Lithuania’s 2025 tax & legal landscape: what businesses & individuals need to know

As these changes take effect, it’s crucial for businesses and individuals to stay informed, understand the new rules, and make any necessary adjustments to ensure compliance and maximize the potential benefits. By preparing ahead, Lithuanian taxpayers can navigate these changes smoothly and leverage the advantages they offer. — Akvilė Spirgienė, Senior Tax Advisor at FO Consulting group.

State Defence Fund 

A key change from October 2024 is the establishment of a State Defence Fund aimed at securing additional resources for national defence. This fund will be supported by:  

• A continued temporary levy on banks extended for an additional year;  
• A higher corporate income tax (CIT) rate, increased from 0% to 1%, from 5% to 6% and from 15% to 16%, with specific tax exemptions for healthcare and insurance sectors now removed;  
• Adjusted excise taxes on products such as alcohol, tobacco, and fuel, all of which will contribute to the fund;  
• A portion of revenue from personal income tax (PIT) further strengthens this initiative.  

Learn more about it here (in Lithuanian) and here (in English).  

Corporate Income Tax changes 

Starting in January 2025, CIT rules will change and affect Lithuania’s 2025 tax & legal landscape in several ways.  

Increasing rate. The general CIT rate will increase from 15% to 16%. Additionally, the preferential CIT rate of 5%, which applies to small companies, cooperatives, and businesses engaged in research and experimental development (R&D), will rise to 6%. Furthermore, a reduced tax rate of 1% will be applied to the taxable profits of agricultural cooperative companies.  

Removing exemptions. Specific exemptions previously offered to healthcare and insurance providers will be removed, i.e.:  

All income of healthcare service providers for healthcare services provided are classified as taxable income, regardless of the sources of funding for those services (state or patient), while the expenses related to earning this income will be considered allowable deductions;  

In case of accumulated funds in third-pillar pension funds or paid premiums for investment life insurance, one could have benefited from a PIT exemption, allowing you to reclaim up to €300 annually when declaring one’s income. However, with the amendments to the Law on PIT passed by the Lithuanian Parliament, these PIT exemptions will gradually be phased out starting in 2025, i.e., for contracts concluded by December 31, 2024, they will remain in effect for an additional 10 years.  

Limiting deductions. From 1 January 2025 new rules will limit vehicle expense deductions, and therefore reduce the payable CIT based on emissions, encouraging businesses to invest in cleaner vehicles, i.e.:  

• EUR 75,000 when purchasing a passenger car with carbon dioxide (CO2) emissions equal to 0 g/km;  
• EUR 50,000 when purchasing a passenger car with CO2 emissions not exceeding 130 g/km; 
• EUR 25,000 when purchasing a passenger car with CO2 emissions exceeding 130 g/km but not exceeding 200 g/km;
• EUR 10,000 when purchasing a passenger car with CO2 emissions exceeding 200 g/km.  

More information in Lithuanian here.  

Changes in Tax Administration 

The Law on Tax Administration is also undergoing revisions, particularly in the areas of data management, international payment reporting, and debt collection procedures:  

Companies handling international payments must now adhere to updated standards for data retention and reporting, aligned with EU CESOP guidelines for consistency. Read more about it here (only in Lithuanian).  

Clearer protocols for collecting overdue taxes aim to enhance compliance and streamline the tax collection process. More information can be found here (only in Lithuanian).  

Investment accounts  

Lithuania is introducing new ways for residents to handle investments in 2025:  

• Taxation on withdrawals. Investment returns will be taxed only upon withdrawal from the account, allowing for the aggregation of profits and losses with carry-forward options. This allows investors to grow their wealth more freely within the account.  
• Various forms of assets. The investment account can include stocks, bonds, investment funds, crowdfunding, peer-to-peer lending platforms, and derivatives, supporting a wide range of investment strategies.  
• No contribution limits. Investors can open multiple investment accounts without limits on contributions or geographical restrictions. However, investment account tax benefits will only be available to Lithuanian residents.  
• Notification Requirement. Investors must notify the State Tax Inspectorate (STI) about their investment accounts, including all accounts if multiple are held.  
• Effective Date. The new provisions will take effect on January 1, 2025. Investments made before this date will also qualify under the new rules if reported to the STI by the end of 2025.  
• Inheritance and Gifting. Financial instruments received as gifts or through inheritance can be included in the investment account with proper notification to the STI.  

More information in Lithuanian here.  

VAT registration updates for small businesses  

An anticipated change in value added tax (VAT) rules from 2025:  

The annual income threshold for VAT registration should rise from €45,000 to €55,000. Instead of calculating income on a rolling 12-month basis, it should now be based on the calendar year.  

Other notable changes 

The tax rate for gambling activities, such as betting and casino games, will increase from 20% to 22% starting in January 2025. 

Employers will need to notify the Social Security Board at least one hour before a new employee starts work. 

From July 2024 onwards, businesses can now use digital receipts, following updated standards for recording and reporting sales. 

To conclude, Lithuania’s 2025 tax & legal landscape updates reflect a commitment to financial stability, eco-friendly practices, and administrative modernization.  

For businesses, these changes will require adjustments to tax planning, reporting, and compliance processes. Particularly with the increase in CIT and the introduction of vehicle expense limitations.  

For individual taxpayers, the introduction of investment accounts provides an exciting new option for managing investments in a tax-efficient way.  

As these changes take effect, it’s crucial for businesses and individuals to stay informed, understand the new rules, and make any necessary adjustments to ensure compliance and maximize the potential benefits. By preparing ahead, Lithuanian taxpayers can navigate these changes smoothly and leverage the advantages they offer. 

If you have any questions, feel free to contact us HERE.