Lithuania Personal Income Tax

Residents are subject to income tax on their world­wide income. Nonresidents are subject to income tax on income earned through a fixed base in Lithuania and other income derived in Lithuania, including the following:

  • Interest, except for interest from securities of the Government of Lithuania
  • Income from distributed profits
  • Rent received for real estate located in Lithuania
  • Income on sales of immovable property and movable property subject to mandatory registration in Lithuania
  • Employment income
  • Income of sportspersons and performers
  • Royalties, including copyright and auxiliary rights

Income is recognized when it is received.

An individual is considered to be a resident of Lithuania for tax purposes if he or she meets any of the following conditions:

  • He or she has a habitual abode in Lithuania.
  • His or her center of vital interests is in Lithuania.
  • He or she is present in Lithuania continuously or with interrup­tions for 183 or more days in the calendar year.
  • He or she is present in Lithuania continuously or with interrup­tions for 280 or more days in two consecutive calendar years and is present in Lithuania continuously or with interruptions for 90 or more days during one of these tax years.

If an individual who is considered a Lithuanian resident for three tax years leaves Lithuania during the fourth year, and if he or she spends less than 183 days in Lithuania during the fourth year, he or she is treated as a Lithuanian resident during the fourth year until his or her last day in Lithuania.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Residents employed by Lithuanian compa­nies are subject to income tax on income earned from employment in Lithuania and abroad. Nonresidents employed by Lithuanian companies are subject to income tax on income earned from em ployment in Lithuania. Residents of Lithuania employed by foreign companies and nonresidents employed by foreign compa­nies to work in Lithuania are subject to income tax on their employment income.

Taxable employment income is all income in cash and in kind, in cluding wages and salaries, bonuses, fringe benefits including free lodging, and other incentive payments.

Self-employment and business income. The taxation of income from partnerships and private (personal) enterprises is regulated by the Law on Corporate Profit Tax. Income from an individual activity (for example, income from rendering independent ser­vices) that is registered with the Lithuanian tax authorities is subject to tax under the Law on Resident Income Tax at a rate of 5% or 15%, depending on the type of activities performed.

Investment income. Dividends received from Lithuanian and for­eign companies (with certain exceptions) are taxed at a rate of 15%.

Interest income is taxed at a rate of 15%. However, the following types of interest are exempt:

  • Interest income from non-equity government and company bonds, interest from deposits held in banks and other credit institutions, provided that the total amount of interest does not exceed EUR500 during a calendar year and that the bonds were acquired or the deposit agreement was concluded on or after 1 January 2014
  • Interest from government securities issued by European Economic Area (EEA) countries that were acquired before 31 December 2013
  • Interest from non-equity bonds that were acquired before 31 December 2013 and that the issuer started to redeem not earlier than 366 days from the date of issuance (additional cri­teria apply)
  • Interest from banks and other types of credit institutions of EEA countries under contracts concluded before 31 December 2013

The above exemptions for interest income do not apply to interest received from tax havens.

Royalties paid to resident and nonresident authors and inventors are taxed at a rate of 15%.

Directors’ fees. An annual management bonus received from a Lithuanian company by a board member that is not payable under the individual’s employment contract is treated as miscellaneous income and is taxed at a rate of 15%.

Exempt income. The following amounts are excluded from tax­able income:

  • Death allowances to the spouse, children (including adopted children) and parents (including foster parents)
  • Life insurance payments (in certain cases)
  • The difference between annual proceeds received from the sale of property not requiring legal registration and its acquisition price, not exceeding EUR2,500
  • Income received from the sale of movable property legally registered in Lithuania or immovable property located in Lithuania (in certain cases)
  • Income from the sale of securities, provided that the amount of total capital gains received from sale of securities (difference between the sales price and the acquisition price of all securi­ties) during the tax year does not exceed EUR500 (additional criteria apply)
  • Certain other income listed in the Law on Resident Income Tax

Capital gains. Capital gains are generally taxable, subject to the exceptions mentioned in Exempt income.

Deductions

Personal deductions and allowances. Residents and nonresidents may deduct the general non-taxable minimum amount, which depends on the income received. The annual non-taxable mini­mum amount may not be greater than EUR2,400 if annual income does not exceed 12 monthly minimum wages in force on 1 January of the current calendar year. If annual income is greater than 12 monthly minimum wages, the non-taxable mini­mum amount is calculated according to a formula provided in the Law on Resident Income Tax. For specified groups of residents, including disabled persons, the non-taxable minimum amount is greater.

Individuals who have one or more children may deduct an addi­tional non-taxable income amount. For each parent, the monthly amounts are EUR60 for each child.

Nonresidents may deduct the general non-taxable minimum amount from Lithuanian-source income at the end of the tax year.

Deductible expenses. The following deductions from a resident’s personal taxable income are allowed:

  • Cumulative life insurance premiums (these are premiums paid under a life insurance agreement providing that the insurance payments may be received not only in the event of accidents, but also after the expiration of the agreement) paid on the indi­vidual’s own behalf and on behalf of his or her spouse and minor children.
  • Pension contributions to pension funds on the individual’s own behalf and on behalf of his or her spouse and minor children.
  • Expenses relating to vocational training or studies (if first higher education or qualification is obtained on graduation), and to first doctoral studies and first post-graduate art studies. This includes tuition paid for the spouse and children. If a loan is obtained to pay tuition, only the amount of loan repaid during a tax year may be deducted.

The total amount of the above deductions may not exceed 25% of taxable income (taking into account deductions).

Rates. The two rates of individual income tax are 5% and 15%. The 5% rate applies for some types of individual activities that, according to the Law on Residents Income Tax, are not consid­ered “liberal professions.” Other income is subject to tax at a rate of 15%.

Other taxes

Land tax and state land lease tax. Land tax is imposed on land­owners, both individuals and legal entities, at rates ranging from 0.01% to 4% of the estimated value of the land. State land lease tax is imposed on users, both individuals and legal entities, of state land at rates ranging from 0.1% to 4% of the estimated value of the state land.

Inheritance tax. Inheritance tax is applied to both residents and nonresidents, unless international treaties provide otherwise. The tax base for a Lithuanian permanent resident is inherited property, such as movable property, immovable property, securities and cash. The tax base for a nonresident is inherited movable property requiring legal registration in Lithuania (for example, vehicles) or immovable property located in Lithuania. The rate of inheritance tax applied to inheritors is 5% if the taxable value is less than EUR150,000 and 10% if the taxable value EUR150,000 or more. Close relatives, such as children, parents, spouses and certain other individuals, may be exempt from this tax. Inherited prop­erty with taxable value of less than EUR3,000 is also exempt from this tax.

Social security

Social security contributions. Employers must withhold social security contributions at a rate of 3% from an employee’s gross salary (plus an additional 2% if the employee has chosen to par­ticipate in the additional pension system). Social security contri­butions are not deductible when calculating the amount of an employee’s personal income tax to be withheld from the em­ployee’s gross payroll. In addition, employers must make social security contributions at a rate of 27.98%, 28.17%, 28.7% or 29.6%, depending on the type of employer.

Certain types of employment-related income are exempt from social security contributions, including the following:

  • Benefits related to an employee’s death paid by an employer to the employee’s spouse, children and parents, or in the event of a natural disaster or fire, in the amount of five minimum monthly salary payments (EUR1,750)
  • Reimbursement of business travel expenses in the amount specified under the laws or government resolutions
  • Payments for the training and requalification of employees
  • Allowances for illness compensated by the Lithuanian employer for the first two days of illness
  • Directors’ fees received by board members

Self-employed individuals and individuals that register an indi­vidual activity in Lithuania, sportspersons, performing artists, individuals working under copyright agreements and farmers must pay social security contributions that vary depending on the amount of income received.

Totalization agreements. Lithuania has entered into totalization agreements with Belarus, Canada, Moldova and Ukraine. Lithuania also has entered into bilateral agreements with the Russian Federation and the United States regarding pension pay­ments.

Health insurance. Health insurance contributions are separated from social security contributions and residents’ income tax. Employers must withhold health insurance contributions at a rate of 6% from an employee’s gross salary as health insurance con­tributions payable by an employee and pay health insurance contributions themselves in the amount of 3% in addition to the employee’s gross salary.

Under the Law on Health Insurance, self-employed individuals and individuals that register an individual activity in Lithuania, sportspersons, performing artists, individuals working under copy­right agreements and farmers are subject to compulsory health insurance contributions depending on the amount of income re­ceived (with certain exceptions).

In certain cases, Lithuanian tax residents must pay 9% health insurance contributions.

Tax filing and payment procedures

A Lithuanian tax resident that receives income during a tax year must file an annual income tax return by 1 May of the following year. A Lithuanian tax resident must pay the difference in income tax between the amount specified in his or her annual income tax return and the amount paid (withheld) during the tax year by 1 May of the following year.

A Lithuanian tax resident may elect not to file the annual income tax return if any of the following apply:

  • The individual will not exercise his or her right to deduct the annual non-taxable income amount or the additional non-taxable income amount (see Section A).
  • The individual will not exercise his or her right to deduct cer­tain expenses incurred from income.
  • The individual received Class A income only (in general, Class A income includes income received from Lithuanian enterprises in the tax year; the tax is calculated, paid and declared by the enterprise).

Tax residents who hold specified positions in certain Lithuanian institutions must file annual tax returns and special asset tax returns.

Nonresidents must file income tax returns and pay tax due not later than 25 days after the receipt of income.

Double tax relief and tax treaties

The following rules apply to the taxation of foreign-source income received by permanent Lithuanian residents:

  • Income (except dividends, interest and royalties) received by a permanent Lithuanian resident and taxed in another European Union (EU) member state or another state with which Lithuania entered into a double tax treaty is exempt from tax in Lithuania.
  • A permanent Lithuanian resident may reduce the Lithuanian income tax applicable to dividends, interest and royalties by the amount of income tax paid in the country where the income was sourced if the source country was an EU member state or a state with which Lithuania has entered into a double tax treaty.
  • A permanent Lithuanian resident may reduce the Lithuanian income tax applicable to all types of income by the amount of income tax paid on such income in other states, except for income received from tax havens.

Lithuania has entered into double tax treaties with the following countries.

Armenia                          Iceland                        Romania

Austria                            India                           Russian

Azerbaijan                       Ireland                        Federation

Belarus                            Israel                           Serbia

Belgium                           Italy                            Singapore

Bulgaria                           Kazakhstan                 Slovak Republic

Canada                            Korea (South)             Slovenia

China                               Kyrgyzstan                 Spain

Croatia                             Latvia                          Sweden

Cyprus                            Luxembourg               Switzerland

Czech Republic               Macedonia                  Turkey

Denmark                         Malta                          Turkmenistan

Estonia                            Mexico                       Ukraine

Finland                            Moldova                     United Arab

France                             Netherlands                Emirates

Georgia                           Norway                      United Kingdom

Germany                         Poland                        United States

Greece                             Portugal                      Uzbekistan

Hungary

Entry visas

The Law on the Legal Status of Aliens, which entered into force on 30 April 2004, is designed to harmonize the Lithuanian law regulating the legal status of aliens in Lithuania with the require­ments of the EU with respect to visas, migration, asylum and free movement of persons.

In general, to enter Lithuania, a foreign national must have a visa stamped in his or her valid travel document. Under Lithuanian free travel agreements, resolutions and treaties, citizens of the EU and the following jurisdictions may enter Lithuania freely.

Albania (a)(b)                Hong Kong               Philippines (b)

Andorra                           Special                     Russian

Antigua and                   Administrative          Federation (b)

Barbuda                           Region (SAR)         St. Kitts and Nevis

Argentina                       India (b)                    St. Lucia

Armenia (b)                   Israel                         St. Vincent and

Australia                        Japan                         the Grenadines

Azerbaijan (b)                Jordan (b)                 Samoa

Bahamas                        Kazakhstan (b)          San Marino

Barbados                       Korea (South)           Serbia (a)(b)

Bosnia and                     Liechtenstein             Seychelles

Herzegovina (a)(b) Macau SAR (c)                Singapore

Brazil                             Macedonia (a)(b)      Switzerland

Brunei                            Malaysia                   Taiwan

Darussalam                    Mauritius                  Timor-Leste

Canada                           Mexico                      Tonga

Cape                        Moldova (a)(b)                Trinidad and

Verde (b)                 Monaco                           Tobago

Chile                        Montenegro (a)(b)           Turkey (b)

China (b)                 Morocco (b)                    Ukraine (b)

Colombia                 New Zealand                   United Arab

Costa Rica               Nicaragua                        Emirates

Dominica                 Norway                           United States

El Salvador              Oman (b)                         Uruguay

Georgia (b)              Palau                               Vanuatu

Grenada                   Panama                            Vatican City

Honduras                Paraguay                         Venezuela

Peru (a)

a) For holders of biometrical passports.

b) For holders of diplomatic and official passports.

c) For Hong Kong and Macau SAR passport holders only.

In general, Lithuania allows such citizens to stay in Lithuania for up to three months in a six-month period without obtaining any specific stay document.

An ordinary visa allows an individual to enter and stay in Lithuania for up to three months during a six-month period, which is calculated from the date of arrival in Lithuania or any other Schengen country.

Work permits

Before beginning employment in Lithuania under an employ­ment contract, a foreign national, other than an EU citizen, must obtain a work permit. Certain other exemptions from this require­ment exist, including the following:

  • A foreigner has a temporary residence permit issued for the purpose of studying in Lithuania and is employed as a trainee or is planning on working in the field of research and develop­ment.
  • An individual is the manager or a board member (having autho­rization to conclude agreements) of a company registered in Lithuania that has at least three employees who are Lithuanian citizens or persons holding permanent residence permits and that has authorized capital exceeding EUR28,000 (additional criteria apply).
  • An individual is the manager or a member of the management or supervisory board of a company meeting the criteria set out in the preceding bullet, and the purpose of the individual’s stay in Lithuania is work for that company.
  • An individual has a permanent residence permit.
  • A foreigner comes to Lithuania to negotiate the conclusion of an agreement, to instruct personnel, to deal regarding a com­mercial establishment, to implement equipment or to engage in similar activities, for a period of no longer than three months in a particular year.
  • A foreigner has a long-term resident status and a residency permit in another EU country.
  • A non-EU citizen legally and permanently works for an EU member state company that seconds him or her to Lithuania and obtains an E101 (A1) or E102 form issued by an EU member state (except Denmark, where any other document proving insurance coverage there is also acceptable).
  • An employee has high qualifications (additional criteria apply).
  • Managing employees are seconded to a group company in Lithuania (additional criteria apply).
  • Certain other cases.

The State Labor Exchange issues work permits, which are valid for up to two years.

Residence permits

The following are the two types of temporary residence permits:

  • EU citizens must obtain temporary residence permits if they intend to reside in Lithuania for longer than 90 days during a six-month period. The migration authorities issue the residence permit within 10 working days after the application form and other documents (for example, employment contract) are sub­mitted. The permit is valid up to five years.
  • Non-EU citizens may obtain temporary residence permits on the grounds that they intend to work legally in Lithuania (either as an employed person or the owner of a company). The Lithuanian law also provides other grounds for the issuance of a residence permit. The residence permit for non-EU nationals is valid up to one year. It is issued within four months after the submission of all the required documents.

Non-EU nationals who apply for a residence permit for the first time must submit an application to a diplomatic mission of Lithuania or a consular institution abroad. If the non-EU national is legally present in Lithuania, the documents can be submitted to the migration authorities.

An EU citizen may apply for a permanent residence permit in Lithuania if he or she has held a temporary residence permit for at least five years. For non-EU citizens, the minimum period is five years without interruption.

Family and personal considerations

Marital property regime. Marital property relations are regulated by the Civil Code of Lithuania.

Under the law, spouses or future spouses may enter into a nota­rized marital agreement regulating the legal status of the spouses’ property that is registered under an established procedure. If a marital agreement is not entered into, property acquired by spous­es during their marriage is considered jointly owned property. Each of the spouses has equal rights to use and dispose of jointly owned property. At any stage of marital life, couples may divide their jointly owned property by a notarized marital agreement.

The jointly owned property regime applies to all officially mar­ried heterosexual couples who have a permanent residence in Lithuania, unless a marital agreement establishing another gov­erning law is concluded. If the spouses reside in different coun­tries, the jointly owned property regime applies only if both spouses are citizens of Lithuania. In other situations, the jointly owned property regime applies only if the couples solemnize their marriages in Lithuania. The law recognizes a concept of family property that may be used for family requirements only, including matrimonial domicile and right to use a matrimonial domicile.

The law applicable to an agreement between the spouses regard­ing matrimonial property is determined by the law of the state chosen by the spouses in the agreement. The spouses may choose the law of the state in which they are both domiciled or will be domiciled in the future, or the law of the state in which the marriage was solemnized, or the law of the state of which one of the spouses is a citizen. The agreement of the spouses on the applicable law is valid if it is in compliance with the requirements of the law of the selected state or the law of the state in which the agreement is made. The applicable law chosen in the agreement of the spouses may be used in resolving disputes related to real rights in immovable property only if the requirements of public registration of this property and of the real rights therein, as determined by the law of the state where the property is located, were complied with.

Forced heirship. Under the Civil Code of Lithuania, certain heirs and descendants have a right to a legal share of their relatives’ estate. Children (including adopted children) of the deceased, as well as a spouse and parents requiring care, are entitled to half of their intestate share, regardless of the provisions of any will, unless the bequeathed share is larger.

The form of the will is determined by the laws of the country where the will is concluded. However, a will, as well as its amend­ment or revocation, is valid if the form of these items is in com­pliance with the requirements of any of the following:

  • The law of the state of the testator’s domicile
  • The law of the state of which the testator was a citizen when the relevant acts were performed
  • The law of the state of the testator’s residence when the relevant acts were performed or at the time of his or her death

Land, buildings and other immovable property located in Lithuania are inherited in accordance with the laws of Lithuania.

Driver’s permits. A driver’s permit issued to a resident of a foreign country is valid in Lithuania if the person possesses an interna­tional driver’s license that meets the requirements of the 1968 Vienna Convention or a driver’s license issued by an EU member state or a driver’s license that Lithuania must recognize under international agreements. A driver’s license issued by a non-EU country to a foreigner residing in Lithuania may be changed to a Lithuanian driver’s license if certain conditions are met.