Lithuania Tax Rates in 2026: Corporate & Personal Taxes Guide

As a destination for talent looking to make their name on the international stage without it costing the earth, Lithuania is a great choice. There’s internationally renowned unicorns like Vinted and Nord Security, alongside a thriving start-up scene, and big international players like Nasdaq and Western Union. Not only that, there’s the fact that a one bedroom apartment in the centre of Vilnius costs around EUR 730, half of what you would expect to pay in Paris, or a quarter of what you’d pay in London! 

But one of the questions you always ask yourself when thinking about where you work, is what is the tax system like? After all, it can really affect your bottom line, as well as your overall quality of life. 

That is why you’ll be happy to learn that Lithuania has a clear, transparent, and moderate tax system that’s favourable both to foreign employees and those seeking to start their own business here. Whether you are a skilled professional arriving under a work permit, a startup founder, or a multinational expanding into the EU, this guide covers the essentials.

Who administers taxes in Lithuania?

The State Tax Inspectorate (Valstybinė mokesčių inspekcija, or VMI) is the central government body responsible for administering and collecting taxes in Lithuania. 

These days, most interactions with the STI happen through its online portal My VMI, making day-to-day tax administration highly convenient for residents and businesses alike.

How tax residency works

To be considered a Lithuanian tax resident, you must:

• have a permanent place of residence here
• spend more than 183 days in the country during a calendar year, or generate most of your income and assets from Lithuania.

Keep in mind that residents are taxed on worldwide income, while non-residents – only on income sourced directly from the country. If you are still working out whether Lithuania is the right place for you, our smooth relocation guide is a good place to start.

Three tiers of personal income tax

On 1 January 2026, Lithuania’s progressive personal income tax rates changed from a two-tier 20%/32% structure to a three-tier 20%/25%/32% system . Here’s how the new tax brackets for employment income work: 20% applies to annual income up to €82,962; 25% applies to income between €82,962 and €138,270; and 32% applies to income exceeding €138,270.

Dividends and certain other income categories are excluded from this combined calculation and continue to be taxed separately at a flat 15% rate. A tax-free allowance is available for lower earners, softening the tax burden at the bottom of the pay scale.

Income tax is withheld at source by employers, so employees receive their net salary directly. During the annual tax period (January to May of the following year), residents declare all income, claim deductions for pension contributions and life insurance premiums, and reconcile any differences through the VMI portal.

How to File and Pay Taxes in Lithuania

Lithuania’s tax system is highly digital, making filing and payments simple and efficient.

Annual Declarations and Deadlines

Most individuals who receive employment income have their taxes automatically calculated and deducted. However, an annual income declaration may still be required in certain cases — for example, if you have multiple income sources, freelance income, or want to claim tax refunds.

The annual declaration is submitted online, typically by May 1st for the previous tax year.

Filing is simple and often partially pre-filled, meaning you only need to review, confirm, or update your information.

Tax Websites and Calculators

Taxes in Lithuania are managed through the State Tax Inspectorate (VMI), which provides a user-friendly online system for filing and payments.

Key tools include:

• Electronic Declaration System (EDS):
  The main platform where residents can submit income declarations, view tax information, and make payments.
• Tax calculators:
  Available on official websites to help estimate personal income tax and net salary, making it easier to plan your finances before or after relocating.

The system is designed to be accessible, even for international professionals, with clear guidance and growing availability in English.

Social security contributions

Both employers and employees pay mandatory social insurance payments managed by Sodra, Lithuania’s social security and health insurance fund. 

Sodra taxes are split between both parties – employees contribute approximately 19.5% of gross salary, covering pension, sickness, and health insurance, while employers pay around 1.77% on top. These contributions feed into pension accumulation and easy access to Lithuania’s public healthcare system.

Registration, deduction, and payment of Sodra contributions is managed by employers on behalf of those working for them. If you are in the process of securing a work permit, your future employer will typically walk you through what they manage on your behalf from day one.

Corporate income tax

The standard corporate income tax rate rose from 16% to 17% in 2026. The reduced rate for small businesses with annual revenue up to €300,000 increased from 6% to 7%. 

However, the 0% rate for newly registered small companies was extended from one to two years, giving startups more breathing room. 

In addition, companies can now immediately expense the full acquisition cost of qualifying assets – machinery, software, and commercial vehicles – in the year of purchase, reducing taxable income faster. Tax loss carryforwards are capped at 70% of current taxable profits per tax period.

Dividends, capital gains, and interest

Dividends paid to Lithuanian residents remain subject to a flat 15% withholding tax. 

Capital gains from asset sales, including shares and real estate, are taxed at 15% on amounts up to 120 average monthly wages, with amounts above that threshold taxed at 20%. 

Capital gains from real estate sales are now tax-exempt if the relevant property has been held for at least five years, reduced from the previous ten-year requirement. 

Finally, interest income is taxed at 15%, though double tax treaties may reduce this for non-residents.

Self-employed and freelancers

Self-employed individuals earning up to €20,000 annually are taxed at 5%, while income between €20,000 and €42,500 is taxed progressively between 5% and 20%. Income above €42,500 is aggregated with other income sources and taxed under the same progressive brackets as employees. 

Remember – Sodra contributions remain mandatory for self-employed individuals regardless of income level, and consulting a local tax adviser is recommended when transitioning from salaried employment.

Indirect taxes and VAT

Lithuania abolished its general 9% reduced VAT rate in 2026. Accommodation, public transport, and tickets to cultural events moved to a 12% rate, while books and non-periodical publications dropped to 5%. 

District heating, hot water, and firewood for households now fall under the standard 21% rate. 

The value added tax standard rate of 21% remains unchanged for most goods and services. 

Taxes like VAT are filed through the VMI system, and businesses exceeding €45,000 in annual turnover must register as VAT payers.

Property, inheritance, and real estate tax

Primary residences valued below €450,000 are exempt from real estate tax, while other properties are taxed progressively at rates between 0% and 1% depending on value. 

Land tax continues to apply at rates set by municipal authorities. 

Inheritance transfers between close family members remain fully exempt from inheritance tax, while more distant beneficiaries have the inheritance treated as standard taxable income – a meaningful advantage for those planning long-term settlement.

Lithuania Compared to EU Tax Rates

Baltic States Benchmark

Among the Baltic countries, Lithuania maintains a balanced tax structure. Personal income tax rates are broadly aligned with Latvia and Estonia, while corporate taxation remains competitive. Estonia stands out with its deferred corporate tax model (taxed only on distributed profits), whereas Lithuania applies a standard corporate tax but offers incentives such as a 0% rate for new small businesses. Overall, Lithuania provides a stable and predictable framework within the region.

Lithuania vs. Western Europe

Compared to Western European countries, Lithuania’s tax burden is generally moderate. Personal income tax rates are lower than in many high-income EU countries where top rates often exceed 40%. Corporate taxation is also more competitive, with many Western European countries applying higher standard rates.

In addition, Lithuania’s social contributions and cost of living remain relatively lower, which can result in higher net income for professionals. Combined with a digital and transparent tax system, this makes Lithuania an attractive option for both employees and businesses operating within the EU.

Personal Income tax	Applies progressively depending on income level, with different rates designed to balance fairness and competitiveness.
Corporate income tax	Standard rate applies to most companies, with reduced rates and temporary relief available for small and newly established businesses.
VAT	The standard rate applies broadly, while reduced rates are used for specific goods and services defined by law.
Real estate tax	Applies to higher-value property, with thresholds and rates varying depending on ownership and property type.
Land tax	Set at municipal level, meaning rates can differ depending on the location of the land.
Inheritance/gifts	Favorable for close family members, with exemptions or reduced tax burden in most cases.
Excise duty	Applies only to selected goods such as alcohol, tobacco, and fuel, with rates varying by category.

A transparent system for global professionals

Lithuania’s 2026 reforms reflect a broader effort to fund national defence, reduce income inequality, and keep the business environment competitive. 

For most international professionals and SMEs, the framework remains moderate, digital, and predictable. Pair that with a straightforward work permit process, reliable public healthcare, and dedicated smooth relocation support, and Lithuania continues to stand out as a well-structured destination for global talent and growing businesses.

FAQs:

Are taxes in Lithuania high?
Taxes in Lithuania are considered moderate compared to EU countries. While a progressive income tax system applies, overall tax rates are lower than in many Western European economies.

How much is tax-free in Lithuania?
Lithuania applies a tax-free allowance for lower-income earners, which decreases as income increases. The exact amount depends on annual income and is automatically calculated.

Does Lithuania tax worldwide income?
Yes. Tax residents in Lithuania are taxed on worldwide income, while non-residents are taxed only on income earned within Lithuania.

Are there tax incentives in Lithuania?
Yes. Lithuania offers several tax incentives, including reduced corporate tax rates for small businesses, a 0% corporate tax period for new companies, and deductions for certain investments.

What is the TIN number in Lithuania?
The Taxpayer Identification Number (TIN) in Lithuania is typically the personal identification number for individuals or the company registration number for legal entities, used for all tax-related matters.