Lithuania Personal Income Tax Guide 2026

Overview — Valstybinė mokesčių inspekcija (VMI)

The State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI) under the Ministry of Finance administers all taxes in Lithuania. Every taxpayer is registered in the Taxpayer Register and receives a tax number. Lithuania operates a self-assessment system for individuals, with tax returns filed electronically via the VMI portal (Elektroninio deklaravimo sistema, EDS). The tax year runs from 1 January to 31 December. Tax returns must be filed by 1 July of the following year. Lithuanian tax residents are taxed on worldwide income; non-residents are taxed only on Lithuanian-source income.

Progressive IIT Rates — 20% and 32%

Lithuania applies a two-bracket progressive income tax system for 2026:

• 20% — on annual taxable income up to EUR 101,844
• 32% — on annual taxable income exceeding EUR 101,844

The brackets apply to the marginal slice of income. For example, an individual earning EUR 120,000 pays 20% on the first EUR 101,844 and 32% on the remaining EUR 18,156. Certain types of income, such as capital gains and dividends, may be taxed at different rates under separate regimes.

Basic Monthly Allowance — NPD (Neapmokestinamas pajamų dydis)

Every resident individual is entitled to a basic monthly tax-free allowance (NPD) of EUR 625 per month (EUR 7,500 per year). The NPD is not a fixed amount for all taxpayers — it reduces gradually for higher-income earners and phases out completely at higher income levels. The formula for the applicable NPD is based on the taxpayer's monthly gross income:

• Full NPD of EUR 625 — for monthly gross income up to approximately EUR 1,000
• Reduced NPD — for income between approximately EUR 1,000 and EUR 2,500, calculated using a phase-out formula
• No NPD — for monthly gross income above approximately EUR 2,500

The exact phase-out formula is updated annually by the Ministry of Finance. The NPD is applied monthly by employers through the PAYE-like system (GPM).

Child Allowances and Tax Credits

Lithuania provides additional tax-free allowances for dependent children:

• EUR 200 per month for the first child
• EUR 200 per month for each subsequent child

These allowances are added to the parent's NPD, increasing the tax-free portion of income. The child allowance is available for children under 18 (or up to 24 if in full-time education). Single parents and parents of disabled children may qualify for additional allowances.

Employment Income and Withholding

Employers in Lithuania are required to withhold monthly income tax (GPM) from employees' salaries under the PAYE-like system. Tax is deducted monthly based on cumulative earnings. Employers must remit the withheld tax to VMI by the 15th of the following month. The employer also withholds social security contributions (19.5% employee share). At the end of the tax year, employees may receive a refund if too much tax was withheld, or owe additional tax if insufficient amounts were deducted.

Relocated Workers — 50% IIT Exemption

Lithuania offers a significant tax incentive for relocated workers. Qualifying individuals who move to Lithuania for employment can benefit from a 50% exemption on personal income tax for up to 3 years. To qualify, the individual must not have been a Lithuanian tax resident for at least 3 years prior to the move, and the employment must require a certain minimum level of qualifications (typically higher education). The exemption applies to employment income and is granted through a reduced withholding rate.

Deductions and Reliefs

Taxpayers may claim deductions for the following expenses, subject to limits:

• Pension contributions: Contributions to the third pillar (voluntary pension funds) are deductible up to EUR 2,000 per year (plus 25% of the average annual wage for contributions to pension funds)
• Life insurance premiums: Premiums paid on qualifying life insurance policies (with savings element) are deductible up to EUR 2,000 per year
• Mortgage interest: Interest paid on housing loans for owner-occupied property is deductible
• Education expenses: Tuition fees for higher education for the taxpayer, spouse, and dependents
• Medical expenses: Certain medical expenses may qualify for tax relief

FAQs

What is the tax year in Lithuania?

The tax year runs from 1 January to 31 December, aligning with the calendar year.

Is joint filing available for married couples?

No, Lithuania requires individual filing. Each spouse files separately and is entitled to their own NPD and allowances.

How is foreign income taxed for residents?

Residents are taxed on worldwide income. Foreign tax credits may be available under Lithuania's extensive network of double tax treaties (over 60 treaties).

Disclaimer

This guide provides general information about Lithuanian personal income tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Lithuanian tax advisor or VMI directly for advice specific to your situation. InvestmentKit does not provide tax advice.