Whether it’s a forward-looking company or a diligent individual, being part of a well-functioning, fairly-structured and transparent taxation system is essential for reaching business and personal goals with assurance and ease. Lithuanian taxation system is ranked among the top 5 EU countries for the least time-consuming tax payment processes, which suggests that you don’t have to worry about the bureaucracy and can focus on what really counts instead.
There are specific rules for determining income tax rates in Lithuania, which includes identifying sources of income and types of taxpayers. All of them eventually lead to distinguishing two types of the income tax contributions – Corporate Income Tax and Personal Income Tax. Both of them are administered by the State Tax Inspectorate.
Although the standard Lithuanian tax year runs from the 1st of January to the 31st of December, a different 12-month tax period may be set for a taxpayer who makes such a request, provided that the characteristics of the economic activities justify it.
Corporate Income Tax
Lithuanian and foreign companies are subject to paying Corporate Income Tax contributions to the Lithuanian government. A company is considered Lithuanian if it’s been incorporated in Lithuania. The standard Corporate Income Tax rate in Lithuania is 17% for tax periods beginning on or after 1 January 2026. A reduced rate of 7% may apply to qualifying small companies and certain other eligible entities. Newly established small companies may benefit from a 0% Corporate Income Tax rate during their first two tax periods, provided that all statutory conditions are satisfied.
Lithuanian tax-resident companies are generally subject to Corporate Income Tax on their worldwide taxable income. However, profits attributable to permanent establishments located in EEA countries or countries with which Lithuania has an applicable double taxation agreement may qualify for an exemption, subject to the conditions established by Lithuanian tax legislation. Other exemptions, deductions and tax treaty provisions may also apply depending on the nature and source of the income.
Foreign companies are required to pay corporate taxes for the following income:
- Income earned from economic activities carried out through permanent establishments located in Lithuania.
- Income earned from international telecommunications managed through permanent establishments in Lithuania, as well as 50% of income from transport operations which begin in Lithuania and end in foreign countries and vice versa.
- Income earned in foreign countries attributable to the economic activities carried out by a foreign company through permanent establishments based in Lithuania.
- Income sourced in Lithuania and received by a foreign company otherwise than through permanent establishments located in Lithuania.
Certain Lithuanian companies may qualify for preferential Corporate Income Tax treatment. From 1 January 2026, the reduced Corporate Income Tax rate is generally 7% for qualifying small companies with annual revenue not exceeding EUR 300,000, subject to the applicable related-party restrictions. Eligible newly established companies may qualify for a 0% rate during their first two tax periods. Additional preferential tax rules apply to certain agricultural cooperatives and income derived from qualifying intellectual property.
- Companies deriving qualifying profits from the commercial exploitation of eligible intellectual property developed through research and development activities may benefit from Lithuania’s preferential intellectual property taxation regime. From 2026, qualifying income may be taxed at a reduced 7% Corporate Income Tax rate, subject to the statutory eligibility conditions and the applicable nexus requirements.
- Qualifying agricultural cooperative companies may benefit from a reduced 7% Corporate Income Tax rate from 2026, provided that more than 50% of their income during the tax period is derived from eligible agricultural activities, including qualifying sales of agricultural products produced by or acquired from their members. Eligibility depends on the legal form of the entity and the conditions established by Lithuanian Corporate Income Tax legislation.
- From 2026, qualifying small companies with annual revenue not exceeding EUR 300,000 may apply the reduced 7% Corporate Income Tax rate, subject to statutory restrictions concerning related entities and ownership structures. The previous general requirement limiting qualifying companies to 10 employees no longer applies. Newly established companies may qualify for a 0% Corporate Income Tax rate during their first two tax periods if their annual revenue does not exceed EUR 300,000, their shareholders or members are exclusively natural persons, and the company satisfies the applicable continuity, ownership and related-party conditions.
Annual Corporate Income Tax returns in Lithuania must generally be submitted by the 15th day of the sixth month following the end of the tax period. For companies using the calendar year, the standard deadline is 15 June of the following year. Advance Corporate Income Tax payments may also be required, depending on the company’s previous-year revenue and applicable statutory exemptions. Companies whose revenue in the preceding tax period did not exceed EUR 300,000 are generally exempt from advance Corporate Income Tax payments.
Optimising your tax contributions is one of the key elements for sustaining and enhancing your business growth. If you wish to learn more about the Corporate Income Tax rates and allowances available in Lithuania, our dedicated experts will be pleased to provide a personalised consultation. Contact us today to book an appointment.
Personal Income Tax
The obligation to pay and the rate of the Personal Income Tax are determined by the individual’s residence status and the amount of income. From 1 January 2026, Lithuania applies progressive Personal Income Tax rates of 20%, 25% and 32% to income subject to the general progressive taxation regime. The 20% rate applies to annual taxable income up to 36 average national wages (EUR 83,237.40 in 2026), the 25% rate applies to the portion between 36 and 60 average national wages (EUR 83,237.40 to EUR 138,729 in 2026), and the 32% rate applies to the portion exceeding 60 average national wages (EUR 138,729 in 2026). Certain categories of income, including dividends, qualify for separate tax treatment. Lithuanian tax residents are generally taxed on their worldwide income, while non-residents are taxed on specified Lithuanian-source income, subject to applicable tax treaties and statutory exemptions. Certain categories of personal income are subject to specific tax rates or calculation rules. From 2026, dividends and qualifying sickness, maternity, paternity and childcare benefits are generally subject to a 15% Personal Income Tax rate. Income from individual activities is generally taxed under a separate calculation mechanism involving a 20% rate and an income tax credit, with the effective tax burden depending on taxable profit. Other non-employment income may qualify for a 15% rate within the statutory threshold, with higher amounts subject to progressive taxation. Social security and health insurance contributions may apply separately.
An individual may qualify as a Lithuanian tax resident if at least one of the statutory residence criteria is satisfied. 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, and tax residence may also be affected by applicable double taxation agreements.
- You are present in Lithuania for at least 183 days during the tax period.
- You are present in Lithuania for at least 280 days during two successive tax periods, and you stay in Lithuania for at least 90 days in any of such tax periods.
As for the sources of income, permanent residents of Lithuania are subject to paying Personal Income Tax contributions for the income earned inside and outside of Lithuania.
Non-permanent residents are obligated to pay such taxes for the following income sourced in Lithuania:
- Employment relations
- Self-employment on a fixed base
- Interest, except for non-equity government securities
- Distributions and payments to the members of the Management Board and Supervisory Board
- Rent for Lithuanian immovable property
- Autoriniai atlyginimai
- Sports activities
- Performance activities
- Ownership transfer of Lithuania-registered movable property and Lithuanian real estate
- Compensation for infringements of copyright or related rights
Lithuanian Personal Income Tax legislation provides specific tax allowances and deductions, subject to eligibility conditions and statutory limits. These may include the non-taxable income allowance (NPD) applicable to qualifying employment income and certain deductions for eligible life insurance and pension contributions, depending on the date and conditions of the relevant contracts. The former general tax deduction for qualifying home repair and renovation services is no longer available for expenses incurred in 2026. The availability of each deduction depends on the applicable tax-year rules and the taxpayer’s individual circumstances.
Company in Lithuania UAB is eager to contribute to the development of Lithuanian economy through the legal support of businesses and individuals. We are pleased to offer tailored taxation advice to everyone who is interested either in growing a business or in residing in Lithuania. We also provide financial apskaitos paslaugos, as well as offer virtual office solutions to those who’re looking to optimise their business costs.
