Lithuania

Employment expenses

Employment-related expenses are not deductible from individual employment compensation.

Personal deductions

The following expenses incurred by Lithuanian tax residents over the tax period may be deducted from taxable income:

• Pension contributions paid by the tax resident as additional accumulative pension contributions (as per the provisions of the Law on Pension Accumulation, i.e. second tier pension fund contributions paid in excess of the maximum established rate) to pension funds, associations of professional pension funds’ participants, or similar established in the EEA member states or the OECD member countries will be deductible, provided that such contributions exceed 3% of the individual’s income on which social security contributions are calculated.
• Pension contributions paid to pension funds established in EEA member states or OECD member countries for one’s own benefit or for the benefit of a spouse, minor children, or disabled children (applicable for contracts concluded till 31 December 2024).
• Life insurance premiums paid for one’s own benefit or for the benefit of a spouse, minor children, or disabled children if the life insurance company is registered in an EEA member state or OECD member country (applicable for contracts concluded till 31 December 2024).

• Payments for vocational training under a formal vocational training program or formal vocational training program module after the completion of which the relevant qualification or competencies are obtained, as well as the payments for studies after the completion of which the higher education qualification is obtained (the loan amount repaid over the tax period may be tax deductible).

The aggregate amount of deductible expenses described above may not exceed 25% of the individual's taxable income for the tax year. In addition, the total amount of deductible life insurance premiums and pension contributions is limited to EUR 1,500 per tax year. 

Standard deductions

A monthly tax-exempt amount (TEA) is applied only to employment-related income of Lithuanian tax residents, as follows:

• A TEA of EUR 747 per month is applied to individuals whose employment-related income does not exceed an amount of one minimum monthly salary that was in force as of 1 January of the current tax year (EUR 1,153 in 2026).
• If employment-related income exceeds an amount of one minimum monthly salary that was in force as of 1 January of the current tax year, a monthly TEA is calculated according to the following formula: monthly TEA = EUR 747 − 0.49 × (monthly employment income − the individual’s employment-related income per month minus one minimum monthly salary that was in force as of 1 January of the current tax year, i.e. EUR 1,153 in 2026).    

The annual TEA shall be applied to the total annual income received by the individual. In cases where an individual receives additional income to the salary income (or salary increases during the year), corrections are made at the end of the year (when filing the annual income tax return). The calculation is made taking into consideration the annual taxable income, including tax exempt income received for the work performed in the country Lithuania has a DTT concluded with and accordingly taxed in such a country. Also, income from individual activities derived under business certificates is not included in the calculation of the annual TEA.

The annual TEA can be applied to Lithuanian tax non-residents only at the end of the tax period by submitting the annual PIT return. The relief is generally available with respect to Lithuanian-source employment income and is determined based on the individual's annual taxable income in accordance with the provisions of the PIT Law. 

Personal allowances

There are no personal allowances available in Lithuania.

Business expenses

Expenses incurred for the purpose of receiving income from individual activities by self-employed individuals are tax deductible. There are two options to deduct expenses from income received/earned during the tax year:

• It is possible to deduct the actual expenses incurred by individuals while performing individual activities; however, such expenses have to be supported by relevant substantiating documents.
• Alternatively, it is possible to deduct 30% of income received/earned, and no supporting documents are required.

Losses

In certain cases, individuals performing individual activities can carry forward the losses for an unlimited period of time, until the activity that resulted in such losses is terminated.

Generally, losses resulting from the sales of shares and other financial instruments can reduce the profits earned from such sales during the same tax year (certain restrictions apply). However, losses resulting from other sales of property (e.g. immovable property) do not reduce the taxable base of other sales transactions of such property. Moreover, it is not possible to carry forward losses resulting from capital gains.