Lithuania: Key Tax Changes Effective 1 January 2026

1. Personal Income Tax 

Lithuania introduces full income aggregation: most types of personal income are added together and taxed progressively. Salary, bonuses, self-employment income, investment income, and certain capital gains are comboned into one total annual income.

Progressive personal income tax rates (annual income)

• 20% – up to 36 average salaries (VDU) (~EUR 82,962 per year)
• 25% – from 36 to 60 VDU 
• 32% – income exceeding 60 VDU

(Estimated average monthly salary for 2026: EUR 2,304.50)

Income taxed at a flat 15% (not aggregated)

• Dividends and distributed profits
• Certain pension fund payouts
• Capital gains on shares held long-term (subject to conditions)
• Profits withdrawn from investment accounts (above contributions)
• Share option gains if shares are sold after the minimum holding period

Other important changes

• Employer-paid private health insurance exceeding EUR 350 per year becomes taxable employment income.
• Capital gains exemption for real estate applies after 5 years of ownership (reduced from 10 years).
• Income under business licences is excluded from progressive PIT.

2. Self-Employment Income

• Taxation of individual business activity is aligned more closely with employment income.

Personal income tax rates for self-employed individuals

• Up to EUR 20,000 – 5%
• EUR 20,000–42,500 – gradually increasing from 5% to 20%
• Above EUR 42,500 – progressive rates apply: 20% / 25% / 32%

Fixed-rate taxation may be used up to EUR 50,000, with excess income taxed progressively. Special rules continue to apply to agricultural activities.

3. Corporate Income Tax (CIT)

Standard rate

• Increased from 16% to 17%

Reliefs for small and new businesses

• 0% CIT for the first two financial years, if:
• Annual revenue does not exceed EUR 300,000
• Shareholders are only individuals
• 7% CIT for small companies with revenue up to EUR 300,000

Additional corporate tax changes

• Immediate depreciation allowed for certain assets (machinery, IT equipment, vehicles).
• Tax loss utilisation limited to 70% of taxable profit.
• Expanded deductibility for:  (a) STEM student scholarships; (b) Research and development (R&D) stipends

4. Real Estate Tax

Primary residence

Tax applies only above:

• EUR 450,000 – single owner
• EUR 900,000 – joint owners

Rates range from 0.1% to 1%, set by municipalities.

Additional real estate

Progressive annual tax starting from EUR 50,000, increasing up to 1% for high-value properties.

Municipalities may apply higher rates for:  abandoned property and commercial real estate

5. Value Added Tax (VAT)

Reduced VAT rates

• 5% VAT – books and publications (printed and electronic)

VAT increases

• Heating, hot water, firewood: 21% VAT
• Accommodation, passenger transport, cultural events: 12% VAT (up from 9%)

Key Takeaway for Foreign Investors

The 2026 reform increases tax progressivity and overall compliance requirements, particularly for high-income individuals and self-employed professionals. At the same time, Lithuania maintains competitive corporate tax incentives for startups, SMEs, and investment in assets and R&D. For more information contact us at: info@sulijapartners.com 

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