Lithuania pursues a consistent growth-friendly tax policy aimed at promoting productive investments and innovations that support regional development.
Currently available corporate income tax incentives for investments and innovations shall apply for:
- Encouraging entrepreneurship – from 1 January 2026, qualifying newly established small companies in Lithuania may benefit from a 0% Corporate Income Tax rate during their first two tax periods, provided that their annual revenue does not exceed EUR 300,000 and all statutory eligibility conditions are satisfied. From the third tax period, eligible small companies may apply a reduced Corporate Income Tax rate of 7%, compared with the standard rate of 17%. The preferential regime is subject to applicable ownership, related-party and other statutory restrictions.
- promoting innovations — tax incentives targeting companies developing new technologies and afterwards using them in their activities to generate income:
- triple deduction of scientific research and experimental development (hereinafter — R&D) costs — expenses incurred for R&D purposes may be deducted from income three times (usually costs are deducted only once);
- shorter depreciation period for assets used in R&D — the acquisition price of fixed assets used in R&D activities may be written off within two years (usually it is written off within 3 to 8 years);
- Tax incentive for R&D commercialisation – from 1 January 2026, a reduced Corporate Income Tax rate of 7% applies to qualifying profits derived from the commercialisation of eligible intellectual property developed through research and development activities. The incentive may apply to income generated from the use, licensing, sale or other qualifying transfer of intellectual property created through eligible R&D activities. The preferential treatment is subject to the statutory eligibility conditions, including the applicable nexus requirements linking the qualifying income to the company’s own R&D expenditure.
Promotion of investments in technological renewal
In order to increase efficiency, competitiveness and energy efficiency of national companies, in end-2008 Lithuania adopted the corporate income tax incentive allowing to reduce taxable profits of companies investing in fundamental technological renewal down to 50%.
Lithuanian companies investing in qualifying technological renewal projects may reduce their taxable profits by up to 100% through the investment project tax incentive, subject to statutory conditions. From 1 January 2026, companies that do not apply this investment project incentive may also benefit from immediate tax deduction of the acquisition cost of certain qualifying fixed assets, including machinery, equipment, computer hardware, software and specified commercial vehicles. The immediate deduction is subject to the applicable asset categories, holding periods and other statutory requirements and cannot be combined with the investment project incentive for the same qualifying assets.
This incentive may be used by companies investing in fixed assets intended for:
- producing new, additional products or providing services or increasing the potential of these activities;
- implementing a new production or service provision process;
- substantially changing the existing process (part thereof);
- introducing technologies protected by international patents for inventions.
The aforementioned fixed assets shall be:
- attributed to the groups of fixed assets specified in Annex 1 to the Law on Corporate Income Tax: “machines and equipment”, “facilities (constructions, drilling wells, etc.)”, “hardware and communication equipment (computers, their networks and equipment)”, “software”, “acquired rights”, and groups of fixed assets “lorries, semi-trailers and trailers, buses” that are not more than five years old, and assets such as “lorries, semi-trailers and trailers” (in case of acquiring lorries, semi-trailers and trailers, taxable profits from the acquisition of these assets can only be reduced by the amount of expenses, up to EUR 300,000, incurred during the tax period), and
- not used and produced not earlier than 2 years ago (counting from the beginning of the use of fixed assets).
Under Lithuania’s investment project tax incentive, companies making qualifying investments in technological renewal may reduce their taxable profits by up to 100% of eligible investment expenditure. The incentive applies to qualifying expenses incurred during the tax periods from 2009 through 2028. Where qualifying investment expenditure exceeds the taxable profit of the relevant tax period, the unused amount may generally be carried forward for up to four subsequent tax periods. The assets must satisfy the applicable eligibility conditions and generally remain in use in the company’s business activities for at least three years.
Fixed assets, the acquisition of which led to a reduction in taxable profits, shall be used in the company’s activities for at least three years.
Regional promotion — corporate income tax incentives for companies registered in free economic zones:
- A qualifying company operating in a Lithuanian Free Economic Zone (FEZ) may benefit from a Corporate Income Tax exemption for 10 consecutive tax periods, starting from the tax period in which its qualifying capital investment reaches at least EUR 1 million, followed by a 50% reduction in the applicable Corporate Income Tax rate for the subsequent six tax periods. The incentive is subject to statutory requirements, including qualifying activities, the required investment level, applicable state aid rules and the condition that at least 75% of the company’s income during the relevant tax period must generally derive from eligible activities carried out within the Free Economic Zone. The incentive is not automatically available to every company registered in an FEZ. The incentive may only apply if at least 75% of the company’s income in the zone for the relevant tax period consists of income from production or service activities carried out in the zone and applies to the extent that this is compatible with Commission Regulation (EC) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the common market by applying Articles 107 and 108 of the Treaty;
- a free economic zone company whose average number of staff members during the tax year is at least 20 and whose capital investments reached at least EUR 100 thousand during 10 tax periods starting from the tax period in which this amount of investments has been reached shall not be subject to the corporate income tax, while for the remaining 6 tax periods the company shall be subject to the reduced corporate income tax rate of 50%. The incentive specified in this paragraph may only apply if at least 75% of the company’s income in the zone for the relevant tax period consists of income from production or services activities carried out in the zone and applies to the extent that this is compatible with Commission Regulation (EC) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the common market by applying Articles 107 and 108 of the Treaty.
At present, there are 7 free economic zones in Lithuania: Akmenė, Kaunas, Kėdainiai, Klaipėda, Marijampolė, Panevėžys and Šiauliai.
Free economic zone means a territory intended for business and financial activities and offering special economic and legal conditions for economic entities established by the Law on the Fundamentals of Free Economic Zones of the Republic of Lithuania.
Lithuania provides preferential Corporate Income Tax treatment for qualifying collective investment undertakings and certain venture capital and private equity investment structures. Eligible income may be exempt from Corporate Income Tax under the conditions established by Lithuanian legislation. However, exemptions do not automatically apply to every investment vehicle, all categories of income or every distribution to investors. The tax treatment of distributed profits depends on the legal status and tax residence of the recipient, the nature of the distribution, applicable participation exemption rules and relevant anti-abuse provisions. From 2026, the standard Corporate Income Tax rate is 17% where no exemption or reduced rate applies.
Company in Lithuania UAB strives to contribute to the development of the Lithuanian economy by providing legal support to legal entities and individuals. We are pleased to offer personalized tax advice to anyone who wants to develop a business or live in Lithuania. We also provide apskaitos paslaugos and offer virtual office solutions for those who want to optimize their business costs.
