Taxes in Lithuania
The Republic of Lithuania implements a business-friendly taxation policy, and the taxation system is adapted to the legislation of the European Union. Since 1990, the Lithuania's taxation system has drastically changed to support foreign investments and labour market development.
Taxes and other payments are collected to the budget based on the order by the Supreme Council; however, regional and city councils act separately in matters of tax collection. In Lithuania, basic principles of tax payment and their regulation is governed by the Law on Tax Administration stipulating the rights and obligations of a tax administrator and tax payer, as well as the tax calculation procedure and chargeable amounts.
There are 7 main types of
taxes in Lithuania:
corporate income tax
personal income tax
real estate tax
land tax
inheritance and gift tax
value added tax
excise duty
lottery and gaming tax
The state collects also social insurance contributions, taxes on state natural resources, petroleum and natural gas resources tax, tax on environmental pollution, consular fees, state fees.
Corporate income tax
Corporate income tax payers are enterprises pursuing commercial activities, and this tax is also paid by non-profit organisations obtaining profit from commercial activities.
The general corporate tax rate is 15%, although companies with fewer than 10 workers and less than EUR 300,000 in gross annual revenue may opt for a smaller corporate tax rate of 5%. Additionally, such small companies benefit from
NB! Corporate tax rate in 2009 was 20%, nevertheless in 2010 tax rate was reduced to 15% and still is at the same level.
For 2010 year the basic contributions amount to 40.7 % of the total income before tax, thus covering all risks (except for accidents at work and occupational diseases), out of which 31.7 % is paid by an employer, but the remaining 9 % – by an employee.
Agricultural and farming enterprises, non-profit organisations, small enterprises, enterprises with foreign investment and enterprises employing the disabled person can apply for tax relief. Lithuania actually ensures the most preferable conditions for business growth for micro-enterprises comparing to other Baltic States.
Personal income tax
Progressive reduction of the personal income tax was commenced in 2006. Today every natural person is obliged to pay the personal income tax in the amount of 15 % if this person is employed or self-employed. If the person can be considered a permanent resident, the income tax is calculated from the person's income received in Lithuania and abroad. Foreign residents must pay tax only from that part of income which is received in Lithuania. To consider someone a resident of Lithuania, this person has to live in Lithuania for at least 183 subsequent days within a 12-month period.
Persons receiving a salary lower than the minimum non-taxable income are practically exempt from the personal income tax. The minimum non-taxable income is calculated as STANDARD NON-TAXABLE INCOME AMOUNT - 0.15 * (WAGE - MINIMUM WAGE). Currently, the standard non-taxable income amount is EUR 300, and the minimum wage is EUR 555. Below you will find an example for calculating non-taxable income sums for a wage of EUR 555 and a wage of EUR 1000.
EUR 555 wage
EUR 555 wage - EUR 555 minimum wage = EUR 0
0.15 * EUR 0 = EUR 0
EUR 300 standard non-taxable amount - EUR 0 = EUR 300 of non-taxable income
EUR 1000 wage
EUR 1000 wage - EUR 555 minimum wage = EUR 445
0.15 * EUR 445 = EUR 66.75
EUR 300 standard non-taxable amount - EUR 66.75 = EUR 233.25 of non-taxable income
Also disabled persons and single mothers (fathers) are exempt from personal income tax, and the tax is not deducted from pensions and scholarships.
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