INCOME TAX ADVANTAGES
From 1 January 2026, the standard Corporate Income Tax rate in Lithuania is 17%. Qualifying small companies may benefit from a reduced rate of 7%, while eligible newly established companies may apply a 0% Corporate Income Tax rate during their first two tax periods, provided that all statutory conditions are satisfied.
From 1 January 2026, a reduced Corporate Income Tax rate of 7% applies to qualifying small companies whose annual revenue does not exceed EUR 300,000, subject to applicable ownership, related-party and other statutory restrictions. The previous general requirement limiting qualifying companies to 10 employees no longer applies. Companies cannot qualify for the reduced tax rate solely because they employ fewer than 10 people.
From 2026, qualifying newly established Lithuanian companies may apply a 0% Corporate Income Tax rate during their first two tax periods. Annual revenue must not exceed EUR 300,000 in the relevant tax period, and the company’s shareholders or members must be exclusively natural persons. The company must also satisfy the applicable related-party restrictions and continuity requirements. During three consecutive tax periods, including the first two, the company generally must not suspend its activities, undergo liquidation or reorganisation, or transfer ownership interests to new shareholders or members. The previous general employee limit of 10 persons no longer applies.
Further income tax deductions may apply to businesses who execute capital investment projects focused on one of the following objectives:
- Acquisition of property for expansion of services / new manufacturing operations or operational capacity.
- Implementation of new manufacturing processes or partial replacement of current manufacturing processes.
- Implementation of technologies protected by international invention patents.
- Lithuanian companies implementing qualifying investment projects involving technological renewal, increased production capacity or eligible business expansion may reduce their taxable profits by up to 100% of qualifying investment expenditure, subject to statutory conditions. The investment project tax incentive applies to eligible expenditure incurred during the tax periods from 2009 through 2028. Any unused qualifying expenditure may generally be carried forward for up to four subsequent tax periods. Not every acquisition of property or business asset qualifies for this incentive, and companies must satisfy the applicable asset eligibility, documentation and holding-period requirements.
Finally, income tax deductions also apply to:
- Manufacturers who employ individuals with disabilities.
- Companies operating in Lithuanian Free Economic Zones (FEZs) may qualify for significant Corporate Income Tax incentives, provided that they meet the applicable investment, activity and state aid requirements. A qualifying FEZ company may benefit from a 0% Corporate Income Tax rate for 10 consecutive tax periods, followed by a 50% reduction in the applicable Corporate Income Tax rate for the subsequent six tax periods. The standard qualifying capital investment threshold is generally EUR 1 million, although alternative conditions may apply to certain eligible service activities. At least 75% of the company’s income must generally derive from qualifying activities carried out within the FEZ. Registration in an FEZ alone does not automatically entitle a company to these benefits.
- Companies who carry out scientific research or experimental business expansion projects.
VAT ADVANTAGES
From 1 May 2025, businesses in Lithuania generally become liable for VAT registration when their turnover from taxable supplies of goods and services carried out in Lithuania exceeds EUR 45,000 during the current or preceding calendar year. VAT registration obligations may also arise when the value of qualifying intra-EU acquisitions of goods exceeds EUR 14,000 during the current or preceding calendar year. Additional VAT registration and reporting obligations may arise from cross-border services and other transactions, even where these thresholds have not been exceeded. The standard VAT rate in Lithuania is 21%.
Businesses whose Lithuanian taxable turnover does not exceed EUR 45,000 during the current or preceding calendar year may qualify for the domestic small business VAT exemption, provided that all statutory conditions are satisfied. However, remaining below this threshold does not automatically eliminate VAT obligations. VAT registration may still be required for qualifying intra-EU acquisitions exceeding EUR 14,000, certain cross-border services and other transactions specified by law. Where applicable, businesses may use the small business VAT scheme introduced on 1 May 2025, subject to its eligibility and reporting requirements.
SUMMARY OF THE MAIN CORPORATE TAXES IN LITHUANIA
Corporate Income Tax: 17% from 1 January 2026. A reduced rate of 7% applies to qualifying small companies and certain other eligible entities. Newly established companies meeting the statutory requirements may qualify for a 0% rate during their first two tax periods.
Capital gains taxation: Capital gains realised by Lithuanian companies are generally included in taxable profits and subject to the standard 17% Corporate Income Tax rate from 2026, unless a specific exemption or reduced rate applies. Qualifying gains from the disposal of shares may benefit from a participation exemption where statutory requirements are met. Capital gains realised by individuals are subject to separate Personal Income Tax rules, which may involve rates of 15%, 20%, 25% or 32%, depending on the type and amount of income and applicable exemptions.
VAT: 21 %, exception applies in cases noted above.
Corporate Income Tax: The standard rate is 17% from 1 January 2026. Qualifying small companies and certain other eligible entities may apply a reduced 7% rate, while eligible newly established companies may benefit from a 0% rate during their first two tax periods. Certain credit institutions are subject to an additional 5% Corporate Income Tax charge on taxable profits exceeding the statutory threshold, resulting in a combined 22% rate on the relevant portion of taxable profits.
Social security contributions: In 2026, employees in Lithuania generally pay mandatory social security and health insurance contributions amounting to 19.5% of their gross salary. Employees participating in supplementary second-pillar pension accumulation generally contribute an additional 3%. Employer social security and related contributions generally range from approximately 1.77% to 3.03% for indefinite-term employment contracts, depending on the applicable occupational accident risk category. Different rates may apply to fixed-term employment contracts and specific categories of employment.
Real Estate Tax: From 1 January 2026, Lithuanian companies are generally subject to municipal Real Estate Tax rates ranging from 0.5% to 3% of the property’s taxable value, together with an additional statutory levy of 0.2%. Abandoned or neglected properties may be subject to increased municipal rates ranging from 1% to 5%. Applicable exemptions and special rules depend on the type, ownership and use of the property. Separate taxation rules apply to residential and other qualifying real estate owned by individuals.
To sum up, there are a multitude of tax-related deductions and exemptions that companies can take advantage of in Lithuania. Navigating the tax system with confidence is key for every business, and Company in Lithuania UAB will gladly provide apskaitos paslaugos and guidance tailored specifically to your needs and expectations.
