Corporate Income Tax

Starting in 2025, corporate income tax (CIT) rates will increase: —  The reduced CIT rate will rise to 6% (previously 5%). —  The standard CIT rate will rise to 16% (previously 15%).  

VAT on Incomplete Buildings

Previously, the sale of “old” buildings (those completed more than 24 months ago) was exempt from VAT. However, incomplete buildings (e.g., those not registered as 100% complete) were not considered “old.” The State Tax Inspectorate (VMI) has updated its commentary on Article 32 of the VAT Act, indicating that incomplete buildings used for more than 24 months may also be considered “old” and may be sold without VAT.  

Minimum Wage

From January 1, 2025: —  The minimum monthly wage (MMW) will increase to €1,038 (up from €924), a rise of €114 or 12%. —  The minimum hourly rate will increase to €6.35 (up from €5.65), a rise of €0.70 or 12%.  

Average Wage and Social Security Caps

From January 1, 2025: —  The average monthly gross wage (AMW) will increase to €2,108.88 (up from €1,902.70). —  The annual social security cap, set at 60 times the AMW, will rise to €126,532.80 (up from €114,162). Note: Income from employment exceeding the 60 AMW threshold will be taxed at a 32% personal income tax rate (income below the threshold is taxed at 20%).  

Cars

From January 1, 2025, a new framework will apply for allowable expenses related to company car purchases. The deductible amount will depend on the car’s CO2 emissions. More details in Lithuanian are available here  

Labor Code

From January 1, 2025: —  Employers may require employees to work overtime only with their written consent (Article 119, Clause 2). —  The rules for agreements on additional work will change. More details in Lithuanian are available here     We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 250 2657  /  info@audita.lt

Updated 16.01.2025   When a shareholder grants a loan to a company, the tax consequences arise in the following cases: 1. The company may include interest paid in allowable deductions if the interest rate corresponds to market interest. If the amount of interest paid exceeds the interest available on the market, the excess will not be considered as a allowable deduction. In order to prove the market interest rate, it is necessary to prove the interest that a particular company can borrow on the market from an unrelated person. Therefore, we recommend that you have documentation of the loan transaction with the shareholder that would justify the compliance of the applied interest rate with the interest in the market (for example, offers of commercial banks to the company to conclude a loan agreement). 2. If the amount borrowed exceeds the company's equity * more than 4 times, the tax administrator may recognize the interest paid on the excess as a not allowable deduction and tax it as dividends if both of the following conditions are met: a) The interest rate is higher than the market interest rate; b) The shareholder (lender) controls ** the company on the last day of the tax period. 3. For an individual shareholder (both a Lithuanian resident and a foreigner), interest payments that do not exceed 120 times the Average Monthly Wage (VDU)*** are taxed at a 15% personal income tax rate, while the portion of interest income exceeding 120 times the VDU is taxed at a 20% rate. Please note that when calculating whether the individual's income has exceeded 120 times the VDU, not only interest income but also other taxable income received by the individual is taken into account (excluding income from employment, dividends, and individual activities). In other words, if you receive interest income along with other taxable income, these will be aggregated, and the respective 15% and 20% rates will be applied (GPMĮ 6str.). 4. Interest paid to a Lithuanian legal entity is taxed at the applicable corporate income tax rate (16% or 6 %). 5. Interest paid to a legal person registered in a state of the European Economic Area or in a state with which Lithuania has concluded a double taxation agreement is not taxable. 6. Interest paid to a legal person that is not registered in a state of the European Economic Area or in a state with which a double taxation agreement has been concluded shall be taxed at the rate of 10%. 7. An individual shareholder may lend to the company without interest. In this case, there are no tax consequences for either the shareholder or the company.   * The ratio of borrowed amount to equity is calculated on the last day of the tax period (excluding the result of that tax period). ** A shareholder is considered to control a company if he directly or indirectly owns more than 50% of the shares or together with related parties holds more than 50% of the shares and the shareholder himself owns at least 10% of the shares. *** 120 VDU in 2025 amounts to EUR ~253,065 (120 VDU * EUR 2,108.88).   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 250 2657 /  info@audita.lt

Updated 21.01.2025  

Important details

Dividends are entitled to shareholders who were shareholders of the company on the day of the shareholders' meeting announcing the dividends, regardless which year profit are distributed. Dividends are also considered to be shareholders' income received by reducing the company's authorized capital, if this capital has been increased from the company's profit. Income received by the owner of an Individual enterprise (IĮ) or a member of a Small partnership (MB) after the distribution of the company's profits is treated as dividends. Private limited companies (UAB) and public limited companies (AB) may pay dividends only in cash. Dividends cannot be paid in advance. Dividends are usually paid once a year, when the result for the year ended, is calculated, but they can also be paid for a period shorter than the financial year, provided that all the requirements for the payment of interim dividends are met.  

Taxation of dividends

If dividends are received by individuals, they are subject to personal income tax (PIT), if legal entities are subject to corporate income tax (CIT).  

Lithuanian company pays a Lithuanian resident

Dividends paid by a Lithuanian company to a Lithuanian resident are taxed at 15% PIT.  

Lithuanian company pays a foreigner

Dividends paid by a Lithuanian company to a foreigner are taxed at 15% PIT in Lithuania. If Lithuania has concluded a double taxation avoidance agreement with the state of residence of the foreigner receiving the dividends, then the dividends are taxed in both countries according to the rates provided for in the agreement, which in Lithuania is usually lower than the standard rate.  

Lithuanian company pays another Lithuanian company

Dividends paid by a Lithuanian company to another Lithuanian company are not taxable if the company receiving the dividends holds (or intends to hold) at least 10% of the voting shares in the company paying the dividends for 12 months. If a company with the intention of holding shares for more than 12 months has benefited from this benefit but has subsequently transferred the shares before the end of 12 months, the dividends paid must be taxed at 16% CIT. If the company receiving the dividends does not meet any of these conditions, the dividends paid are taxed at 16% CIT.  

Lithuanian company pays a foreign company

Dividends paid by a Lithuanian company to a foreign company are not taxable if the foreign company holds (or intends to hold) at least 10% of the voting shares in the company paying the dividends for 12 months and is not registered in the offshore territories. If a foreign company does not meet any of these conditions, the Lithuanian company must pay 16% CIT when paying dividends. If Lithuania has concluded a double taxation avoidance agreement with the state where the foreign company receiving the dividends is registered, the rate provided for in the agreement shall be applied. Note: If a foreign company meets the above conditions under which dividends paid to it are not taxable, then the tax rate provided for in the double taxation agreement does not apply.  

A foreign company pays a Lithuanian company

Dividends paid by a foreign company to a Lithuanian company are not taxable in Lithuania if: — The foreign company is registered in a state of the European Economic Area and is a payer of corporate income tax or similar tax; or — The Lithuanian company has been holding (or intends to hold) at least 10% of the voting shares in a foreign company paying dividends for 12 months without interruption and this company is not registered in the offshore territories. If none of these conditions is met, the Lithuanian company pays 16% CIT on the dividends received from the foreign company.  

A foreign company pays a resident of Lithuania

Dividends paid by a foreign company to a resident of Lithuania are taxed at 15% PIT in Lithuania. If Lithuania has concluded a double taxation avoidance agreement with the state where the company paying the dividends is registered, then the dividends are taxed at the rate provided for in the agreement, which is usually lower than the standard rate.   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 250 2657  /  info@audita.lt    

  * 120 VDU (average salary) in 2025 for the calculation of personal income tax amounts to EUR ~253,065 (120 VDU * EUR 2,108.88).   We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today  +370 5 250 2657   /  info@audita.lt  

  * 120 VDU (average salary) in 2025 for the calculation of personal income tax amounts to EUR ~253,065 (120 VDU * EUR 2,108.88).     We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 250 2657  /  info@audita.lt

Updated 16.02.2025   Advance corporate income tax is payable quarterly on these dates 15.03 /15.06 / 15.09 / 15.12. The amount of the advance payment depends on the chosen calculation method. The following methods are available: 1. According to the profit of the previous year. 2. According to the profit for the following year. If you forecast that the company's profit in the current year will be lower than in the previous year, then the advance income tax will be lower using the 2nd calculation method. If your accountant calculated the advance income tax using Method 1, consult with him about changing the method. To change the method of calculating the tax, indicate this by submitting an advance income tax return. If you have already submitted a tax return for the first quarter and would like now to change your method, you can do so by resubmitting this tax return.  

Notes

— Newly registered companies do not pay advance income tax for the first tax year. The tax is also not paid by companies whose taxable income in the previous tax period did not exceed EUR 300 000 (PMĮ 47str. 5d.). — The amount of advance income tax calculated on the basis of the expected profit must be at least 80% of the actual amount of annual income tax. If the forecasts are incorrect and the amount of the advance income tax is lower, the STI will charge interest.     We will be happy to assist you with accounting, taxation or finance matters Get in touch with us today   +370 5 250 2657 /  info@audita.lt