Tax Changes 2026

The Lithuanian Parliament has adopted significant tax reforms that will take effect on January 1, 2026, and will apply when calculating income for the 2026 and subsequent tax periods.

Corporate Income Tax

Increase in Corporate Income Tax Rates

• The standard corporate income tax rate will increase from 16% to 17%.
• The reduced rate will increase from 6% to 7%.
• The reduced rate will apply to companies with annual revenues not exceeding EUR 300,000.

Impact:

For every EUR 100,000 of net profit, the corporate income tax burden increases by EUR 1,000.

Extension of 0% Tax Rate for New Companies

• The 0% corporate income tax rate for newly registered companies will be extended from 1 to 2 years.

Introduction of Immediate Depreciation Incentive

A new immediate depreciation incentive has been introduced, allowing businesses to:

• Deduct the full acquisition cost of qualifying fixed assets in the tax year in which the asset is first used.
• The incentive applies only to specific asset groups, including: machinery and equipment, buildings and wells, computer hardware and software, trucks, trailers, buses, etc.

Impact

This measure is particularly beneficial for businesses investing heavily in equipment.

Limitations on Loss Carryforward

• The total deductible tax losses cannot exceed 70% of the company’s taxable profit.
• Within a corporate group, loss transfer will only be allowed if the companies have belonged to the same group without interruption for at least 2 years.
• The loss carryforward rules remain unchanged for companies taxed at the 7% rate (along with other exceptions).

Impact

There is a reduced ability to offset taxable profits using accumulated tax losses.

Personal Income Tax (PIT)

New Progressive PIT Rates

Beginning in 2026, all personal income sources (e.g., salaries, self-employment, rental income, property sales, etc.) will be aggregated and taxed progressively according to the following brackets:

• 20% rate for annual income up to 36 Average Monthly Wages (AMW)* → in 2026 – EUR 82,962
• 25% rate for income from 36 to 60 AMW → in 2026 – EUR 82,962 to 138,270
• 32% rate for income exceeding 60 AMW → in 2026 – over EUR 138,270

*AMW — is the government-approved average monthly wage used to calculate state social insurance contributions. The projected AMW for 2026 is EUR 2,304.50.

The following types of income will not be aggregated with others and will be taxed at a flat 15% PIT rate:

1. Dividends

2. Income earned through an investment account

3. Gains from the sale of shares held for more than 5 years (outside an investment account)

4. Gains from employee share options or similar programs

5. Sickness, maternity, paternity, childcare, and long-term work benefits

6. Life insurance payouts equal to contributed premiums

7. Pension payments from private pension funds, up to the amount of contributions made

Current Situation (Before 2026)

• “Employment income” up to 60 AMW is taxed at 20%, income above this is taxed at 32%.
• Income from the sale of assets (real estate, shares, etc.) (difference between purchase and sale price): Up to 120 AMW: taxed at 15%; Amounts exceeding 120 AMW: taxed at 20%.

Impact

• Individuals earning between EUR 82,962 and EUR 138,270 annually from employment will see their tax rate increase from 20% to 25%.
• Other income (e.g. rent, asset sales) up to 12 AMW (EUR 27,654) will be taxed at 15%, and any excess will be taxed progressively at 20%, 25%, or 32%.

Self-Employment (Individuali veikla pagal pažymą)

Annual taxable income from individual activity (after deductions), up to EUR 42,500, will be taxed at 20% PIT. Any income exceeding EUR 42,500 will be taxed according to the progressive PIT brackets (20%, 25%, 32%), aggregated with other annual income.

If income from individual activity does not exceed EUR 42,500, reduced PIT rates apply:

• Income up to EUR 20,000 → taxed at 5%
• Income between EUR 20,000 and EUR 42,500 → taxed progressively from 5% to 20%, depending on the amount

Current Situation (before 2026):

Income up to EUR 20,000 → taxed at 5%, income from EUR 20,000 to 35,000 → taxed progressively from 5% to 15%.

Impact:

Individuals earning between EUR 35,000 and EUR 42,500 will see their PIT increase from 15% to 20% (previously max 15%). Income above EUR 42,500 will be taxed progressively at 20%, 25%, or 32%, together with other income.

Real Estate Sale

Capital gains from selling real estate will be tax-exempt if the property was acquired more than 5 years ago (previously: 10-year holding period)

Exemption for a primary residence remains:

• If the individual declared the property as their primary residence for at least 2 years before sale, OR
• If used for less than 2 years, but the proceeds are used to acquire another primary residence within 1 year.

Business Certificates & Rental Income

Income up to EUR 50,000 from activities under a business certificate (verslo liudijimas) will be taxed under a fixed PIT system* (Income from different activities is combined). Any amount exceeding EUR 50,000 will be taxed at progressive PIT rates (20%, 25%, 32%), as part of total income.

Real Estate rental under a business certificate up to EUR 50,000 → taxed with fixed PIT. Income exceeding EUR 50,000 will be added to “non-employment income” and first EUR 27,654 (12 AMW) → taxed at 15%, the rest → taxed at 20%, 25%, or 32%.

*Fixed PIT = predefined tax amount for selected activity, not linked to actual income

Current Situation (before 2026):

Fixed PIT applies regardless of income amount,

Impact:

Individuals with business certificates and annual income above EUR 50,000 will now pay higher taxes on the exceeding portion.

Farmers

Two-tiered PIT structure for agricultural income:

• Up to 60 AMW → 15% PIT
• Above 60 AMW → 20% PIT

Note

The amended PIT law does not clearly specify how different types of income will be aggregated for tax purposes. Final interpretation may depend on future guidance from the State Tax Inspectorate (VMI).

Real Estate Tax

The Real Estate Tax Law has been amended to differentiate between primary residences and other (non-commercial) real estate owned by individuals.
Primary Residence
Municipalities will define the non-taxable threshold for the taxable value of a primary residence, however, it cannot be set below EUR 450,000, meaning: Property value up to EUR 450,000 will not be taxed.

The taxable portion (value exceeding EUR 450,000) will be subject to rates set by municipalities, ranging between 0.1% and 1%.

Other Non-Primary Real Estate
Depending on the total value:

• Up to EUR 50,000 → 0% tax rate
• From EUR 50,000 to 200,000 → 0.2% tax rate
• From EUR 200,000 to 400,000 → 0.4% tax rate
• From EUR 400,000 to 600,000 → 0.6% tax rate
• From EUR 600,000 to 1,000,000 → 0.8% tax rate
• Above EUR 1,000,000 → 1% tax rate

Real estate owned by legal entities continues to be taxed at 0.5% to 3%, depending on municipal decisions.

An additional 0.2% tax will be levied on commercial properties owned by individuals and all properties owned by legal entities. This amount will be directed to a national defence fund. This 0.2% surcharge will NOT apply to personal residential properties.

Properties classified as abandoned or neglected may be taxed at a rate of 1% to 5%. This does not apply to Primary residences and additional real estate held by individuals, even if it is neglected.

Current System (Before 2026)

• Property value under EUR 150,000 → tax-exempt
• EUR 150,000–300,000 → taxed at 0.5%
• EUR 300,000–500,000 → taxed at 1%
• Above EUR 500,000 → taxed at 2%

Impact

• Most individuals will no longer pay tax on their primary residence due to the high non-taxable threshold (EUR 450,000).
• High-value property owners will also benefit from lower effective rates.
• However, individuals owning multiple properties may face higher tax burdens.

Other Tax Changes

• The tax-exempt amount for employer-paid voluntary health insurance contributions will be reduced to EUR 350 per year.
• A new Defence Contribution Law introduces a 10% levy on non-life insurance premiums collected by insurance companies.
• A child-related tax relief of EUR 208.80 per child will be reintroduced. This will take effect from January 1, 2027.
• Corporate income tax base may be reduced by scholarships paid by companies to: Students in mathematics, life sciences, engineering, or technology fields; Researchers involved in R&D projects directly related to company activities.
• Income earned by individuals (not from business activities) from selling recyclable waste, up to 12 AMW per year, will be taxed at 5% PIT
• Sugar tax introduced – excise duties will apply to non-alcoholic beverages containing added sugars or sweeteners.
• Reduced VAT rate for books and non-periodical publications will decrease from 9% to 5%.
• 9% VAT rate will increase to 12% for: Tourist accommodation services; Public passenger transportation; Admission to cultural and art events.
• Standard VAT rate will now apply to: Firewood; District heating for households