Taxes in Lithuania 2024: Everything a Business Owner Should Know

2023 11 23

Opening a company in Lithuania is a tempting idea due to the country’s strategic location and rising prominence in the worldwide market. More importantly, Lithuania enforces business-friendly tax laws, so domestic and foreign investors can grow their businesses with ease.

Still, the requirements to initiate a venture in Lithuania change every year, and it’s important for business owners to keep up with the updates. So, if you’re wondering: how much tax do you pay in Lithuania? This article will walk you through the complete guide.

Types of taxes in Lithuania

Generally, Lithuania taxes can be categorized by the following criteria:

• Taxes applied for legal entities, such as corporate income tax and sales tax or VAT.

• Taxes applied for employees, including income and social tax.

Let’s dive deeper into the specific types of taxes in Lithuania:

1. Corporate Income Tax

Corporate Income Tax (CIT) is applicable to entities running commercial operations in Lithuania. The standard income tax rate for corporations stands at 15%.

Corporate tax is obligatory for Lithuanian tax residents who receive taxable income from domestic and global trades.

As of July 2022, a higher income tax rate of 20% has been mandated for credit institutions with taxable profits exceeding the threshold of EUR 2 million. Special rules are also in place for calculating this tax. This regulation, temporarily effective from 1 January 2022 until the end of 2022, has now been extended for an indefinite period.

Small enterprises and agricultural companies are allowed to apply for a reduction in corporate tax rate of 0% in the first year to 5% in the proceeding years if they meet specific conditions. These include having fewer than ten employees and less than 300,000 euros in gross annual revenue.

Non-profit organizations, agricultural and farming enterprises, small businesses, and companies employing people with disabilities can also register for corporate tax relief.

Likewise, companies whose income is sourced from foreign activities and investments, specifically from countries in the European Economic Area or those that have a double tax treaty (DTT) with Lithuania, are exempted from tax obligations.

Furthermore, CIT can be levied if the foreign-sourced income, not generated through a Permanent Establishment, is taxed with Withholding Tax (WHT) in a foreign country that has established a DTT with Lithuania.

As for non-resident enterprises, Lithuania-sourced income earned through a local PE will be taxed and subtracted by deductible expenses or on income that is liable to the WHT in Lithuania.

2. Value Added Tax (VAT)

The standard Lithuania VAT rate is 21% for the services and goods provided by a legal corporation with a Lithuanian tax number.

If a company’s turnover has not reached 45,000 euros since the start of the calendar year, it is not compulsory to register as a taxpayer, although voluntary registration is open.

Nevertheless, if the value of goods brought from other EU countries surpasses EUR 14,000, the company must register as a taxable entity, even if it has not yet reached a turnover of EUR 45,000.

However, based on Article 19 of the Lithuanian VAT law, some provisions are subject to a lower VAT rate.

Here are the details of Lithuania VAT:

9% Reduced Rate	Home heating and printed materials
	Physical books, e-Books, and non-periodical publications (e.g. manuals, brochures, children's activity books, manuscript, etc)
	Passenger transport on regular routes set by the Ministry of Transport and Communications or municipalities, including passenger luggage
	Tourist accommodation services
	Firewood and wood supply for residential heating
	Restaurant, cafétaria, catering, and take-away services (excluding alcoholic beverages)* *valid until December 31, 2023
	Entry to performances by artists, musicians, dances, and singers* *valid until December 31, 2023
5% Reduced Rate	Medicine- and health-related products, services, and equipment
	Technical support and devices for disabled persons
	Periodical publications (newspapers, magazines, journals), excluding those purposed for advertising or non-professional ethics
6% Reduced Rate	Flat-rate compensation for small farmers
0% Rated Products	The export of goods, including transportation and insurance
	Intra-community supply of goods
	Goods exported by non-EU citizens that fall into a value limit determined by the Lithuanian government
	Services and goods used in international transport, including in air and water
	Services and goods for diplomatic missions, consular institutions, EU and international organizations, staff, and families
	Gold for the European Central Bank and its system
	Goods provided to Lithuanian recipients under sponsorship that are transported outside of the EU
	Recycling and maintenance of goods under inward-processing
Exempt from VAT	Healthcare
	Welfare for minor rights' protection
	Education
	Non-profit services
	Postal services
	Radio and television broadcast
	Most insurance and financial services
	Postage stamps
	Gambling
	Training services

3. Income Tax

The income tax rate of 20% applies to individuals whose annual income does not exceed EUR 101,094 in a calendar year. Individuals under the following categories are subject to such tax:

• Residents of Lithuania. Foreign residents will be considered as residents once they have lived in Lithuania for 183 subsequent days within a year.

• Non-residents of Lithuania who receive income sourced in Lithuania.

People who earn more than EUR 104,227 in a calendar year, whether they’re residents or non-residents with Lithuanian-sourced income, are liable to the personal income tax rate of 32%.

The flat rate of personal income tax of 15% is also taxed for:

• Income from profit distribution, such as dividends, regardless of the total annual income.

• Individual activities, both done by residents or non-residents whose income source is in Lithuania, that have not been stated above, such as self-employment.

• Employee benefits, such as sick leaves, maternity and paternity leaves, and child-care leaves.

Smaller enterprises with less than ten employees and net profit of less than EUR 330,000, typically those in the early years of operation, are mandated to the Lithuania tax rate of 0% (within the first year) to 5% (within the second year).

4. Social Tax

As a contribution to the social security of the state, the following individuals need to allocate 19.50% of their gross income – usually withheld by the employer during payroll:

• Residents of Lithuania

• A non-resident with a permanent base of operations in Lithuania

• An individual entrepreneur

An additional 1.47% Lithuania tax rate is also required to be paid by the employer.

In 2023, pension savings are taxable at 3%.

Ready to Start a Business in Lithuania?

Now that you understand the ins and outs of Lithuania taxes, it’s time to start your own business.

Not sure where to start? Our team at Demire Inc. is happy to assist. Simply contact our advisor and discuss your project details.

Don’t worry, we’ll make your business registration process as smooth as possible.

Frequently Asked Questions

Do Individuals in Lithuania Pay Tax?

Yes, different tax rates apply for both residents and non-residents whose income is sourced in Lithuania based on the gross amount they earn annually. The Lithuania tax rate ranges between 20 to 32%, along with a provision for minimum non-taxable income. Self-employed personnel are taxed differently.

How Much Tax is Free in Lithuania?

Lithuania tax rate of 0% applies to the following aspects, but is not limited to:

• Good exports

• Intra-community good supplies

• Goods and services for international transports

Tax exemption is also available for healthcare, welfare for minorities, education, and non-profit services.

Which EU Country Has the Lowest Tax Rate?

Lithuania is one of the EU countries with the lowest tax rate, providing more opportunities for entrepreneurs to establish a profitable business in the center of Europe.

Taxes in Lithuania 2024: Everything a Business Owner Should Know