Amendments to tax laws adopted by the Seimas

President G. Nausėda signed the amendments to the tax laws proposed by the Ministry of Finance and approved by the Government, supplemented and adopted by the Seimas in recent weeks, which increase the financing of the State Defence Fund and at the same time ensure sustainable long-term revenue to the country's budget. An additional EUR 0.5 billion will be raised annually to fund the defence, which will account for more than 90% of the total additional budget revenue that will result from changes in tax laws.

It is estimated that the adopted amendments to the tax laws will raise an additional EUR 277.1 million to the State and municipal budgets in 2026 and EUR 549.4 million in 2027 (without taking into account the decision of the Seimas on persons engaged in agricultural activities).

An additional EUR 343.7 million in 2026 and EUR 512.7 million in 2027 will be mobilised to finance national defence.

The amendments will enter into force on 1 January 2026, with the exception of the additional non-taxable amount for children raised established in the PIT Law, which will apply from 2027.

Amendments to the PIT Law adopted

In order to achieve a fairer distribution of the tax burden and reduce income inequality, greater progressivity in higher income taxation was established and the same personal income tax (PIT) rates were set to different types of income, except dividends, certain proceeds from the sale of shares, income of persons engaged in agricultural activities and some other payments.

A 20 % rate will be applied to annual income below the amount of 36 average wages (AW) (estimated at EUR 6.9 thousand per month in 2026), and a 25 % rate to income from 36 AW to 60 AW (estimated from EUR 6.9 to 11.5 thousand per month). All income exceeding 60 AW will be subject to a rate of 32 %. 

Income from individual activities is also included in the general progressive taxation of residents, but it is important to emphasize that for lower- and middle-income earners (up to EUR 35 thousand of taxable income per year) taxation will not change due to the tax credit applied.

Individual progressive rates are set for the income of persons engaged in agricultural activities, respectively, income up to 60 AW (it is projected that this will amount to an average of EUR 11.5 thousand per month in 2026) will be subject to a 15% rate, and income from 60 AW – a 20% rate.

At the same time, the legislative amendments maintained the benefits for lower-income earners. Non-labour income amounting below 12 AW will be subject to a 15% rate, and a 5% rate will be applied to income from non-individual activities received from sales of base metals.

Certain income, e.g. shares held for 5 years, shares received from the employer held for 3 years, as well as alternatively acquired shares from the employer, life insurance and pension benefits, sickness, maternity, childcare and long-term work benefits, profits received through the investment account, as well as dividends, will continue to be taxed at the current income tax rate of 15% regardless of the amount of income, i.e. without including such income in the annual income, the amount of which depends on the level of the progressive rate.

A decision was taken to waive the application of insignificant non-taxable income amounts (NTA). The NTA will therefore apply to wages not exceeding EUR 2562.49.

At the same time, the law establishes scholarships paid by an enterprise to researchers carrying out a research and experimental development project, when a tripartite agreement has been signed between the enterprise, a higher education institution or a research institute and the researcher as non-taxable income. Non-taxable income also includes the income from the sale of immovable property retained for 5 years (instead of 10 years) and the income received as reimbursement for the provision of services on the basis of a service receipt not exceeding 1/4 of the annual NTA during the tax period (EUR 2,241 instead of EUR 1,750).

The scope of relief for additional health insurance paid by the employer for the benefit of the employee has been reduced by attributing an amount of insurance not exceeding EUR 350 to non-taxable income. If the employee's benefit in excess of this amount per year is considered to be part of the wages, the employer will continue to be able to reduce taxable profits by the full amount of such costs.

The flat-rate income tax payable on the acquisition of a business certificate may be levied on income from individual activities or immovable property rental not exceeding EUR 50,000 (instead of EUR 45,000 in force) during the tax period.

An additional NTA has been introduced for those earning labour income or an additional income tax credit for those earning income from individual activities, which applies to parents raising children. The additional NTA will amount to EUR 1,044 and the additional income tax credit will amount to EUR 208,8 per year for each child raised. This amendment will enter into force as of 2027.

Amendments to the Corporate Income Tax Law

The current standard corporate income tax rates of 16% and 6% are increased by 1 percentage point to 17% and 7% respectively.

In order to create additional preconditions for increasing productivity, technological renewal and innovation, thus contributing to business sustainability and development potential and further strengthening Lithuania's economic growth and competitiveness, a relief for instant depreciation of fixed assets is introduced, e.g. for equipment, computer equipment and software. This relief will allow companies to deduct the acquisition price of fixed assets in the tax period in which the assets were put into use.

Allowable deductions of limited amounts are to include scholarships that will allow companies to deduct from their income scholarships of up to EUR 2,500 per tax period paid under tripartite agreements for students studying Science, Technology, Engineering or Mathematics.  It will be also possible to deduct scholarships for researchers carrying out a research and experimental development project without any limitation on the amount.

For small businesses, the period during which the 0% corporate income tax rate would be applied to the profits earned by newly registered companies is extended from 1 to 2 years, thus creating more favourable conditions for the growth and development of companies. 

The amendments to this law also waive the requirement of the 10-employee criterion for applying the preferential corporate income tax rate. 

The limitations on the deductible amount of tax losses are unified, in cases of loss transfer between companies in a group of companies, a 70% limit of taxable income is applied, as is the case for companies operating individually in Lithuania. 

These amendments would allow the State budget to secure more than EUR 43 million of additional revenue per year.

Amendments to the Law on VAT, review of reliefs

The current preferential 9% value added tax (VAT) rate for books and non-periodical publications is reduced to 5%. Other goods and services currently subject to a preferential VAT rate of 9% will be taxed at a preferential VAT rate of 12%.

VAT relief for heating, hot water and firewood has also been abolished, but at the same time, efforts will be made to increase the number of people eligible for compensation for heating. 

These adopted amendments to the law would generate more than EUR 80 million in additional revenue for the State budget every year.

Excise duty on sweetened beverages

Taking into account the objectives of public health policy, sweetened beverages containing added sugars, the amount of which exceeds 2.5 gr. per 100 ml of the beverage, or containing sweeteners, shall be subject to excise duty rates based on the amount of sugars in them, without distinguishing between individual beverage categories, as well as concentrates used for the preparation of beverages. In this way, beverages containing natural sugars, e.g. from fruit or milk, are not classified as an object of excise duty.

For sweetened beverages containing less than 8 g of added sugars per 100 ml of drink, as well as those containing sweeteners, the rate of excise duty is set at EUR 7.4 per hl, whereas for beverages containing 8 g or more of added sugars, the rate is set at EUR 21 per hl. The rate of excise duty of 105 EUR/hl or 4.3 EUR/kg will apply to beverage concentrates.

It is estimated that due to tax factors, the price for 1 litre of a beverage containing more than 2.5 g but less than 8 g of added sugars, as well as a beverage containing only sweeteners, would increase by EUR 0.09, 1 litre of a beverage containing 8 g or more of sugars would increase by EUR 0.25, 1 litre of concentrate would increase by EUR 1.27 and 100 g of concentrate would increase by EUR 0.52. The excise duty on sweetened beverages is expected to raise EUR 25 million of additional revenue to the budget each year.

Security contribution

In order to ensure sustainable revenue for defence funding, it was proposed to supplement the State Defence Fund with a security contribution. The 10% rate of the security contribution will be paid by insurers operating in Lithuania in respect of the total amounts of insurance premiums specified in non-life insurance contracts concluded – extended or amended, if the insurance premium also changes – with the exception of compulsory insurance premiums for natural persons against civil liability in respect of the use of motor vehicles as well as crop and livestock insurance premiums, which will not be subject to taxation. This tax change to the Defence Fund will generate around EUR 107 million in revenue every year.

Amendments to the Immovable Property Tax

Corrections to immovable property taxation ensure a gradual transfer of tax determination for non-commercial immovable property owned by residents to municipalities: from 2026 municipal councils will regulate the taxation criteria of the main residential property within the limits set by the law, and from 2031 - taxation of all other non-commercial immovable property of residents. 

The amendments to the Law on Immovable Property Tax establish that the tax-exempt amount of the main residential property (i.e. where the residence is declared) of at least EUR 450,000 and the rates in the range from 0.1% to 1% will be set by the municipal councils, taking into account the criteria laid down in the law. Accordingly, the revenue collected from this type of immovable property tax will go to municipal budgets.

The tax on a resident's non-commercial immovable property, except for the main residential property, will be transferred to the State Defence Fund. The total value of such property will be subject to taxation until 2030 as follows:

• 0 % rate applies to the value of the property not exceeding EUR 50,000;
• 0.2 % rate applies to the value of the property above EUR 50,000 but not exceeding EUR 200,000; 
• 0.4 % rate applies to the value of the property above EUR 200,000 but not exceeding EUR 400,000; 
• 0.6 % rate applies to the value of the property above EUR 400,000 but not exceeding EUR 600,000; 
•  0.8 % rate applies to the value of the property above EUR 600,000 but not exceeding EUR 1,000,000; 
• 1 % rate applies to the value of the property exceeding EUR 1,000,000.

Commercial immovable property will be subject to an additional rate of 0.2%, in addition to the rate set annually by individual municipalities for commercial immovable property owners. This additional revenue will also be transferred to the State Defence Fund.

Incomplete construction will be subject to immovable property tax not only when it is actually used, but also in cases where the requirements for registration of completion of construction are not met.

Municipal councils will set a specific rate for abandoned or unsupervised immovable property, except for residential non-commercial immovable property within the 1-5% range.

The amendments also introduced a relief for agriculture in view of the limited liquidity of immovable property used in agricultural activities, i.e. not to tax immovable property of legal persons and residents that was used to earn income from agricultural activities for 5 years from the date of cessation of agricultural activities.

It is estimated that these amendments to the Law on Immovable Property Tax would raise an additional EUR 76 million annually to finance defence.

Amendments to the Law on the State Defence Fund

Following the adoption of the draft laws and the increase in the respective tax rates, the additional revenue earmarked for defence funding in the years 2026-2027will consist of:

Last updated: 07-07-2025

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