Lithuania (LT)
Lithuania is the largest and most southerly of the three Baltic states, a semi-presidential EU republic celebrated for its remarkably preserved Baroque capital Vilnius (UNESCO World Heritage), dramatic coastal dunes at Neringa (also UNESCO), vibrant startup and fintech ecosystem (home of Revolut HQ, Vinted, Nord Security, and Hostinger), rapidly rising living standards, and a resilient population with deep cultural roots stretching back to one of the last pagan civilisations in Europe to adopt Christianity.
Tax & Payslip Guide
Understanding your taxes in Lithuania — tax year Calendar year (1 January – 31 December).
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 8,964 | 0% (NPD — non-taxable income amount up to ~€747/month) | The NPD (Neapmokestinamasis pajamų dydis — non-taxable income amount) for 2026 is approximately €747/month (€8,964/year) at the minimum wage level. The NPD is progressive — it reduces gradually as income increases, reaching zero for income above approximately €2,864/month. You must declare to your employer that you are entitled to NPD, otherwise tax is deducted on full gross salary. Additional NPD supplements: ~€70/month for the first child, €140/month for each subsequent child. |
| 0 | 82,962 | 20% (employment income up to 36× average monthly salary / ~€82,962/year) | The standard 20% personal income tax (gyventojų pajamų mokestis, GPM) applies to employment income up to 36 times the average monthly salary (approximately €82,962/year in 2026, based on an average monthly salary of ~€2,304). The effective rate is lower due to the NPD deduction and social insurance contributions which are deducted before tax. For most expats, the effective income tax rate is 10–18% of gross salary. |
| 82,963 | 138,270 | 25% (employment income between 36× and 60× average monthly salary) | A new 25% GPM rate applies to employment income between €82,963 and €138,270/year (36–60 times the average monthly salary). This third bracket was introduced from 1 January 2026 as part of Lithuania's progressive tax reform. The threshold is adjusted annually based on the average monthly salary declared by the State Social Insurance Fund (Sodra). |
| 138,271 | ∞ | 32% (employment income above 60× average monthly salary / ~€138,270/year) | The higher 32% GPM rate applies to annual employment income exceeding 60 times the average monthly salary (approximately €138,270/year in 2026). Note: at income above €138,270/year, pension social insurance contributions cease to accumulate; only the health insurance contribution (6.98%) continues. Capital income (dividends, interest above thresholds) is subject to 15% GPM. Rental income: 15% GPM. |
🏛️ Social Contributions
Employee social insurance contributions (sodros įmokos) are deducted from gross salary: pension insurance 8.72% (part goes to Sodra state pension, part optionally to 2nd pillar fund), compulsory health insurance 3.48% (PSDF — Privalomojo sveikatos draudimo fondas), and unemployment insurance 0.32%. The employer additionally pays 1.77% of gross salary on top as their contribution. All contributions go to Sodra which administers pensions, sickness benefits, maternity pay, and unemployment benefits.
PSD (compulsory health insurance) contributions fund the PSDF (National Health Insurance Fund) which reimburses healthcare providers. The combined employee and employer health insurance contribution ensures access to the public healthcare system. Non-working residents must pay PSD themselves through Sodra (minimum ~€20–40/month depending on income level). Students and some other categories are exempt.
Lithuania's second pension pillar is a voluntary but highly recommended accumulation fund. Employees divert 3% of gross salary to a private pension fund of their choice (managed by Swedbank, SEB, Luminor, Sodra PRISMA, etc.). The state adds a supplement of 1.5% of the average monthly wage (~€30–35/month in 2026). Joining is done via Sodra's portal (sodra.lt) or through your employer.
🛒 VAT Rates
All prices in Lithuanian shops are displayed inclusive of PVM (VAT). Businesses with annual turnover above €45,000 must register for VAT. VAT returns: monthly (over €200,000 annual turnover) or quarterly.
🧾 Sample Payslip Decoder
🌍 Special Expat Tax Rules
Lithuania does not have a dedicated expat tax scheme like Denmark's Forskerskatteordningen. Important tax considerations: (1) The NPD (non-taxable income amount) must be claimed — declare to your employer each year using the form provided by VMI; without claiming NPD, excess tax is withheld. (2) Foreign-earned income: Lithuanian tax residents (residing >183 days/year or having permanent ties to Lithuania) are taxed on worldwide income. Double tax treaties apply. (3) IP income: income from intellectual property (patents, know-how) may qualify for the Innovation Box regime at 5% GPM rate. (4) The 2026 three-bracket system (20%/25%/32%) replaced the former two-bracket (20%/32%) structure — high earners resident in Lithuania have an intermediate 25% tier before reaching the top 32% rate.
📋 Double Tax Treaties
Lithuania has double taxation treaties (dvigubo apmokestinimo išvengimo sutartys) with over 50 countries including all EU member states, the USA, UK, Germany, France, Netherlands, Norway, Switzerland, Japan, India, China, Canada, and Australia. Lithuania follows the OECD model convention. The Lithuania–UK tax treaty remains in full effect post-Brexit.
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