instantaneous depreciation of assets as a softer alternative to the distributed profit tax model, which they do not dare to accept,” said E. Leontieva. «However, it is important that this new rule does not inherit the restrictions of the investment project, which did not allow the companies to actually take advantage of the investment project».
It does not want to support the proposal of the Ministry of Finance to abolish the regime of income tax (NDFL) for long-term investments and savings in investment life insurance and level III pension funds. «This instrument is erroneously called a tax credit, but in fact it implements the principle of subsidiarity, when the income or expenditure of economic activities complement the functions of the state and ultimately create subsidiary responsibility of the population and the state» This is stated in the commentary published by LLRI.
According to the expert, the introduction of an investment account for residents would be a relevant change, because it would mean that the person investing does not pay taxes until he brings the investment to consumption.
This is equivalent to a distributed corporate tax model, only at the level of people, but this proposal will only lead to positive changes if, if it is introduced to preserve the tax regime of life insurance and third-level pension funds contributions, not instead of them. The small business account is good, but he’s offering to tax all the family income.
The introduction of a small business account would be a welcome step that would make it easier for self-employed residents to administer their taxes. However, in the opinion of the experts, it would be advisable to plan the tax burden accordingly without increasing it.
“The most alarming thing is that the idea of progressive taxation is being introduced deeper into the tax system,” said E. Leontieva. Instead of combining family income into a single tax base and thereby reducing the tax burden (especially for those families who live on the same salary), now have to combine different types of income and tax them, introducing progressivity. According to the idea of the Ministry of Finance, a progressive system of taxation of income of a resident will be applied not only to labor incomes, for which it was introduced as a replacement for the tariff «Sodra» (after reaching a higher income level, which does not lead to an increase in pensions). Arguments in favor of this progressive tax cannot be forgotten or erased from the institutional tax memory».
LLRI’s desire to tax passive income
It is argued that the proposal to apply a rising tax rate to all types of income that have hitherto been taxed transparently and proportionately – dividends, real estate leases, sales and other types of income – would destroy the tax system.
LLRI points out in its commentary that the progressive GPM rate currently applied to employment-related income is related to the Sodra ceiling, which is equal to the income threshold of the progressive GPM rate. Thus, the resident, who has reached the limit of progressive payment of OPM, ceases to pay state social insurance contributions to «Sodru» and practically does not feel an increase in the tax burden.
Additional taxation of other types of income not covered by the Sodra ceiling will inevitably increase the tax burden on residents. Since higher-value-added capital and labor are very mobile these days, higher taxes increase their likelihood of leaving the country. Given this, the forecast of the Ministry of Finance about the number of potential players of progressive tax seems unfounded and mechanical».
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