From 1st of January 2026, tax changes come into force in Lithuania.
Personal income tax (PIT)
PIT will be taxed at progressive rates on all types of income received by residents, summing them up. Income from employment, individual activities, income from copyright contracts, royalties, etc. is added up and, depending on the amount of income, is taxed at the following PIT rates:
20% – for annual income up to 36 average salary (82,962 EUR per year);
25% – from 36 to 60 average salary (from 82,963 EUR to 138,270 EUR per year); and
32% – for the part of income exceeding 60 average salary (from 138,271 EUR per year).
It should be noted that there are exceptions to the summation of income. Certain income is not subject to taxation at progressive PIT rates and is subject to a reduced PIT rate of 15%, i.e.:
- income from distributed profits;
- the part of the pension payment received from the pension fund, equal to the contributions paid;
- shares that were acquired not through an investment account and held in ownership for 5 years;
- funds paid out from an investment account that exceed the funds contributed; etc.
The 15% PIT rate is also applied to income from the sale of shares acquired under an option agreement, if the shares are sold no earlier than 3 years after the right to acquire shares arises.
Another important change is related to the limitation of health insurance contributions for taxation purposes. An independent health insurance contribution paid by an employer to an employee exceeding 350 euros will be considered the employee’s income in kind and would be classified as income related to employment and taxed accordingly.
We would also like to draw attention to several amendments to the PIT Law:
- the term for maintaining real estate in order to receive tax-free income has been reduced from 10 years to 5;
- income received from activities under a business certificate is not included in the calculation of taxable income.
Corporate income tax (CIT)
From 2026, the standard rate of corporate income tax (CIT) is increasing from 16% to 17%. However, additional benefits will be applied to small and newly established businesses. The period during which newly registered small businesses will be subject to a 0% corporate income tax rate on earned profits is being extended. This period will be extended from 1 to 2 years in order to provide additional assistance to growing businesses. The taxable profit of companies in the first and second tax periods is taxed at a 0 percent CIT rate if:
1) annual income does not exceed EUR 300,000;
2) all shareholders are natural persons;
3) during three consecutive tax periods, the company’s activities are not suspended, it is not liquidated, reorganized and the company’s shares (parts, shares) are not transferred to new participants.
The 7% VAT rate is applied to small enterprises whose income for the tax period does not exceed EUR 300,000. The number of employees is irrelevant according to the amendments to the VAT Law.
Value Added Tax (VAT)
Amendments to the VAT Law, effective from 1st of January 2026
The preferential VAT rate for books and publications is reduced from 9% to 5% and applies to both printed and electronic books and non-periodical information publications.
However, the 9% VAT rate applied to heating, firewood, hot water will increase to 21%.
The 9% VAT rate is increased to 12%:
- Accommodation services;
- Passenger transport services;
- For visiting art and cultural events and institutions.