Grant Thornton Lithuania can assist expatriates and their employers with Lithuania tax and employment-related matters including advice on tax planning opportunities, management of assignment policies, and the provision of tax filing services.
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Prior to arrival, non-nationals willing to work in Lithuania must seek separate permit to work and reside in Lithuania. Employers without a legal entity or a branch in Lithuania must register as a non-resident employer with Lithuanian authorities, prior to commencing activities in Lithuania.
Grant Thornton Baltic in-house legal team can help.
The tax year in Lithuania is a calendar year (1 January to 31 December). However, an entity may adopt a substitute year of reporting.
Lithuanian tax residents filing their annual income tax returns for the previous tax year have to pay the related personal income tax on or before 1 May.
Lithuanian tax non-residents who file tax returns on a monthly basis have to pay personal income tax within 25 days from the receipt of income that is reported.
Income tax withheld by employers must be paid to the state budget on or before the 15th day of the respective month (if a portion of income has been paid out on or before the 15th day of that month) or on or before the last day of the respective month (if the last portion of income has been paid on or before the last day of that month).
Tax returns should be submitted also in case the individual wishes to use deductions that are not automatically applied.
20% income tax rate is applied to the following income:
15% income tax rate is applied to the following income:
5% is applicable to the share of non-self-employment income from waste sold or otherwise disposed of per year that does not exceeding 202’188 Eur for the year 2023.
32% rate is applicable to the share of annual income sourced from employment relations or the equivalent thereto exceeding 101,094 Eur.
Lithuanian tax residents are subject to tax on their worldwide income; non-residents are subject to tax only on Lithuania-source income and on income derived from activities through a fixed base in Lithuania, including foreign-source income attributed to that fixed base.
An individual is treated as a tax resident of Lithuania if:
Treaty residency principles are applied in case double tax treaty is in place.
Employment income is deemed to be sourced in the country in which the employment services are physically performed.
Director’s fees related to the management of a Lithuanian company are taxable in Lithuania.
Taxable income from employment includes salaries, wages, bonuses, lump-sum payments, as well as sick leave, maternity, and paternity leave.
The tax is withheld by the employer at a 20% rate from the employee’s wage and paid till 15th of the month following the payment. The 32% rate is applied and the difference between the 20% rate and 32% rate is paid by the employee once per year when filing the annual income tax return.
Employee fringe benefits are subject to the employer’s contribution.
Employers contribute to unemployment insurance, guarantee fund, and long-term benefit fund.
Stock options are exempt from personal income tax when a share option is held by an employee (but not exercised) for at least 3 years and if a share option agreement is concluded after 1 February 2020.
There are no specific concessions for expatriates in Lithuania.
Relief from double taxation is provided under effective double taxation treaties (DTTs).
A monthly tax-exempt amount (TEA) is applied only to the employment-related income of Lithuanian tax residents, as follows:
TEA is not applicable when monthly employment income is equal to EUR 2864 or exceeds this income.
Employment-related expenses are not deductible from individual employment compensation.
Following deductions are available in Lithuania:
Income tax of 15, 20, or 32% is withheld after the deduction of basic exemption and employee’s social security contributions.
No special rules exist on capital gains tax - individuals are taxed by 15 % on capital gains from the disposal of property as well as shares.
Employees must contribute to the social security at a rate of 19.50% of their gross salary. The social security contribution is withheld by the employer during payroll.
Employers contribute 1.77% of a permanent employee’s salary to social security (if labor contract is permanent). In other cases payments of different sizes might be applicable.
Employers must contribute 0.16% of the gross salary payable to the employee into the country’s guarantee fund, which provides support to workers if the employer goes bankrupt.
Employers must contribute 0.16% of the employee’s gross salary into the long-term employment fund, which entitles employees to receive a payment if the employer terminates the employment agreement without cause.
Share plans, including stock option plans, fall under the regulation of the Law on Personal Income Tax. A taxable event arises when the shares are transferred to the employee free of charge or under market price.
Stock options are exempt from personal income tax when a share option is held by an employee (but not exercised) for at least 3 years and if a share option agreement is concluded after 1 February 2020.
There are no other taxes on employment or another type of income.
Please be aware that the information above is general in nature and is correct at the time of publication. It is not intended to be advice and we cannot guarantee that it is current at the time which you are reading it and applicable based on your facts and circumstances.
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For further information on expatriate tax services in Lithuania please contact: |
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Vykintas Valiulis |
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