Value-added tax (VAT)
Supply of goods and services for consideration within the territory of Lithuania, performed by a taxable person engaged in economic activity, is subject to VAT in Lithuania.
The standard VAT rate is 21%.
The reduced rate of 9% applies to:
- Books and non-periodical information publications.
- Public transport services.
- Supply of heating to residential premises and supply of hot water.
- Firewood for household energy users.
- Accommodation services (applicable until 31 December 2022).
The reduced rate of 5% applies to:
- Periodical publications.
- Technical aid devices and their repair services for the disabled.
- Pharmaceuticals and medical aid devices compensated by the state (under certain conditions).
- Not compensated prescription drugs.
Supply of goods exported outside of the European Union (EU) as well as supply of goods to VAT payers registered in another EU member state is subject to VAT at the rate of 0% (exempt with credit). There are other supplies of goods and services that are exempt with credit (e.g. goods and services for vessels and aircraft, transportation and linked services related to export or import of goods).
In order to apply zero-rated VAT on goods carried out from Lithuania, VAT payers must hold supporting documents as evidence that these goods were actually exported from the European Union or carried out from Lithuania to another EU member state.
Goods and services that are exempt without credit include, but are not limited to, the following:
- Supply of goods/services related to health care.
- Social services supplied by non-profit entities.
- Education and training services.
- Cultural and sports services rendered by non-profit entities.
- Services provided by political parties, trade unions, and other non-profit membership based legal entities to their members, meeting certain requirements.
- Services provided by religious communities, other communities, and centres to their members, meeting certain requirements.
- Postal services.
- Radio and TV broadcasting services provided by non-profit legal entities.
- All types of insurance and re-insurance services.
- Financial services meeting certain requirements (option to tax may be exercised for some financial services).
- Lotteries and gambling.
- Rent or sale of immovable property (option to tax may be exercised, certain conditions apply).
- Supply of goods where the VAT payer has not deducted any proportion of the VAT on purchases and/or importation thereof (certain conditions apply).
Sale and contribution in kind of a business or part of a business is treated as being out of scope of VAT (under certain conditions).
EU customs law is applicable in full.
EU customs law, also known as the Union Customs Code, compiles the rules, arrangements, and procedures applicable to goods traded between the European Community and non-member countries. The Union Customs Code indicates an obligation on a person to pay the amount of the import or export duties that apply to specific goods under the Community provisions in force. The application of the EU customs law means that:
- trade between Lithuania and other EU countries is customs-free
- imports from non-EU countries are subject to EU customs tariffs, and
- numerous free trade agreements concluded between EU and non-EU countries apply to Lithuania.
Excise duty is imposed on the following goods produced in or imported into Lithuania: ethyl alcohol and alcoholic drinks, including beer and wine; processed tobacco, including cigarettes, cigars, cigarillos, and smoking tobacco; electronic cigarettes liquid, energy-related products, including petrol, kerosene, gasoline, fuel oil, lubricating oils, natural gas, and their substitutes and additives; coal, coke, and lignite; and electricity. The tax rate depends on the type and quantity of goods.
Lithuanian and foreign entities are subject to land tax collected by the municipalities for the land they own in Lithuania. Roads for general use and forestland are exempt. The assessment and payment terms are set forth by the municipalities, which are also entitled to grant land tax incentives.
The annual land tax rate ranges from 0.01% to 4%, depending on local municipalities. Please see the table below describing the main features of the land tax:
|Tax rate||0.01% to 4%, defined by municipality.|
|Taxable value||The average market value determined in the map of values established according to the mass valuation.|
|The mass valuation is performed not rarer than every five years.|
|A possibility to apply the value determined during the individual valuation if it differs from the market value by more than 20% (principles are similar to real estate tax).|
|Declaration||Template of a tax return is completed and sent by the tax authorities until 1 November.|
|Payments||One annual payment due 15 November.|
Land lease tax
State-owned land that is leased for Lithuanian and foreign companies is subject to land lease tax at a rate established by the municipalities. The minimum tax rate set by the government is 0.1%, and the maximum rate is 4% of the value of the land.
Real estate tax
The real estate tax rate ranges from 0.5% to 3%. Tax is levied on the value of real estate owned by individuals and used for commercial purposes or owned by legal entities (with certain exemptions). Municipal councils establish a specific tax rate for real estate situated in their territories annually.
State duties (stamp taxes)
There are no stamp duties applied in Lithuania; however, minor fees for the services of state institutions, such as the issuance of documents having legal force and other deeds, may apply (e.g. notary fees apply on share purchase agreements [SPAs] meeting certain criteria).
Employers should withhold PIT at the rate of 20% from the employee’s salary. In case employment related income exceeds certain threshold (EUR 104,278 for FY2020)per calendar year, the employee is required to pay the higher 32% PIT rate on the part exceeding such threshold while filing annual PIT return (i.e. to additionally transfer 12% on such income part after the calendar year ends). This threshold is foreseen to be reduced in upcoming years.
There are no additional payroll taxes applicable to an employer other than the employee’s and employer's SSC and the employer’s contributions to the Guarantee Fund and to the Long-term Employment Fund (see below).
Social security contribution (SSC)
SSC is composed of employee’s and employer’s parts (both payments are administered by employer). Rates are higher for annual income up to certain threshold (EUR 104,278 for FY2020).
Employee’s income up to this threshold is subject to the standard rate of SSC for employers in the range from 1.45% to 2.71% and 19.5% for employees. Income above this threshold is subject to lower employee’s SSC - 6.98%. The threshold is foreseen to be reduced on upcoming years.
Also, SSC (employee’s and employer’s parts) must be paid by the employer on the official minimum monthly salary amount in force regardless of the fact that an employee receives lower salary (not applicable when an individual is employed in another company, receives an old age pension benefit, is not older than 24 years, has limited capacity to work, or receives maternity/paternity or childcare benefit, etc.).
Contributions to the Guarantee Fund and Long-term Employment Fund
Contributions to the Lithuanian Guarantee Fund are calculated by employers at a rate of 0.16% on the gross salary payable to employees. The Guarantee Fund provides support to employees in case of employer’s bankruptcy.
Employers also pay an additional contribution to the Long-term Employment Fund amounting to 0.16% on employee remuneration in order to entitle the individuals to receive payment from this fund if their employment agreement is terminated upon employer’s initiative without employee’s fault (special conditions apply). The aforementioned rates are foreseen to be capped and not applied to income exceeding EUR 104,278 per calendar year. This threshold is foreseen to be reduced on upcoming years.
Environmental tax is imposed on pollutants discharged into the environment, dumped waste, a few specified products (e.g. tyres, batteries), and certain types of packaging.
Tax on natural resources
A tax on natural resources is payable on the value of extracted natural resources.