The Seimas approved the proposal of the Ministry of Finance to increase the non-taxable amount by 20% from the New Year
Today, the Seimas unanimously approved the draft amendment to the Law on Personal Income Tax submitted by the Ministry of Finance, following which from 1 January 2024 the maximum applicable non-taxable amount (NTA) is increased by 20 %, up to EUR 747. According to Minister of Finance Gintarė Skaistė, the approval of the Ministry's proposal by the Seimas will allow those earning the minimum monthly wages (MMW) to receive by EUR 75.2 higher net monthly income next year, or by EUR 902.4 more per year.
"We maintain the Government's consistent direction of increasing the non-taxable amount and bringing it closer to the minimum monthly wages. Increasing the non-taxable amount by 20 % from the beginning of next year will not only guarantee higher income to the MMW earners, but also reduce labour taxation for the lowest income earners. This is a targeted measure aimed at strengthening the incentives to work, ensuring higher net income and reducing income inequality," noted Minister of Finance G. Skaistė.
Amendments adopted by the Seimas offer for the year 2024 to apply by 20 % higher than the currently valid maximum NTA – EUR 747 – for persons whose monthly income does not exceed EUR 2,167. It is proposed to maintain the currently applied NTA for persons whose monthly income exceeds the mentioned EUR 2,167, it would continue to be calculated according to the formula established in the Law on Personal Income Tax. The limit of EUR 2,167 was chosen taking into account the average wages projected for 2024.
Simultaneously, the maximum applicable NTA also increases by the same amount for persons with disabilities, for whom a certain level of participation was determined and the NTA applicable for persons with limited participation (from EUR 1,005 to EUR 1,127), for other persons – from EUR 935 to EUR 1,057.
Since the beginning of the term of this Government in 2020, the MMW has increased by 52% (from EUR 607 to EUR 924), the NTA – by 86.7 % (from EUR 400 to EUR 747). Comparing the growth of the MMW and the NTA since 2020 and the influence of the latter on personal net income, the income for the lowest income earners will increase by EUR 261. According to Sodra, 811 thousand persons earn up to 1 average wages (AW) in Lithuania.
Increasing the maximum applicable NTA will cost about EUR 241 million.
Specific examples of increasing net income:
Increasing the non-taxable amount (NTA) by 20 % (from EUR 625 to EUR 747) will increase the net income of persons earning up to EUR 2,167 gross salary per month (approximately one AW projected in 2024). According to the data by Sodra, up to 1 AW is earned by 811 thousand persons.
The net monthly income of persons earning the MMW will increase by EUR 75.22 (EUR 50.82 due to the increase of the MMW, and EUR 24.4 due to the increase of the NTA).
The person earning EUR 924 can mean two different options:
- a person who earns the same amount in both 2023 and 2024 – EUR 924 – will receive by EUR 31.66 higher net income amount;
- a person who earned the MMW (EUR 840) in 2023, and whose MMW increases to EUR 924 in 2024, will receive by EUR 75.2 higher net income amount (due to the increase of the NTA and MMW);
The net income of a person earning EUR 1 thousand will increase by EUR 30.24 due to the increased NTA;
EUR 1.2 thousand – by EUR 27.04;
EUR 1.5 thousand – by EUR 22.24;
EUR 1.8 thousand – by EUR 17.44;
EUR 1.9 thousand – by EUR 15.84;
EUR 2,166 – by EUR 0.06.
Depending on the level of disability and participation, the NTA for persons with disabilities or persons with limited participation will increase to EUR 1057-1127 (currently – EUR 935-1005).