The Lithuanian Parliament has approved a comprehensive tax reform package, introducing changes that will take effect from 1 January 2026. The updates impact corporate income tax, personal income tax (PIT), real estate taxation, and more. Businesses and individuals operating in or with Lithuania should begin preparations now to ensure compliance and strategic alignment.
Corporate Income Tax Updates: Higher Rates, New Incentives
From 2026, Lithuania will raise its standard corporate income tax rate from 16% to 17%. For small businesses with annual revenue under EUR 300,000, the reduced rate will increase from 6% to 7%. However, the current 0% tax rate for new companies will be extended from one to two years, encouraging entrepreneurship.
A key incentive is the introduction of immediate depreciation, allowing companies to deduct the full cost of certain assets—such as machinery, equipment, and software—in the year of purchase.
Other noteworthy corporate tax changes include:
- A new 70% limit on deductible tax losses
- Tighter rules for intra-group loss transfers, requiring at least two years of group relationship
A Progressive Personal Income Tax System
Lithuania will transition to a progressive PIT regime, taxing total income—including employment, self-employment, rental income, and capital gains—at 20%, 25%, or 32%, depending on income level. Dividends and certain capital gains will continue to be taxed at a flat 15% rate.
For the self-employed, income up to EUR 42,500 will be taxed at 20%, while a lower band (5–20%) will apply to smaller incomes. Income above this threshold will be taxed progressively, alongside other income streams.
Real Estate and Additional Measures
Significant changes are also coming to real estate taxation:
- Primary residences valued below EUR 450,000 will be exempt
- Other properties will be taxed progressively at 0% to 1%, depending on value
- Commercial properties and corporate-owned properties will incur an additional 0.2% defence contribution
Further measures include:
- A reduced capital gains holding period (from 10 to 5 years) for tax-exempt real estate sales
- A sugar tax on sweetened beverages
- Higher VAT rates for sectors such as tourism and transport
- Lower VAT on books (from 9% to 5%)
- The return of child-related tax relief, effective from 2027
Eurofast's Take
As Lithuania introduces a more progressive and investment-focused tax environment, early planning will be key to navigating compliance and minimising tax exposure. Eurofast's tax experts in the Baltics are ready to help:
- Assess how the reforms impact your corporate or personal tax liability
- Recalculate cost structures and compliance timelines
- Adjust your strategy to benefit from new reliefs or mitigate higher tax burdens
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
