Welcome to the presentation of personal taxation in Lithuania.
Lithuanian tax residents are subject to tax on their worldwide income. Non-residents are subject to tax only on income sourced in Lithuania and on income derived from activities through a permanent establishment and other income originating in Lithuania, including foreign source income attributed to that permanent establishment.
Income received by a resident of Lithuania in a foreign country (in other EU Member State or with a State which Lithuania has concluded a treaty for the avoidance of double taxation, shall not be subject to income tax in Lithuania, provided that such taxes has been paid on such income in that particular foreign country.
Personal income tax (PIT)
An individual is considered to be a tax resident of Lithuania if at least one of the following conditions is satisfied:
- Individual’s permanent place of residence is in Lithuania;
- individual’s centre of personal, social or economic interests are in Lithuania;
- individual spends 183 days or longer during the tax period in Lithuania;
- individual spends 280 or more days in Lithuania in 2 consecutive tax periods and spends at least 90 or more days in Lithuania during one of these tax periods;
- individual does not meet the above mentioned criteria, but he/she is a citizen of Lithuania who receives employment related remuneration or whose costs of living in another country are covered by the state budget or municipal budgets of Lithuania.
Personal income tax (PIT) rates
Standard personal income tax rate for most types of income is 15%.
Important to note that a progressive system of taxation applies to income from independent individual activities (business, professional income). A 5% rate applies where annual income do not exceed EUR 20,000 and the rate increases progressively to a maximum of 15% where annual income is at least EUR 35,000.
Alternatively, fixed income tax rates may apply to:
- income earned from individual activities or the rental of real estate which does not exceed EUR 35,000 per tax period or;
- income earned from activities for which the taxpayer holds a business certificate.
Income derived from self-employment pursued having acquired a business certificate not exceeding EUR 45,000 is taxed at fixed rate depending on the municipality.
Income exceeding EUR 45,000 derived from self-employment pursued having acquired a business certificate during a tax period shall be taxed at a rate of 15%.
A self-employed person may choose to recognise 30% of income received from that activity as allowed deductions (no obligation to keep the documents proving allowed deductions). This rule cannot be applied if a person receives remuneration from the employer.
Taxable and non-taxable income
Taxable income includes employment income, income from commercial activities, royalties, income from the lease of assets and all other personal income.
Natural persons employed in Lithuanian registered enterprises are subject to the personal income tax of 20% on their salary. In some cases, PIT on employment increases to 27% when salary is about EUR 120,000 per year (120 x average wage amount per year).
The maximum monthly non-taxable amount is EUR 300 which could be applied if employment income does not exceed monthly minimum wage valid on 1 January of the 2019 year.
Income tax is not applied to death allowances paid to the spouse, children (adopted children) and parents (foster parents); life insurance payments under agreements concluded before 1 January 2003 for at least 10 years; income received from the sale of movable property requiring legal registration or immovable property (only in some cases); certain other incomes.
The inheritance tax rate is 5% of inheritable assets valued at EUR 150,000 or less, and 10% on inheritable assets valued at more than EUR 150,000. However, the taxable base is only 70% of the inherited assets. The taxable value not exceeding EUR 3,000 is exempt. Exemptions also apply to assets inherited by family members.
Progressive personal income tax (excluding individual activity and dividends)
Distributed profit (dividends) are taxed at a standard PIT rate of 15%.
Interest, royalties, sale of property (other transfer in ownership), gambling wins, tantjems (bonuses), presents, prizes are taxed progressively:
- At a standard PIT rate of 15% if the income amount of above mentioned do not exceed 120 average wage amounts per year (approx. EUR 120,000 per year);
- At a higher PIT rate of 20% if the income amount of above mentioned exceeds 120 average wage amounts per year (approx. EUR 120,000 per year).
- Find out more about corporate taxation in Lithuania here.
- Find out more about establishing a company in Lithuania here.