{"id":8897,"date":"2022-04-04T08:53:02","date_gmt":"2022-04-04T05:53:02","guid":{"rendered":"https:\/\/tet.lt\/?p=8897"},"modified":"2026-10-09T15:39:43","modified_gmt":"2026-10-09T12:39:43","slug":"tax-system-in-lithuania","status":"publish","type":"post","link":"https:\/\/tet.lt\/lt\/blog\/tax-system-in-lithuania\/","title":{"rendered":"Mokes\u010di\u0173 sistema Lietuvoje"},"content":{"rendered":"Mokes\u010di\u0173 sistema Lietuvoje<\/h1>\n
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Lithuania offers a structured tax system for businesses and individuals, with electronic tax administration, online filing services and various tax incentives for eligible companies. However, the country’s tax competitiveness should be assessed based on current legislation, effective tax rates, compliance obligations and internationally comparable indicators rather than outdated rankings. The country boasts a wide variety of forms of companies and individual activities, allowing differentiated income taxation, as well as underlying the necessity for professional tax advice.<\/p>\n
Most national taxes in Lithuania, including Corporate Income Tax, Personal Income Tax and VAT, are administered by the State Tax Inspectorate (VMI). Social insurance contributions are administered by the State Social Insurance Fund Board (Sodra), while customs duties and certain excise-related procedures fall within the competence of Lithuanian Customs. The tax year generally corresponds to the calendar year, although companies may use a different financial and Corporate Income Tax period where permitted by law.<\/p>\n
This article aims to overview the most common types of Lithuanian taxes that businesses and individuals are subject to paying.<\/p>\n
Corporate Income Tax<\/h2>\n
From 1 January 2026, the standard Corporate Income Tax rate in Lithuania is 17%. Lithuanian tax-resident companies are generally subject to Corporate Income Tax on their worldwide taxable income, subject to applicable exemptions, deductions and double taxation agreements. Foreign companies may be subject to Lithuanian Corporate Income Tax on profits attributable to their permanent establishments in Lithuania and certain categories of Lithuanian-source income. Qualifying small companies and other eligible entities may benefit from reduced rates or specific tax incentives.<\/p>\n
Foreign companies are generally subject to Lithuanian Corporate Income Tax on profits attributable to their permanent establishments in Lithuania and certain Lithuanian-source income received without a permanent establishment. Taxable Lithuanian-source income may include dividends, certain interest payments, royalties, income from Lithuanian immovable property and other categories specified by the Lithuanian Law on Corporate Income Tax. Profits attributable to a Lithuanian permanent establishment may include relevant income derived from activities connected with that establishment, regardless of where the income is received. The applicable tax treatment may be modified by a double taxation agreement, EU legislation or statutory exemptions. There is no general rule requiring foreign companies to pay Lithuanian Corporate Income Tax on 50% of revenue from international transport operations.<\/p>\n
From 1 January 2026, qualifying newly established small companies with annual revenue not exceeding EUR 300,000 may apply a 0% Corporate Income Tax rate during their first two tax periods, provided that all statutory eligibility conditions are satisfied. A reduced rate of 7% applies to qualifying small companies in subsequent tax periods, compared with the standard rate of 17%. The previous general requirement limiting qualifying businesses to 10 employees no longer applies. Eligibility remains subject to applicable ownership, related-party and other statutory restrictions.<\/p>\n
Supportive and knowledgeable Company in Lithuania UAB<\/strong> specialists will gladly share their expertise with you, should you wish to receive tailored advice on corporate taxes in Lithuania.<\/p>\nValue-added Tax<\/h2>\n
Lithuanian VAT legislation is harmonised with the EU Value-added tax system, which is an important part of the borderless single market. The standard rate of Value-added Tax (VAT) in Lithuania is 21%, and it\u2019s applied to the majority of goods and services sold in Lithuania. The acquisition of goods or services in Lithuania for commercial purposes from another EU member state may also be subject to VAT.<\/p>\n
However, there are instances when VAT rates may be reduced or even not applicable. For example, leasing of residential real estate is normally VAT-exempt, except for the hospitality sector, parking and transportation and permanently installed equipment which is considered immovable.<\/p>\n
Personal Income Tax<\/h2>\n
Permanent and non-permanent residents of Lithuania are obligated to pay a variety of personal income taxes. From 1 January 2026, Lithuania applies progressive Personal Income Tax 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. All other types of income sourced in Lithuania and outside Lithuania by permanent residents are also subject to the Personal Income Tax. Income sourced in foreign countries by non-permanent residents isn\u2019t taxed by the Lithuanian government.<\/p>\n
However, in addition to the income received from employment relations in Lithuania, non-permanent residents are also obligated to pay income tax for remuneration received for a number of activities carried out in Lithuania. For example, sale of movable and immovable property, interests, self-employment (on a fixed base), sports and performances, just to name a few.<\/p>\n
Lithuanian tax residents may claim certain Personal Income Tax deductions or refunds when filing their annual income tax returns, provided that the relevant statutory conditions are satisfied. These deductions are not automatically available to all taxpayers or for every category of expenditure. Eligibility depends on the taxpayer’s residence status, the nature of the expense, applicable deduction limits and the tax year in which the expense was incurred.\u00a0 <\/strong><\/p>\n\n- Fees paid for studies or vocational training<\/li>\n
- Interest paid on a loan for the purchase or construction of a home, for which the contract was concluded before the 1st of January 2009<\/li>\n
- The former Personal Income Tax deduction for qualifying building finishing and repair services was a temporary measure applicable to eligible expenses incurred during the statutory relief period. This deduction is no longer available for expenses incurred in 2026 and should not be presented as a current tax benefit.<\/li>\n
- The temporary Personal Income Tax deduction for qualifying passenger car repair services applied to eligible expenses incurred during the statutory relief period and is no longer available for expenses incurred in 2026. Ordinary personal vehicle maintenance and repair costs do not generally qualify for a Personal Income Tax deduction.<\/li>\n
- The former temporary Personal Income Tax deduction for qualifying childcare services for minor children is no longer available for expenses incurred in 2026. Any currently available family-related tax benefits or allowances must be assessed separately under the applicable Lithuanian tax legislation.<\/li>\n<\/ul>\n
Permanent residents are also entitled to request a tax refund for the social insurance related expenses: <\/strong><\/p>\n\n- Personal Income Tax relief for qualifying life insurance contributions is subject to statutory conditions and transitional rules. From 1 January 2025, contributions under newly concluded life insurance contracts generally no longer qualify for the previous tax deduction. Eligible contracts concluded before 1 January 2025 may continue to benefit from transitional tax relief, subject to the applicable deduction limits and statutory conditions.<\/li>\n
- Contributions to eligible voluntary third-pillar pension funds may qualify for Personal Income Tax relief under the applicable transitional provisions. However, contributions under pension accumulation contracts concluded on or after 1 January 2025 generally do not qualify for the former tax deduction. Tax relief may remain available for qualifying contracts concluded before that date, subject to statutory restrictions and deduction limits.<\/li>\n
- Additional cumulative pension contributions paid in accordance with the provisions of Paragraph 4 of Article 8 of the Law on Pension Accumulation and which are higher than 3% per capita income from which state social insurance contributions are calculated<\/li>\n<\/ul>\n
Social Security Tax<\/h2>\n
Lithuanian social security obligations depend primarily on the applicable social insurance legislation, employment arrangements and individual insurance status rather than solely on tax residence. State Social Insurance (VSD) and Compulsory Health Insurance (PSD) contributions are administered by Sodra. Employees, employers and self-employed individuals may be required to pay contributions according to their respective legal status and applicable contribution bases. Cross-border employment arrangements are subject to EU social security coordination rules or relevant bilateral agreements where applicable. The contributions are made by both an employer and an employee.<\/p>\n
In 2026, employees in Lithuania generally pay 19.5% of their gross salary in mandatory social security and health insurance contributions. Employees participating in supplementary second-pillar pension accumulation generally contribute an additional 3%. Employer contributions depend on the type of employment contract, occupational accident risk category and applicable statutory requirements. Foreign employees are not automatically exempt from Lithuanian social security contributions based on their residence or nationality. Under EU social security coordination rules, a valid A1 certificate may confirm that an employee remains subject to another EU, EEA or Swiss social security system, provided that the relevant statutory conditions are satisfied.<\/p>\n
Immovable Property Tax<\/h2>\n
Companies and individuals are obligated to pay taxes imposed on Lithuania-located immovable property (real estate and land). If an individual owner of real estate transfers the use of it to a company for a period longer than one month, the Real Estate Tax is paid by the company.<\/p>\n
From 1 January 2026, Lithuanian real estate taxation distinguishes between principal residences, other residential and specified non-commercial properties, and other taxable real estate. The taxable value of an individual’s principal residence is exempt up to a threshold of at least EUR 450,000, with municipalities setting rates of 0.1% to 1% on the excess. Other qualifying residential property held by individuals is subject to progressive rates of 0% to 1%, depending on its aggregate taxable value. Most other taxable real estate, including corporate property, is subject to municipal rates of 0.5% to 3%, with an additional 0.2% statutory levy applying to specified property from 2026. Abandoned or neglected property may be subject to rates of 1% to 5%. Land Tax is governed by separate rules, with municipal rates generally ranging from 0.01% to 4%.<\/p>\n
Exemptions from Lithuanian Real Estate Tax depend on the type of property, its ownership, actual use and the specific conditions established by legislation. Certain properties used for public benefit, education, social services or qualifying agricultural activities may benefit from statutory exemptions. However, such exemptions do not automatically apply to every property used for these purposes. From 2026, abandoned or neglected real estate may be subject to increased municipal tax rates of 1% to 5%. Unfinished construction does not universally qualify for an exemption, and the applicable treatment depends on its legal and factual circumstances. Properties developed under public-private partnership arrangements may qualify for specific relief where statutory conditions are met. If you wish to find out more about your own eligibility, please contact one of our experienced professionals, who will be more than happy to advise.<\/p>\n
Excise Tax<\/h2>\n
Excise taxes are international taxes levied on particular goods and services, usually paid by authorised warehouse keepers, registered consignees and consignors. In Lithuania such taxes are imposed on alcohol, tobacco, energy products such as fuel and electricity.<\/p>\n
The tax period of an authorised warehouse keeper, registered consignee and consignor is a calendar month, after which the excise duty return must be submitted by the 15th of the following month.<\/p>\n
While the excise tax rates on tobacco are relatively low, alcohol excise taxes significantly exceed minimum requirements imposed by the EU. This is largely determined by the fact that alcohol consumption in Lithuania is higher than in the majority of other EU member states, which causes public health issues.<\/p>\n
Exemptions from the Excise Tax apply to a number of goods. Here are a few examples:<\/strong><\/p>\n