Legislation update

On 29 June 2016 the recast of Law on State Social Security of the Republic of Lithuania regarding social security system reform was approved by Seimas, which will be effective as from 1 January 2017.

On 29 June 2016 the recast of Law on State Social Security of the Republic of Lithuania regarding social security system reform was approved, which will be effective as from 1 January 2017. By these amendments the threshold on SODRA taxes is introduced, which is planned to be reached gradually within six years. For the year 2017 threshold on taxes will be 120 monthly statistical average wages (amounting to annual gross income of 89,760 EUR, if applied now).  Starting with 2018 it is planned to reduce the limit by 12 average wages each calendar year while in 2022 threshold on taxes will be limited to 60 average wages (amounting to annual gross income of EUR 44,880, if applied now).

Calculation of pension contributions is changed as well – they shall consist of general and individual parts. General part of social security contributions shall be financed from State budget and the individual – from the budget of social security fund. The latter shall be directly linked to the paid contributions. In addition, clear rules for the pension’s indexation is determined, it is planned to increase required social insurance period – starting with 2018 it shall be increased for half-year annually and from 2027 the required social insurance period shall be 35 years.

More over the rate of the employer's contribution to “Sodra” will decline by 1% in 2017 and from 2018 decisions on this will be made on an annual basis after weighing the impact on the sustainability of public finances.

Amongst other amendments it is provided to extend social security of self-employed persons as well. 

More information about the recast of the Law on State Social Security of the Republic of Lithuania is available here.

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