Taxable monthly earnings in cash and in kind received from the principal workplace include wages, various additional payments (e.g. sickness and maternity benefits paid from social insurance), bonuses, employee stock option benefits, incentive payments, taxable allowances and other similar payments, compensation upon discharge from work (e.g. compensation for remaining vacation), gratuities, and compensation for unlawful dismissal from work.
The following income derived from employment in a Lithuanian legal entity is non-taxable for PIT purposes:
- Life insurance contributions, additional (voluntary) health insurance contributions, and pension contributions paid by an employer on behalf of an employee are not considered as taxable benefits if certain conditions are met and provided that the total amount of such contributions does not exceed 25% of the employee's annual employment-related income and the recipient of such contributions is established in an EEA country.
- Certain compensations established by the local Lithuanian legislation (e.g. business trip related expense reimbursements, daily allowances if certain conditions are met).
- Income received as a prize or gift from the employer if the value does not exceed EUR 200 per tax year.
- The benefit when employer pays for railway or public transport tickets for the employee for the arrival/departure to/from one's workplace.
- Payments made by an employer upon the death of a spouse or certain other heirs of an employee, as well as benefits paid to a spouse, children (adopted children), and parents (adoptive parents) upon the death of an employee.
- Other income determined in Article 17 of the Law on PIT.
For tax purposes, equity compensation received by an employee in kind or in cash is treated as employment-related income and is subject to PIT. The taxable amount is calculated based on the difference between fair market value of the equity granted and the amount paid for it by the employee, if any.
Employee stock options exercised at no cost or for lower than their fair market value price not earlier than three years following their grant date will be treated as non-taxable income for PIT purposes, meaning that taxation should arise only at the time of share sale. This relief applies to stock options granted after 1 February 2020.
An individual's business income derived from self-employment and other individual activities, including income received from rent, sale, or transfer of property related to individual activities (not taking into account objects of immovable kind) is taxed depending on the amount of income received. PIT calculated at the 15% flat rate on taxable income is reduced by applying a PIT credit, calculated according to special formulas. Therefore:
- A 5% rate applies if taxable income does not exceed EUR 20,000 per calendar year.
- A proportionally increasing rate ranging from 5% to 15% applies to taxable income exceeding EUR 20,000 but lower than EUR 35,000 received per calendar year.
- A 15% flat PIT rate is applied to the taxable income amount of EUR 35,000 and higher received per calendar year.
Income under a business certificate (including certain rental income) can be received if it does not exceed the limit of EUR 45,000; the excess is taxed at PIT rate of 15% by applying a PIT credit as commented above.
Taxable income derived from the sale of property is calculated as the difference between the sale price and the acquisition price, and the taxable gain is subject to a 15% PIT rate for income amount not exceeding EUR 162,324 per calendar year. The exceeding part is taxable at a PIT rate of 20%.
The following capital gains are non-taxable:
- Profits from transfer of financial instruments or realisation of derivatives not exceeding EUR 500 per tax year (with certain exceptions).
- Income from the sale of housing (including land) located in an EEA member state if the individual’s place of residence was declared there during the last two years prior to the sale. If the place of residence was declared for a shorter period but income received from the sale was invested into the acquisition of another housing located in one of the EEA member states in one year after the sale and the place of residence was declared there accordingly, such income would also be treated as non-taxable.
- Income from the sale or other transfer of movable property that is legally registered in Lithuania or within an EEA member state if the property was acquired more than three years prior to its sale or other transfer.
- Income from the sale of immovable property (except for housing as indicated above) if the property was acquired more than ten years prior to its sale.
- Capital gains not exceeding EUR 2,500 during the tax period.
Dividends are subject to a flat 15% PIT rate.
The following interest income is tax exempt:
- Interest income received on consumer credits granted via peer-to-peer lending platforms or funds lent via crowdfunding platforms in Lithuania or in another EEA country is non-taxable, provided that the amount does not exceed EUR 500 per calendar year.
- Interest received on (i) government or municipal bonds of the member states of the EEA and (ii) deposits kept in banks and other credit institutions of the EEA member states if the government or municipal bonds are acquired or the contracts of deposits are concluded before 31 December 2013.
- Interest received on non-equity securities if such securities (i.e. corporate bonds) are acquired before 31 December 2013 and started to be redeemed not earlier than 366 days after the date of issue.
- When the contracts of (i) deposits kept in banks and other credit institutions (not necessarily in the EEA member states) are concluded or (ii) non-equity securities or (iii) non-equity government securities (i.e. government or municipal bonds, not necessarily of the EEA member states) are acquired after 1 January 2014, the tax relief is applied only to the amount of such interest that does not exceed EUR 500 per tax year.
Income derived from rent is subject to a 15% PIT rate for the income amount not exceeding EUR 162,324 per calendar year. The exceeding part is taxable at a rate of 20%.
Certain items of income are non-taxable in Lithuania, including:
- Employee stock options exercised at no cost or for lower than their fair market value price not earlier than three years following their grant date are treated as non-taxable income for PIT purposes. This relief applies to stock options granted after 1 February 2020.
- Various welfare allowances (except sickness, maternity/paternity) and compensations.
- Inherited income, if it is subject to inheritance tax.
- Income received as a gift from spouses, children (adopted children), parents (adoptive parents), brothers, sisters, grandchildren, and grandparents, as well as the amount (value) of income received as a gift from other individuals during the tax period, which shall not exceed the amount of EUR 2,500.
- Lottery winnings, provided they are paid by EEA entities that pay taxes on the lottery turnover in accordance with the order established by the legislation of the EEA member states.
- Awards, sport contest prizes, and lottery winnings herein the value of which does not exceed EUR 200, provided such prizes are received from the same person not more than six times during the tax period.
- Sailors' earnings for their work on a ship registered in the Register of the EEA country maritime transport during the voyage.
- Other income determined in Article 17 of the Law on PIT.