Lithuania's Tax System and Regulatory Framework in 2025

Lithuania’s tax administration is overseen by the State Tax Inspectorate (STI), operating under the Ministry of Finance. The country has ten regional tax offices, with additional coordination from agencies such as the Customs Department and the Ministry of Environment for specific levies. Key taxes in Lithuania include corporate income tax, personal income tax, real estate tax, land tax, value-added tax (VAT), excise duties, inheritance tax, and gambling tax. Tax years generally follow the calendar year. Corporate income tax returns are due by May 1 annually, personal income tax is filed quarterly, and VAT declarations must be submitted by the 15th of each month.

Businesses file directly with the Lithuanian State Tax Inspectorate via online platforms at www.vmi.lt. Firms must complete designated forms and retain financial records, including audited accounts, to support filings. The STI reserves the right to conduct audits and request documentation to verify compliance.

Main Taxes and Rates in Lithuania

The Lithuanian tax system applies to both domestic entities and foreign businesses operating within its borders, as well as non-residents earning income in the country. Below is a breakdown of major tax categories and their current rates.

Corporate Income Tax

• The standard corporate income tax rate in Lithuania is 15%. Small enterprises—defined as those with fewer than 10 employees and annual revenue under €300,000—benefit from a reduced rate of 5%.
• Dividends paid to foreign shareholders are generally taxed at 15%, though exemptions may apply under applicable double taxation treaties or if conditions under the EU Parent-Subsidiary Directive are met.
• R&D incentives have been strengthened: companies can deduct up to three times the amount spent on qualifying research and development activities when calculating taxable income, a policy introduced in 2008 and still active in 2025.

Personal Income Tax

• As of 2025, Lithuania maintains a progressive personal income tax structure. Income up to €104,277.60 is taxed at 20%, while earnings above this threshold are subject to a 32% rate.
• Distribution income, including dividends and profit shares, is taxed at a flat rate of 15%, making it attractive for investors and entrepreneurs reinvesting returns.

Real Estate Tax

• Both individuals and legal entities—residents and non-residents alike—are liable for real estate tax on properties valued above €220,000. The effective rate ranges between 0.3% and 3%, depending on the municipality and property type. Local councils set rates within this band, allowing for regional variation.

Land Tax

• Private landowners pay an annual land tax calculated as a percentage of the land’s assessed value. The base rate is 1.5%, but differentiated rates apply: agricultural land is taxed at lower levels (as low as 0.01%–0.5%), while urban residential or commercial plots face higher assessments.

Value-Added Tax (VAT)

• The standard VAT rate in Lithuania is 21%, applied to most goods and services, including imports. Reduced rates exist for certain sectors: 9% for public transport, books, and restaurant meals; 5% for pharmaceuticals and children’s products. Digital services provided to consumers in Lithuania also fall under local VAT rules, in line with EU regulations.

Excise Duties

• Excise taxes are imposed on alcohol, alcoholic beverages, tobacco products, and energy commodities such as motor fuels and electricity. These duties align with EU minimum standards and are periodically adjusted for inflation and environmental goals.

Environmental Pollution Tax

• Lithuania enforces an environmental pollution tax on businesses whose operations generate emissions or waste. Producers and importers of items like tires, batteries, electronic equipment, and packaging materials must pay eco-fees to fund recycling and waste management programs. This reflects Lithuania’s broader commitment to circular economy principles and green transition policies supported by EU funding.

Special Economic Zones and Incentives

Legal Basis for Special Economic Areas

Special economic zones (SEZs) in Lithuania operate under the Republic of Lithuania’s Investment Law and the Law on Free Economic Zones. Additional local legislation governs individual zones, ensuring alignment with national development strategies and EU state aid rules.

Overview of Economic Zones

Lithuania hosts 4 industrial parks, 6 free economic zones, and 5 technology parks designed to attract foreign investment and foster innovation. These zones offer significant fiscal advantages, including:

• Full exemption from corporate income tax for the first 10 years of operation;
• 50% reduction in corporate income tax for the subsequent 6 years;
• Exemption from real estate and land taxes;
• Waiver of dividend withholding tax for profits distributed within the zone.

These incentives are particularly beneficial for startups, tech firms, and export-oriented manufacturers. For example, companies in the Kaunas Free Economic Zone have reported faster ROI and streamlined regulatory processes. Similarly, the Vilnius Tech Park supports R&D-intensive ventures through tax breaks and access to EU research grants.

International investors looking to establish operations in the Baltic region should consider Lithuania’s competitive tax environment and strategic location. Professional offshore human resource solutions, such as those offered by SailGlobal, can assist foreign firms in navigating local compliance, payroll, and cross-border employment requirements efficiently.