Employment-related expenses are not deductible from individual employment compensation.
The following expenses incurred by Lithuanian tax residents over the tax period may be deducted from taxable income:
- An individual will be able to deduct the expenses incurred for one's own or spouse’s benefit for building finish and any type of its repair (except for apartment building renovation), car repair, and childcare services for children until 18 years, provided that the service provider is/should be registered as a Lithuanian taxpayer. The total annual amount of such expenses should not exceed EUR 2,000. The relief is temporary and is applied to 2019, 2020, and 2021 calendar years.
- 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 Organisation for Economic Co-operation and Development (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.
- 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.
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 total amount of deductible expenses specified above is limited to 25% of the taxable income (subject to 15%, 20%, and 32% PIT rates) during the calendar year. The total deductible life insurance premiums and both types of pension contributions amount should not exceed EUR 1,500.
A monthly tax-exempt amount (TEA) is applied only to employment-related income of Lithuanian tax residents, as follows:
- A TEA of EUR 625 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 840 in 2023).
- 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 formulae:
- When an individuals‘ employment-related income per month does not exceed an amount of EUR 1,926, monthly TEA = 625 - 0.42 x (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 840 in 2023).
- When an individuals‘ employment-related income per month exceeds an amount of EUR 1,926, monthly TEA = 400 - 0.18 x (the individual’s employment related income per month minus EUR 642).
- The TEA is proportionally reduced for larger amounts of income, and, if income amounts to or exceeds EUR 2,864.22 per month, no TEA is applied.
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 double taxation treaty (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, provided their annual gross income does not exceed EUR 34,370.67.
For all children, the Lithuanian local municipal offices pay to families EUR 85.75 per month per child from birth to 18 years of age or older if they study according to a general curriculum until they reach the age of 21. The additional children allowances are also possible for families receiving certain low amounts of income, having three or more children, etc.
There are no personal allowances available in Lithuania.
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.
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.