Personal Income Tax

Personal income tax shall be paid by an individual who has received income. Individuals shall be divided into residents or non-residents of Lithuania. An individual is deemed to be a resident of Lithuania, if he satisfies the requirements set in the Republic of Lithuania Law on Personal Income Tax, e.g. his permanent place of residence is in Lithuania, his place of personal, social or economic interests is in Lithuania, he is present in Lithuania for a certain period of time.

The object of the income tax shall be income of individuals.

The object of the income tax of residents of Lithuania shall be income sourced in and outside Lithuania.

The object of the income tax of non-residents of Lithuania shall be:

• income from individual activities carried out through a fixed base;
• income sourced in Lithuania and received otherwise than through a fixed base:
• interest, except for the interest on non-equity securities of the Government;
• income from distributed profit and payments to members of the board and the supervisory board;
• income from employment or from similar relations that are essentially compatible with employment relations;
• income from sports activities;
• income from performing activities;
• income from rent, sale or other transfer into ownership of immovable property located in Lithuania;
• proceeds from the sale or other transfer into ownership of movable property if that type of property is subject to legal registration under legal acts of the Republic of Lithuania;
• royalties;
• compensations for copyright or related rights infringement.

20 % income tax rate shall be applied to income from employment or from similar relations that are essentially compatible with employment relations, profit sharing, income received from the employer under copyright agreements and income of managers of small partnerships, when the annual part of such income is below the amount of 60 average national wages (hereinafter − AWs) that applies to calculate the basis of the state social insurance contributions of the insured persons. The annual part of income that exceeds the amount equal to 60 AWs shall be subject to a 32 % income tax rate.

A 15% income tax rate shall be applied to sickness, maternity, paternity, child care and long-term work benefits, also to dividends.

Income from relations other than employment (except for income from individual activities, income from  distributable profit, profit sharing and etc.) not exceeding an amount equal to 120 AWs shall be subject to a 15 % income tax rate, and exceeding the amount equal to 120 AWs – to a 20 % income tax rate.

Income from individual activities, regardless of the type of activities, shall be subject to a 15 % income tax rate. The final payable income tax rate shall be set by applying the tax credit amount following the procedure established by the Law.

Income from non-individual activities received from received from the sale or other disposal of waste specified in the Republic of Lithuania Law on Waste Management shall be subject to a 5 % income tax rate, if total share of received incomefrom relations other than employment does not exceed an amount equal to 120 AWs, and to a 20 % income tax rate, if such income exceeds the amount equal to 120 AWs. 

A fixed income tax set by municipal councils shall be paid for the income received from activity being pursued under a business license.

The tax period of income tax shall coincide with the calendar year.

Procedure for the Calculation of Taxable Income

For the purpose of calculating taxable income the following shall be deducted from income in accordance with the procedure prescribed by the Law:

• tax-exempt income;
• income received from activities conducted under a business certificate;
• allowable deductions related to the receipt or earning of income from individual activities;
• the acquisition price of property other than that related to individual activities that is sold or otherwise transferred into ownership and item immovable by nature attributed to the property used for the purpose of individual activities during the tax period, as well as expenses related to the sale or other transfer into ownership of that property or item;
• tax-exempt amount of income (hereinafter – TEA) (only income from employment or from similar relations that are essentially compatible with employment relations and only during a tax period);
• costs incurred by a permanent resident of Lithuania (in calculating taxable income that is subject to the income tax rates of 15 %, 20 % or 32 % and 15 % or 20 %).

For the purpose of calculating the taxable income of a non-resident of Lithuania from individual activities through his fixed base, tax-exempt income from individual activities carried out through that fixed base and/or allowable deductions related to the receipt or earning of that income from individual activities through that fixed base shall be deducted from gross income derived or earned through his fixed base.

Tax-exempt Income

The following income shall be exempt from tax:

• benefits and compensations set in the Law;
• insurance benefits satisfying the conditions established in the Law;
• pension benefits and pension annuities satisfying the conditions established in the Law;
• interest satisfying the conditions established in the Law;
• income received as charity;
• gifts received from spouses, children, parents, brothers, sisters, grandchildren and grandparents; gifts from other individuals not exceeding EUR 2,500 per year;
• gifts and awards received from a person connected with an individual by employment relations not exceeding EUR 200 per year, and rail or road transport tickets paid by the employer for an individual to arrive at/ departure from the place of work ;
• income received by inheritance, which is subject to tax under legal acts of the Republic of Lithuania on estate tax;
• income from the sale or other transfer into ownership of property other than that related to individual activitiessatisfying the conditions established in the Law;
• income received from agricultural activities in accordance with the conditions laid down in the Law;
• amounts awarded by court;
• scholarships satisfying the conditions laid down in the Law;
• prizes, premiums and lottery winnings satisfying the conditions laid down in the Law;
• donations and gifts received during the political campaign and used for their intended purpose;
• income received by the clergy, servers at religious ceremonies and service staff of religious communities, associations and centres as maintenance;
• income received as reward for services supplied under service vouchers in accordance with the conditions established in the Law;
• certain items of income received by mariners and etc.
• TEA.

TEA shall be applied not only to the income related to the employment relationship or to the relationship that is consistent with the essence of employment relationship. Monthly TEA applied over the tax period shall be calculated considering only the main salary, bonuses and premiums.

In 2025 for the resident whose income related to the employment relationship or to the relationship that is consistent with the essence of employment relationship per month does not exceed one payment of the minimum monthly wages that were in force on 1 January of the current year, then the monthly TEA applied shall be EUR 747.

For the resident whose income related to the employment relationship or to the relationship that is consistent with the essence of employment relationship per month exceeds one payment of the minimum monthly wages that were in force on 1 January of the current year, but does not exceed EUR 2,387,29 then the applicable monthly TEA shall be calculated according to the formula: the monthly TEA = 747 – 0.49 x (the monthly income of the resident related to the employment relationship or to the relationship that is consistent with the essence of employment relationship - one payment of the minimum monthly wages that were in force on 1 January of the current year).

For the resident whose income related to the employment relationship or to the relationship that is consistent with the essence of employment relationship per month exceeds EUR 2,387,29 the applicable monthly TEA shall be calculated according to the formula: TEA = 400 – 0.18 x (the monthly income of the resident related to the employment relationship or to the relationship that is consistent with the essence of employment relationship – 642).

Following the end of the tax period, the TEA applicable to an individual shall be recalculated considering also other taxable income received over the year (a 15 % income tax rate shall be applied to income from individual activities, income from transfer of assets of non-individual activities, income from distributed profits, royalties, pensions and etc.). In 2024 the annual TEA shall be recalculated in accordance with the following procedure:

 If annual income of the resident does not exceed twelve payments of the minimum monthly wages that were in force on 1 January of the current calendar year, then the annual TEA shall be EUR 8,964.

If annual income of the resident exceeds twelve payments of the minimum monthly wages that were in force on 1 January of the current year, but does not exceed EUR 28,647,48 per year, then the annual TEA shall not be higher than the amount calculated in accordance with the formula: annual TEA = 8,964 – 0.49 x (annual income of the resident – twelve payments of the minimum monthly wages that were in force on 1 January of the current calendar year).

If annual income of the resident exceeds EUR 28,647,48 per year, then the annual TEA shall not exceed the amount calculated in accordance with the formula: TEA = 4,800 – 0.18 x (annual income of the resident – 12 x 642).

Following recalculation of the annual TEA applicable to the resident, the income tax from excessive TEA applied during the tax period shall be refunded to the State budget.

Deductible Expenses

When calculating taxable income, a resident of Lithuania may deduct from income the following incurred expenses: life insurance premiums, contributions to Pillar III  pension funds, also contributions to Pillar II pension funds that are paid as additional savings-pension contributions and are higher than 3 % of income of the resident which formed the basis of calculating the State social insurance contributions, interest paid on one credit taken before 1 January 2009 to build or acquire one housing, payments for higher education or vocational studies, amounts paid in 2019-2021 for car repair services provided for his own benefit or for the benefit of his spouse, for works of finishing and any repair of buildings and other structures, also for childcare (nursing) services for minors under 18.

Total amount of deducted expenses shall not exceed 25 % of total amount of taxable income of a resident subject to an income tax rate of 15 %, 20 % or 32 % and 15 % or 20 %. Total annual amount deducted for life insurance premiums and contributions to pension funds may not exceed EUR 1,500.

Administration

According to the procedure for tax payment, income of an individual shall be divided into two classes: A and B.

Classified as income of class A:

• income hat was received from Lithuanian entity, from foreign entity through its permanent establishment and from a non-resident of Lithuania through its permanent base, except for the exceptions specified;
• income from employment or from similar relations that are essentially compatible with employment relations, income from sports activities, performer‘s activities, interest and royalties received from a permanent resident of Lithuania engaged in individual base metal scrap business for sold or otherwise transferred into ownership base metal scrap, as well as income from rent of items immovable by nature received from a resident of Lithuania engaged in individual activities, except for income from which a fixed income tax rate is paid.

Income of class B shall include other income not classified as income of class A.

The income tax on income attributed to class A income must be calculated, withheld and paid to the State budget by individuals paying this income. The income tax on income attributed to class B income shall be declared, calculated and paid by a resident of Lithuania himself or his authorised person.

A resident of Lithuania who has an obligation to file the annual income tax return must pay to the State budget the difference between the amount of income tax calculated in the return and actually paid amount of income tax by 1 May of the calendar year following this tax period.

The Law on Personal Income Tax  was adopted on 2 July 2002 and came into effect on 1 January 2003. This Law substituted the temporary Republic of Lithuania Law on Income Tax of Natural Persons valid since 1990.