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.