{"id":37845,"date":"2026-04-28T08:06:11","date_gmt":"2026-04-28T05:06:11","guid":{"rendered":"https:\/\/tet.lt\/?p=37845"},"modified":"2026-10-09T15:54:20","modified_gmt":"2026-10-09T12:54:20","slug":"taxes-in-lithuania-2026-key-changes-and-tax-rules-for-non-residents","status":"publish","type":"post","link":"https:\/\/tet.lt\/lt\/blog\/taxes-in-lithuania-2026-key-changes-and-tax-rules-for-non-residents\/","title":{"rendered":"Mokes\u010diai Lietuvoje 2026 m.: svarbiausi poky\u010diai ir mokes\u010di\u0173 taisykl\u0117s nerezidentams"},"content":{"rendered":"

Mokes\u010diai Lietuvoje 2026 m.: svarbiausi poky\u010diai ir mokes\u010di\u0173 taisykl\u0117s nerezidentams<\/h1>\n

5 pagrindiniai veiksniai<\/h2>\n
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  • From 2026, the standard corporate income tax rate in Lithuania has been increased from 16% to 17%, and the reduced rate for small businesses from 6% to 7%. These changes directly affect the net profit of Lithuanian companies and require a revision of financial models built on previous rates.<\/li>\n
  • The personal income tax system has been reformed: instead of two rates, a three-tier progressive scale has been introduced \u2014 20%, 25%, and 32%. This increases the tax burden on higher incomes and changes the payment strategy for business owners and directors of Lithuanian companies.<\/li>\n
  • Alongside the rate increases, Lithuania has expanded tax incentives: accelerated depreciation of assets, investment support, relief for new companies (0% CIT for up to 2 years), and enhanced R&D opportunities. The reform is not solely about tightening \u2014 it also creates new optimisation possibilities.<\/li>\n
  • The 2026 tax reform is accompanied by strengthened controls, digitalisation of reporting, and increased requirements for economic substance. For foreign owners, this means heightened risks in the absence of professional support in Lithuania.<\/li>\n
  • Company in Lithuania UAB (company code 304377400) helps non-residents of Lithuania adapt their business to the new tax rules: company registration, accounting support, tax planning, and reporting in line with the 2026 reform.<\/li>\n<\/ul>\n

     <\/p>\n

    The 2026 tax reform is the most significant change to the Lithuanian tax system in recent years. The increase in corporate and personal income tax rates, the introduction of a three-tier progressive PIT scale, the expansion of tax incentives, and strengthened controls together shape a new reality for business in Lithuania. For foreign entrepreneurs and non-residents who own Lithuanian companies, understanding these changes is a mandatory condition for running a business effectively and minimising tax risks.<\/p>\n

    This guide covers all the key changes that have come into effect in 2026 and provides practical recommendations for adapting to the new rules \u2014 from corporate income tax and PIT to VAT, payroll taxes, cross-border payments, and strategic tax planning.<\/p>\n

    What Changed in Lithuania Taxes in 2026? Full Overview<\/h2>\n

    Increase in Corporate Income Tax Rates<\/h3>\n

    The central element of the reform is the increase in the standard Corporate Income Tax (CIT) rate from 16% to 17%. The reduced rate for small businesses has been raised from 6% to 7%. Although the increase is only one percentage point, it directly affects the net profit of every Lithuanian company and must be factored into budgeting and financial planning.<\/p>\n

    Introduction of New Tax Incentives<\/h3>\n

    Alongside the rate increases, Lithuania has expanded its system of tax incentives. Accelerated depreciation has been introduced for certain categories of assets, opportunities for deducting investment-related expenses have been broadened, and support for technological modernisation of business has been strengthened. These measures are aimed at maintaining Lithuania\u2019s competitiveness as a jurisdiction for doing business in the EU.<\/p>\n

    Shift Toward a More Complex Tax Structure<\/h3>\n

    The overall direction of the reform is a more complex tax system. Rate increases are combined with an expanded range of incentives, new conditions for their application, and stronger oversight from tax authorities. For foreign owners, this means that managing tax obligations becomes more resource-intensive and requires professional support.<\/p>\n

    Corporate Income Tax in 2026: New Rules for Companies<\/h2>\n

    Standard and Reduced CIT Rates<\/h3>\n

    From 2026, the standard CIT rate is 17%. From 1 January 2026, a reduced Corporate Income Tax (CIT) 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 rate solely based on the number of employees. These rates form the new baseline model for profit taxation in Lithuania.<\/p>\n

    0% Tax for New Companies<\/h3>\n

    From 1 January 2026, qualifying newly established Lithuanian companies may apply a 0% Corporate Income Tax rate during their first two tax periods. To qualify, annual revenue must not exceed EUR 300,000, the company’s shareholders or members must be exclusively natural persons, and the company must satisfy applicable ownership, related-party and business continuity requirements. The previous general limit of 10 employees no longer applies. The 0% rate is not automatically available to every newly incorporated company.<\/p>\n

    Changes in Deductibility and Depreciation<\/h3>\n

    The reform expands accelerated depreciation options for certain categories of fixed assets, allowing companies to write off the cost of assets more quickly and reduce taxable profit. The list of allowable deductible expenses related to investment activities has also been expanded. Correct application of these mechanisms requires precise accounting.<\/p>\n

    Tax Loss and Profit Planning<\/h3>\n

    From 1 January 2026, Lithuania applies a unified limitation on the deduction of carried-forward tax losses. The combined amount of deductible losses, including the company’s own carried-forward losses and qualifying losses transferred within a corporate group or following a reorganisation, generally cannot exceed 70% of the relevant taxable profit calculated before deducting prior-period losses. The restriction must be applied in accordance with the Lithuanian Law on Corporate Income Tax, including any applicable special rules and exceptions.<\/p>\n

    Personal Income Tax Reform in 2026<\/h2>\n

    New Progressive PIT System<\/h3>\n

    From 1 January 2026, Lithuania applies progressive Personal Income Tax (PIT) rates of 20%, 25% and 32% to employment income and other 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), and the 32% rate applies to the portion exceeding EUR 138,729. Certain categories of income, including dividends and qualifying investment income, are subject to separate taxation rules.<\/p>\n

    Impact on Salaries and Dividends<\/h3>\n

    The introduction of the intermediate 25% rate directly affects business owners, directors, and highly paid employees of Lithuanian companies. The payment strategy \u2014 the balance between the director\u2019s salary and dividends \u2014 must be recalculated taking into account the new progressive scale. The dividend tax rate remains at 15%, making dividend distributions still a significant tool for profit allocation.<\/p>\n

    Integration of Self-Employed Taxation<\/h3>\n

    From 1 January 2026, Lithuania introduced revised Personal Income Tax rules for individuals conducting registered individual activities (individuali veikla). Taxable profits of up to EUR 42,500 are generally subject to a 20% PIT rate reduced by an applicable income tax credit. The effective tax rate is 5% for annual taxable profits up to EUR 20,000 and gradually increases to 20% as profits approach EUR 42,500. Where annual taxable profits exceed EUR 42,500, the income tax credit no longer applies and the relevant taxable income is subject to progressive taxation. Individual activity remains a separate legal and tax category, with applicable registration, reporting and social insurance obligations.<\/p>\n

    VAT and Indirect Taxes in 2026<\/h2>\n

    VAT Rates and Stability<\/h3>\n

    From 1 January 2026, Lithuania’s standard Value Added Tax (VAT) rate remains 21%, but the reduced VAT rate of 9% has been replaced by a 12% rate for qualifying goods and services. The 5% reduced VAT rate remains available for certain categories specified by Lithuanian legislation. The VAT changes affect activities including qualifying accommodation services, passenger transport and certain cultural services. Businesses must apply the appropriate rate based on the type of supply and the rules in force at the time of the taxable transaction.<\/p>\n

    Compliance and Digital Reporting Trends<\/h3>\n

    Despite the absence of changes in rates, the reform is accompanied by stronger enforcement of VAT compliance rules. Lithuania continues to develop the digital infrastructure for tax reporting, including electronic invoicing and automated data reconciliation. For companies, this means increased demands on the accuracy and timeliness of reported data.<\/p>\n

    Cross-Border VAT Risks<\/h3>\n

    Errors in intra-EU transactions remain one of the key tax risks. Incorrect determination of the place of supply, improper application of the reverse charge mechanism, or insufficient documentary evidence for intra-Community supplies can result in additional VAT assessments, interest, and penalties. With the strengthening of digital controls, the likelihood of such errors being identified is increasing.<\/p>\n

    Payroll Taxes and Employment Costs in 2026<\/h2>\n

    Increase in Minimum Salary<\/h3>\n

    From 1 January 2026, the minimum monthly wage in Lithuania is EUR 1,153 and the minimum hourly wage is EUR 7.05. The increase in the minimum wage directly raises personnel costs, including social contributions calculated on the gross salary.<\/p>\n

    Social Contributions and Employer Burden<\/h3>\n

    In 2026, employees in Lithuania generally pay mandatory social security and health insurance contributions amounting to 19.5% of their gross salary, with an additional 3% contribution for employees participating in supplementary second-pillar pension accumulation. Employers pay separate social security and related contributions, with rates depending on the employment contract, occupational accident risk category and applicable statutory provisions. Personal Income Tax and employee social contributions are generally withheld from the employee’s gross salary and should not be added again when calculating the employer’s total employment cost.<\/p>\n

    Changes in Allowance Taxation<\/h3>\n

    The reform introduces adjustments to the rules for taxing business travel expenses, daily allowances, and other employer-paid compensations. The changes concern the limits that are exempt from taxation and the documentation requirements for such payments. Failure to comply with the updated rules may result in compensations being reclassified as taxable income.<\/p>\n

    Withholding Tax and Cross-Border Payments<\/h2>\n

    Standard WHT Rates<\/h3>\n

    Lithuanian withholding tax rates in 2026 depend on the type of income and the tax status of the recipient. Dividends paid to non-resident individuals are generally subject to 15% Personal Income Tax, while dividends paid to foreign corporate shareholders are generally subject to 17% withholding tax, unless a statutory participation exemption or applicable tax treaty relief applies. Royalties paid to foreign entities are generally subject to 10% withholding tax, subject to applicable exemptions and treaty provisions. Interest paid to foreign entities established in the European Economic Area or in countries with which Lithuania applies a double taxation agreement is generally exempt from Lithuanian withholding tax. Other taxable interest payments may be subject to a 10% rate. The applicable treatment must be determined separately for each payment.<\/p>\n

    Treaty-Based Reductions<\/h3>\n

    Lithuania has concluded double taxation agreements with numerous countries that may provide reduced withholding tax rates or exemptions for qualifying cross-border payments. To apply treaty benefits at the time of payment, the Lithuanian payer must comply with the applicable State Tax Inspectorate (VMI) documentation requirements, generally including the appropriate DAS-1 application and supporting evidence of the recipient’s tax residence. Where excessive Lithuanian withholding tax has already been deducted, the recipient may be entitled to request a refund through the applicable DAS-2 procedure. Treaty relief is subject to applicable beneficial ownership, anti-abuse and other eligibility requirements.<\/p>\n

    Compliance Requirements<\/h3>\n

    For the correct application of reduced rates or exemptions, the company must hold proper documentation: a certificate of tax residency, confirmation of the beneficial owner of the income, and justification for the application of a specific treaty. The absence of documentation means that standard Lithuanian rates apply and potential penalties may follow upon audit.<\/p>\n

    Tax Incentives and Opportunities in 2026<\/h2>\n

    R&D and Innovation Incentives<\/h3>\n

    Lithuania is expanding tax incentives for companies engaged in research and development. R&D expenses may be deducted at an enhanced rate, reducing taxable profit. For technology companies and startups, this creates an additional incentive to locate their business in Lithuania.<\/p>\n

    Startup-Friendly Tax Rules<\/h3>\n

    In addition to the 0% CIT rate for new companies, Lithuania offers simplified procedures and support during the initial stage of operations. Startup support programmes complement the tax incentives and create a comprehensive environment for launching a business. Foreign entrepreneurs can take advantage of these opportunities provided all criteria are met.<\/p>\n

    Investment-Oriented Tax Policy<\/h3>\n

    Accelerated depreciation, expanded deductions for capital investment, and incentives for technological modernisation are tools aimed at attracting investment into the Lithuanian economy. These mechanisms are available to both domestic and foreign companies and can significantly reduce the effective tax rate when applied correctly.<\/p>\n

    Tax Compliance in 2026: What Becomes More Important<\/h2>\n

    Increased Audit and Control Environment<\/h3>\n

    The reform is accompanied by greater activity on the part of Lithuanian tax authorities. The frequency and depth of audits are increasing, and the use of digital tools for identifying discrepancies in reporting is expanding. For foreign owners, this means heightened requirements for the quality of accounting and reporting.<\/p>\n

    Reporting Obligations for Companies<\/h3>\n

    Companies are required to file CIT, VAT, and payroll tax returns within established deadlines. Annual financial statements and the corporate income tax return are filed at the end of the tax period. VAT returns are filed monthly or quarterly. Payroll reports are submitted monthly to Sodra and the tax inspectorate.<\/p>\n

    Documentation Requirements<\/h3>\n

    All business transactions must be supported by primary documents. Invoices, contracts, acceptance certificates, payment records, and export confirmations must be prepared in accordance with Lithuanian requirements and retained for at least 10 years. The absence or improper preparation of documentation is grounds for additional assessments upon audit.<\/p>\n

    Key Tax Risks in Lithuania After Reform<\/h2>\n

    Higher Tax Burden Miscalculation<\/h3>\n

    The increase in CIT rates and the shift to a three-tier PIT scale raise the overall tax burden. Companies that have not revised their financial models following the reform risk facing insufficient funds for tax payments and a mismatch between budget projections and actual obligations.<\/p>\n

    Incorrect Use of Tax Incentives<\/h3>\n

    The expansion of available incentives also increases the risk of their incorrect application. Improper use of accelerated depreciation, errors in calculating R&D deductions, or non-compliance with the conditions for the 0% rate for new companies can result in additional assessments and penalties.<\/p>\n

    Cross-Border Tax Errors<\/h3>\n

    Incorrect application of VAT rules in intra-EU transactions and errors in withholding tax on payments to non-residents remain systemic risks for companies with foreign owners. The reform does not eliminate these risks \u2014 it strengthens the controls for detecting them.<\/p>\n

    Compliance Failures<\/h3>\n

    Lithuanian tax authorities impose penalties for late filing of returns, incomplete tax payments, missing documentation, and violations of withholding rules. The amounts can be substantial. For foreign owners, the cost of correcting violations almost always exceeds the cost of properly organised compliance from the outset.<\/p>\n

    Strategic Tax Planning for Non-Residents in 2026<\/h2>\n

    Choosing the Right Company Structure<\/h3>\n

    The reform affects the choice between different organisational forms for doing business in Lithuania. CIT rates, conditions for the reduced rate, incentives for new companies, and expense deduction rules \u2014 all of these factors must be considered when choosing a structure. For non-residents, the most common form remains the UAB (private limited liability company).<\/p>\n

    Profit Distribution Strategy<\/h3>\n

    Taking into account the new three-tier PIT scale and the preserved 15% dividend tax rate, the profit distribution strategy \u2014 the balance between the director\u2019s salary and dividends \u2014 requires recalculation. In some cases, dividend payments may remain more efficient, but the specific decision depends on the income amount, the owner\u2019s tax residency, and applicable treaties.<\/p>\n

    Long-Term Tax Optimisation<\/h3>\n

    The 2026 reform is not a one-off change but part of a broader trend towards higher tax burdens and greater system complexity. Foreign entrepreneurs are advised to build their business structure taking into account not only current rules but also likely further changes. Professional tax planning at the company formation stage significantly reduces risks and costs in the future.<\/p>\n

    Why Tax Reform 2026 Makes Local Expertise Essential<\/h2>\n

    Increased Complexity of Tax System<\/h3>\n

    The reform has significantly complicated Lithuania\u2019s tax model: more rates, more incentives, more conditions, and more controls. For a non-resident who does not speak Lithuanian and is unfamiliar with local practice, independently managing tax compliance carries a high risk of errors.<\/p>\n

    Risk of Non-Compliance for Foreign Owners<\/h3>\n

    The absence of professional support in Lithuania is one of the main reasons for tax violations among companies with foreign owners. Missed deadlines, incorrect returns, errors in applying incentives, and improper structuring of payments can lead to substantial penalties and reputational damage.<\/p>\n

    Role of Professional Accounting and Tax Support<\/h3>\n

    Company in Lithuania UAB provides comprehensive support for foreign entrepreneurs: company registration, tax registration, bookkeeping in line with the 2026 reform, payroll administration, preparation and filing of tax returns, advice on structuring payments, and tax planning. Contact Company in Lithuania UAB for a free initial consultation.<\/p>\n

    Da\u017enai u\u017eduodami klausimai<\/h2>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><\/section>