Lithuania Rental Income Guide 2026

Overview — Rental Income Taxation

Rental income from immovable property in Lithuania is classified as income from individual activity. Landlords can choose between two taxation methods: standard progressive taxation (20–32%) with actual expense deductions, or a simplified 15% flat rate on gross rental income (without deductions). The choice is made on an annual basis when filing the tax return. Resident landlords are taxed on worldwide rental income; non-residents are taxed only on Lithuanian-source rental income.

Method 1 — Progressive IIT Rates (20–32%) with Deductions

Under this method, rental income is added to the landlord's total annual income and taxed at the progressive IIT rates (20% up to EUR 101,844, 32% above). The landlord may deduct actual expenses incurred in earning the rental income, including:

• Mortgage interest on the rental property loan
• Property maintenance and repair costs
• Property management fees
• Insurance premiums for the property
• Utilities (if paid by the landlord)
• Annual real estate tax (NT tax)
• Depreciation of the property (furniture, fixtures)
• Advertising costs for finding tenants
• Professional fees (legal, accounting, valuation)

This method is generally more favourable for landlords with significant deductible expenses, as the net taxable income may be substantially lower than gross rental receipts.

Method 2 — Optional 15% Flat Rate

Landlords may opt for a simplified flat rate of 15% on gross rental income. Under this method:

• The tax is calculated on gross rental income (no deductions for expenses)
• No deduction for mortgage interest, maintenance, or other costs
• No depreciation allowance
• The rate is a flat 15% regardless of the landlord's total income level

This method simplifies tax compliance and is beneficial for landlords with low actual expenses relative to rental income (e.g., fully furnished properties with minimal maintenance). The 15% flat rate is an optional election and must be declared in the annual tax return.

Registration and Filing

Landlords receiving rental income must register their rental activity with VMI. Key compliance requirements:

• Registration: Landlords must register as recipients of rental income through the VMI portal (EDS)
• Tax return: Rental income is reported on the annual personal income tax return (by 1 July of the following year)
• Quarterly reporting: Landlords may need to submit quarterly income declarations if they have significant rental income
• Tax payment: Tax is generally paid when the annual return is filed (by 1 July)

Short-Term Rentals (Airbnb-style)

Short-term rental income (accommodation services) is treated as income from individual activity and taxed under the same rules as long-term rentals. However, short-term rental hosts may also need to comply with:

• Registration with the tourism authority (for accommodation services)
• VAT registration if annual turnover exceeds EUR 45,000
• Municipal tourism tax (if applicable)

The 15% flat rate option is also available for short-term rental income.

Non-Resident Landlords

Non-resident landlords are subject to the same tax rules as residents on Lithuanian-source rental income. The income is taxed at the progressive IIT rates (20–32%) or the optional 15% flat rate. Non-residents must appoint a tax representative in Lithuania or register directly with VMI to fulfil their tax obligations. Double tax treaties may affect the taxation of rental income for non-residents.

FAQs

Can I switch between the two methods each year?

Yes, the choice between progressive rates with deductions and the 15% flat rate can be made annually when filing the tax return.

Is rental income subject to social security contributions?

Generally, no. Rental income from immovable property is not subject to Sodra social security contributions for individuals. However, if rental activity constitutes business activity, different rules may apply.

Are expenses deductible under the 15% flat rate method?

No, the 15% flat rate is applied to gross rental income with no deductions. If you have significant expenses, the progressive method with deductions may be more beneficial.

Disclaimer

This guide provides general information about Lithuanian rental income taxation 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.