Taxes in Lithuania 2025: Complete Guide for Foreign Business Owners and Non-Residents
5 Key Factors
- The Lithuanian tax system includes corporate income tax (standard rate — 16%), value added tax (standard rate — 21%), payroll taxes and social insurance contributions, and personal income tax. Each of these taxes has its own calculation rules, payment deadlines, and reporting requirements that a foreign business owner must comply with from the moment the company is registered.
- Non-residents of Lithuania are subject to taxation on income derived from Lithuanian sources. This means that profits of a Lithuanian company, dividend payments, director’s salary, and other payments from Lithuania may be taxed in Lithuania — regardless of where the owner or income recipient resides.
- Dividend distributions from a Lithuanian company are subject to withholding tax. The standard rate is 15%, but it may be reduced or eliminated under double tax treaties or EU directives. The profit withdrawal structure requires planning at the company formation stage.
- From 2026, Lithuania has planned an increase in the corporate income tax rate. Foreign entrepreneurs planning to register a company in 2025 should factor these changes into their financial model and jurisdiction selection.
- Company in Lithuania UAB (company code 304377400) provides company registration, accounting support, tax reporting, and licence assistance services for non-residents of Lithuania. Our team helps foreign entrepreneurs establish tax compliance from the first day of the company’s operations.
Taxes in Lithuania are one of the first topics that a foreign entrepreneur examines when considering Lithuania as a jurisdiction for doing business. Lithuania offers competitive tax rates compared to many Western European countries, transparent legislation, and a well-developed digital infrastructure for filing declarations and reports. However, for a non-resident unfamiliar with the Lithuanian tax system, without a structured understanding of all obligations there is a significant risk of making errors that lead to penalties and additional costs.
This guide provides a practical overview of all the main taxes applicable to foreign company owners in Lithuania in 2025 — from corporate income tax and VAT to payroll taxes, dividends, and cross-border payments.
What Taxes Apply in Lithuania in 2025? Complete Overview for Foreigners
Main Business Taxes: CIT, VAT, Payroll
A company registered in Lithuania faces three main categories of taxes. Corporate Income Tax (CIT) is levied on company profits. Value Added Tax (VAT) applies to the sale of goods and provision of services. Payroll taxes include social insurance contributions (Sodra) and personal income tax on employees, which the employer is required to calculate, withhold, and remit to the relevant authorities.
Taxes for Individuals and Shareholders
Owners of Lithuanian companies who are individuals bear tax obligations when receiving income from their company. This applies to dividend payments, salary (if the owner serves as director or employee), and other distributions. The rates and taxation procedure depend on the type of income and the tax residency of the recipient.
When Foreigners Become Taxable in Lithuania
A non-resident of Lithuania is required to pay taxes in Lithuania on income derived from Lithuanian sources. This includes profits of a Lithuanian company, income from activities carried out in Lithuania, dividends paid by a Lithuanian company, and remuneration for work performed in Lithuania. Having a registered company in Lithuania in itself creates tax obligations — even if the owner does not reside in the country.
Corporate Income Tax in Lithuania: How Company Profits Are Taxed
CIT Rates in 2025: Standard vs Reduced
The standard corporate income tax rate in Lithuania is 16%. For small companies meeting certain criteria, a reduced rate of 6% is available. The reduced rate applies in the first tax period and in subsequent periods provided the conditions on revenue and number of employees are met.
Who Qualifies for the Reduced Tax Rate
The reduced rate of 6% is available to companies with an average number of employees not exceeding 10 during the tax period and income not exceeding EUR 300,000 for the tax period. For non-residents registering a company in Lithuania, this can be a significant advantage at the initial stage, although additional conditions restricting the application of the reduced rate must also be taken into account.
What Is Considered Taxable Profit
The taxable profit of a Lithuanian company is calculated as the difference between income and deductible expenses, subject to adjustments provided for by law. Not all accounting expenses are automatically recognised as deductible for tax purposes. Entertainment expenses, fines, certain types of provisions, and expenses unrelated to the company’s activities may be limited or excluded from deduction.
When and How CIT Is Paid
Corporate income tax is paid annually based on the results of the tax period. The company is required to file an annual corporate income tax return and pay the tax within the established deadlines. Depending on the size of the company, advance CIT payments during the year may apply. Compliance with deadlines and correct completion of declarations is a mandatory condition of tax compliance.
VAT in Lithuania: Rules for Local and Cross-Border Business
VAT Rates and Taxable Transactions
The standard VAT rate in Lithuania is 21%. Reduced rates of 9% and 5% apply to certain categories of goods and services, such as books, periodicals, heating, and certain food products. VAT is charged on the supply of goods and provision of services within Lithuania, the import of goods, and intra-Community acquisitions.
When VAT Registration Is Mandatory
VAT registration becomes mandatory if the company’s annual turnover from taxable transactions exceeds EUR 45,000 over the preceding 12 months. However, for non-residents there are situations where VAT registration is required from the first transaction — for example, when supplying goods within Lithuania or providing certain services in the country. Foreign companies without a local establishment may also be required to register as VAT payers.
EU Transactions and Reverse Charge
Special rules apply to the supply of goods and services between companies in different EU countries. Intra-Community supplies of goods between registered VAT payers may be taxed at 0% provided certain conditions are met. The reverse charge mechanism means that the obligation to pay VAT shifts to the buyer. Correct application of these rules requires precise documentation and reporting.
Applying 0% VAT for Exports
The export of goods outside the EU is subject to VAT at 0%. However, to apply the zero rate, the company must have documentary evidence of the actual export of goods from the EU territory. Errors in export documentation may result in the tax authorities refusing to apply the zero rate and assessing VAT at the standard rate.
Payroll Taxes in Lithuania: Real Cost of Hiring Employees
Minimum Salary and Cost Structure
From 1 January 2025, the minimum monthly wage in Lithuania is EUR 1,038 and the minimum hourly wage is EUR 6.35. The total cost of an employee for the employer includes not only the gross salary but also social insurance contributions, personal income tax, and related obligations for calculation and remittance to the budget.
Employer Taxes and Contributions
In addition to the gross salary, the employer bears social insurance costs. The social insurance contribution rate for insured persons in 2025 is 19.5%, calculated on the employee’s gross salary. The employer is responsible for calculating, withholding, and remitting these amounts to the relevant authorities. When planning the hiring budget, the employer should work from the total cost of an employee rather than the gross salary alone.
Social Security System (Sodra)
Sodra is the State Social Insurance Fund Board of Lithuania. The employer must register with Sodra before hiring the first employee and ensure that each worker is properly enrolled in the social insurance system. Social insurance contributions cover pensions, health insurance, unemployment insurance, and other social benefits.
Payroll Reporting Obligations
The employer is required to submit regular reports to Sodra and the tax inspectorate. Reporting includes monthly data on accrued salaries, withheld taxes, and remitted contributions. Failure to meet reporting deadlines or incorrect completion of forms results in penalties.
Personal Income Tax for Non-Residents in Lithuania
What Income Is Taxed in Lithuania
Non-residents of Lithuania pay personal income tax on income derived from Lithuanian sources. Such income includes salary for work performed in Lithuania, dividends from Lithuanian companies, income from the rental of real estate in Lithuania, board member remuneration, and other payments provided for by law.
PIT Rates and Taxation Logic
Personal income tax in Lithuania applies on a progressive scale. The standard rate is 20% for income not exceeding the established threshold and 32% for income above that threshold. Dividends are taxed at a separate rate of 15%. The application of a specific rate depends on the type of income and the status of the recipient.
Tax Residency vs Non-Residency
Tax residency determines the scope of an individual’s tax obligations in Lithuania. A resident is required to declare and pay tax on worldwide income. A non-resident is taxed only on income from Lithuanian sources. Residency status is determined based on a combination of criteria, including the place of permanent residence and the time spent in the country (183 days or more during the tax period).
Double Tax Treaties: How to Reduce Taxes
Lithuania has concluded double tax treaties with more than 50 countries. These treaties allow for the reduction or elimination of double taxation of the same income in two jurisdictions. To apply reduced treaty rates, a certificate of tax residency from the competent authority of the relevant country must be provided, and the established procedure must be followed.
Dividends and Profit Withdrawal from a Lithuanian Company
Dividend Taxation for Foreign Owners
When dividends are paid from a Lithuanian company to an individual who is a non-resident of Lithuania, withholding tax applies. The standard rate is 15%. If dividends are paid to a legal entity that is an EU resident, the tax may be reduced to 0% under the conditions of the EU Parent-Subsidiary Directive.
Withholding Tax on Distributions
The Lithuanian company is required to withhold and remit withholding tax to the budget when paying dividends. The responsibility for correct calculation and timely remittance of the withheld tax rests with the company making the distribution. Errors in withholding may lead to additional assessments and penalties.
Structuring Profit Distribution Efficiently
Planning the procedure for profit distribution is an important part of tax strategy. The choice between paying dividends, director’s salary, or other forms of withdrawing funds from the company depends on the specific situation of the owner, their tax residency, and applicable treaties. Proper structuring at the company formation stage makes it possible to optimise the overall tax burden.
Withholding Tax in Lithuania: Cross-Border Payments Explained
Payments Subject to WHT
A Lithuanian company is required to withhold tax at source when making certain payments to non-residents. Such payments include dividends, interest, royalties, remuneration for management and consulting services, and other income provided for by law.
Standard Rates and Reductions
The standard withholding tax rates in Lithuania are 15% on dividends and 10% on interest and royalties. These rates may be reduced under double tax treaties or EU directives, provided the established conditions and procedures are met.
Treaty Application Requirements
To apply reduced rates under treaties, the company must hold a certificate of tax residency of the income recipient issued by the competent authority of the relevant country. The document must be provided before the payment is made. Failure to follow the procedure means that standard Lithuanian rates apply.
Real Estate and Other Business Taxes in Lithuania
Real Estate Tax for Companies
Companies owning real estate in Lithuania pay real estate tax. The rate is set by municipalities and ranges from 0.5% to 3% of the tax value of the property. The specific rate depends on the location and type of property.
Land Tax and Local Rules
Land tax is also set at the municipal level. Rates range from 0.01% to 4% of the value of the land plot. The obligation to pay rests with the owner or user of the plot. Foreign companies owning land in Lithuania are subject to this tax on the same basis as domestic entities.
Other Relevant Taxes
Depending on the type of activity, excise duties, environmental pollution taxes, state fees, and other mandatory payments may apply. The applicability of these taxes is determined by the specifics of the business and should be assessed during the planning stage.
Tax Compliance in Lithuania: Reporting and Obligations
Corporate Tax Reporting
A Lithuanian company is required to maintain accounting records in accordance with Lithuanian standards, file annual financial statements, and submit a corporate income tax return. Filing deadlines are established by law, and failure to meet them results in sanctions.
VAT and Transaction Reporting
VAT payers are required to file VAT returns monthly or quarterly depending on turnover. When carrying out intra-Community transactions, additional reports are submitted — including EC Sales Lists and Intrastat declarations for supplies and acquisitions within the EU.
Payroll and Social Reporting
Employers submit monthly reports to Sodra and the tax inspectorate containing data on accrued salaries, withheld taxes, and remitted contributions. An annual summary report is filed for each employee.
Record-Keeping Requirements
Lithuanian law requires the retention of accounting documents for at least 10 years. All primary documents — invoices, contracts, payment records — must be properly prepared and available for inspection by the tax authorities.
Tax Risks in Lithuania for Foreign-Owned Companies
VAT Errors in Cross-Border Transactions
One of the most common errors is the incorrect application of VAT rules in intra-EU transactions. Incorrect determination of the place of supply, errors in applying the zero rate, or incorrect use of the reverse charge mechanism can lead to additional VAT assessments, interest, and penalties.
Incorrect Profit Distribution
Paying dividends without proper documentation, errors in withholding tax at source, or using a suboptimal structure for withdrawing funds are common problems for companies with foreign owners. Every payment from the company must have a legal basis and be properly documented.
Lack of Substance
Lithuanian tax authorities and EU bodies are increasingly scrutinising whether a company has genuine economic substance in its country of registration. A company without employees, a real office, assets, or genuine business activity in Lithuania may be classified as a “shell structure”, which carries tax consequences including the refusal to apply preferential rates and treaty benefits.
Penalties and Tax Audits
Lithuanian tax authorities conduct both scheduled and unscheduled audits. Penalties for violations range from administrative fines to substantial financial sanctions. For foreign owners, the cost of correcting errors almost always exceeds the cost of properly organised compliance from the outset.
Tax Changes in Lithuania: What Will Change After 2025
Corporate Tax Increase in 2026
From 2026, Lithuania has planned an increase in the standard corporate income tax rate. This change directly affects the financial model of the business and must be factored into long-term planning. Foreign entrepreneurs registering a company in 2025 should take into account not only current rates but also future ones.
Changes in Personal Taxation
Adjustments in personal income tax rates and the taxation of certain types of income are possible. Monitoring legislative changes is a necessary part of tax planning for non-residents.
Planning Ahead for Foreign Entrepreneurs
When deciding to register a company in Lithuania, it is necessary to consider not only the current tax environment but also announced changes. Proper planning makes it possible to adapt the business structure to new conditions before they take effect.
Why Non-Residents Need Accounting Support in Lithuania
Complexity of the Lithuanian Tax System
The Lithuanian tax system includes numerous taxes, rates, exemptions, and special rules. For a non-resident who does not speak Lithuanian and is unfamiliar with local practice, independently managing tax accounting and reporting carries a high risk of errors.
Risk of Non-Compliance Without Local Support
The absence of professional accounting support in Lithuania is one of the main reasons for tax violations among foreign companies. Missed deadlines, incorrect declarations, and incorrect application of rates can lead to penalties and reputational damage.
Scope of Professional Services
Company in Lithuania UAB provides comprehensive support for foreign entrepreneurs: company registration in Lithuania, tax registration, bookkeeping, payroll administration, preparation and filing of tax returns, advice on structuring payments, and assistance during tax audits. Contact Company in Lithuania UAB for a free initial consultation.