Learn More About Lithuania and Taxes

The standard VAT rate in Lithuania is 21%. Reduced rates of 12%, 5%, and 0% apply to certain goods and services, including accommodation, transportation, books, medicines, exports, and intra-EU supplies. VAT registration is mandatory once annual turnover exceeds EUR 45,000 or intra-EU acquisitions exceed EUR 14,000. Foreign taxable persons must register regardless of turnover.

Employment income in Lithuania is subject to progressive tax rates ranging from 20% to 32%. Certain passive income, including dividends and capital gains, is generally taxed at a flat 15% rate. Income from individual activities (self-employed) benefits from tax credits resulting in effective rates from 5% to 20% up to EUR 42,500.

Dividends are generally taxed at 17% for companies and 15% for individuals. Participation exemption rules may apply where certain shareholding and holding period requirements are met, including for qualifying EEA and treaty-country entities.

Capital gains in Lithuania are generally taxed at standard corporate or individual income tax rates. Certain exemptions and reduced rates may apply to long-term shareholdings, investment income, qualifying share disposals, and specific real estate transactions, subject to applicable holding and participation requirements.

Royalties paid to resident companies are exempt from withholding tax; the rate for resident individuals is 15%. For non-resident companies the rate is 10%. For non-resident individuals the rate is 15%.

Interest paid to residents is generally not subject to withholding tax. No withholding applies to interest paid to EEA-resident companies or companies in treaty jurisdictions; otherwise, the rate is 10% for non-resident companies. The standard rate for non-resident individuals is 15%.

The tax rate varies from 0.01% to 4% of the market value of the land. Exact rates are set by local authorities.

From 2026, primary residential property in Lithuania will be exempt from real estate tax up to EUR 450,000, with amounts above this threshold taxed at 0.1%-1%. Non-primary residential property is subject to progressive rates ranging from 0.2% to 1%, while commercial real estate is generally taxed at 0.5%-3%, depending on the municipality.

Social security contributions in Lithuania include employee and employer payroll taxes, health insurance, and pension contributions. Employee contributions generally amount to approximately 19.5%-22.5% of gross salary (depending on pension participation), while employer contributions typically range from 1.77% to 2.49%. Different contribution rules and thresholds may apply to self-employed individuals and certain business activities.

Lithuanian thin capitalization rules apply to interest paid to related parties controlling more than 50% of the company. The debt-to-equity ratio generally may not exceed 4:1. Additional interest deduction limitations apply based on EBITDA thresholds, although certain exemptions and group safe-harbour rules may be available.

A foreign company may be treated as a Controlled Foreign Company (CFC) if it is controlled by a Lithuanian tax resident and meets certain low-taxation, passive income, or insufficient substance criteria. In such cases, the CFC's income may be included in the Lithuanian taxpayer's taxable base. A foreign company is a CFC if controlled (more than 50% shares/voting rights) by a Lithuanian resident.

Lithuanian transfer pricing rules require related-party transactions to comply with the arm's length principle. Depending on group revenue thresholds, companies may be required to prepare transfer pricing documentation and country-by-country reporting. Advance pricing agreements are also available. Transfer pricing documentation (master file for groups with revenue over EUR 15 million; local file for revenue over EUR 3 million) and country-by-country reporting (for groups over EUR 750 million) are mandatory.

Operating losses may be carried forward for an indefinite period, provided that certain requirements are met. Acquired tax losses may offset up to 70% of taxable profit including from other entities. Losses from the sale of shares may be carried forward for five years and offset only against profits from share sales. Group loss transfers are permitted where at least a 2/3 ownership interest is maintained and both companies have been members of the same group for at least two years.

A statutory financial audit in Lithuania is generally required where a company exceeds at least two of the following thresholds on the last day of the financial year: annual revenue exceeding EUR 3.5 million; total assets exceeding EUR 1.8 million; average number of employees exceeding 50.

The tax year is the calendar year (1 January to 31 December).

• Klaipėda FEZ (Klaipėda) - primarily manufacturing, plastics, electric components, food processing, assembly, and logistics. Established in 2002, with excellent port and EU access.
• Kaunas FEZ (Kaunas) - focused on logistics, production, high-tech, and pharmaceuticals. Located next to the airport, with production/logistics areas, a business street, and an airpark. Established in 1996, with unique 99-year land leases.
• Šiauliai FEZ (Šiauliai) - manufacturing and engineering (metal, plastics, textiles, furniture, electronics), agriculture, forestry, and fisheries.
• Panevėžys FEZ (Panevėžys) - manufacturing (automotive, electronics, metal/plastic processing, wood/furniture) and logistics, with strong European route connections (E67 and the upcoming Rail Baltica).
• Marijampolė FEZ (Marijampolė, also known as Baltic FEZ) - food, wood, furniture, and textile industries, strategically located on the Via Baltica highway with excellent rail and road access.
• Kėdainiai FEZ (Kėdainiai) - commercial, financial, and industrial activities, with a strong agricultural background and well-developed transport infrastructure.
• Akmenė FEZ (Akmenė) - manufacturing of construction materials (cement, concrete, lime, dolomite), agriculture, and related industries, with full engineering infrastructure (electricity, gas, water, sewage).

Companies operating in Lithuanian Free Economic Zones benefit from one of the most competitive tax environments in the EU:

• 0% corporate income tax for the first 10 years, followed by a reduced 50% corporate tax rate for the next 6 years, subject to applicable conditions.
• Dividend tax exemptions may apply, subject to Lithuanian participation exemption rules and applicable tax treaty conditions.
• Full exemption from real estate tax.
• Attractive conditions for manufacturing, logistics, technology, and export-oriented businesses.
• Strategic access to ports, airports, railways, and major transport corridors.
• Customs and VAT advantages may apply, depending on the nature of operations and the movement of goods.
• Access to modern infrastructure, long-term land lease opportunities, and investment support programs.

• Imports of raw materials, equipment, and components into the FEZ, as well as exports of finished goods, are duty-free, since FEZs are treated as outside the Lithuanian customs territory for duty purposes.
• Ready-to-build industrial plots with full infrastructure (electricity, gas, water, sewage, roads, and rail connections).
• Excellent logistics access, with proximity to seaports (Klaipėda), international airports (Kaunas, Šiauliai), and major highways and rail networks, including Rail Baltica.
• Long-term land leases.
• Additional support, including investor assistance, legal and tax consultations, and promotion of specific industries (e.g., engineering, food processing, automotive, plastics).

To benefit from the preferential tax regime available in Lithuanian Free Economic Zones, companies must generally meet the following requirements:

• The company must be registered and operate within a Lithuanian FEZ.
• At least 75% of the company's income must be generated from activities carried out within the FEZ.
• Capital investment is not less than EUR 1 million, or not less than EUR 100,000 provided the average number of employees in the tax year is at least 20.
• The company must carry out activities permitted under Lithuanian FEZ legislation.
• An auditor's written confirmation regarding the capital investment is required.
• Specific limitations apply under EU legislation governing the provision of state aid.

All FEZ requirements must be met on an ongoing basis: tax incentives apply only while the company maintains the required investment, employment, and operational thresholds under Lithuanian FEZ regulations. FEZs are ideal for export-focused manufacturing and logistics companies seeking long-term tax optimisation and operational efficiency in the Baltic region.