Tax laws Lithuania
Lithuania's taxation system is comprehensive and aligns with European Union standards. Key tax laws include the Law on Tax Administration, the Law on Customs, and individual laws governing specific taxes. The taxation framework is also influenced by international treaties, particularly those concerning the avoidance of double taxation.
1. Personal Income Tax (PIT):
Flat Rate: Lithuania employs a flat PIT rate of 15% for residents, applicable to most types of income, including employment, self-employment, investment income, and capital gains.
Social Security Contributions: Employees contribute 3% of their gross salary to the health insurance fund, while employers contribute an additional 6%. For pensions, employees contribute 6%, with employers adding 12.52%. Self-employed individuals have higher contribution rates, with total contributions reaching up to 29%.
2. Corporate Income Tax (CIT):
- Standard Rate: The standard CIT rate is 15%. However, small businesses with annual income not exceeding €300,000 may qualify for a reduced rate of 5%.
3. Value Added Tax (VAT):
Standard Rate: The standard VAT rate is 21%.
Reduced Rates: Certain goods and services are subject to reduced rates:
9% Rate: Applies to most books, periodicals, and passenger transport services.
5% Rate: Applies to specific pharmaceuticals and medical products.
0% Rate: Applies to international transportation services.
4. Excise Duties:
Excise duties are imposed on specific goods, including:
Alcoholic Beverages: Subject to varying rates based on alcohol content and type.
Tobacco Products: Subject to specific duties, with rates adjusted periodically to align with EU standards.
Energy Products: Includes duties on motor fuels, heating oils, and electricity.
5. Property Taxes:
Real Estate Tax: Municipalities levy real estate taxes, with rates varying based on property type and location. The tax is calculated based on the average market value of the property.
Land Tax: Similar to real estate tax, land tax rates differ by municipality and land use.
6. Other Taxes:
Inheritance and Gift Tax: Rates depend on the relationship between the donor and recipient, with closer relatives facing lower rates.
Environmental Taxes: Include taxes on pollution, waste management, and natural resource extraction.
7. Tax Administration:
The State Tax Inspectorate (Valstybinė mokesčių inspekcija) oversees tax administration, ensuring compliance and addressing disputes. Lithuania's tax system is also influenced by EU regulations, particularly concerning VAT and customs duties.
Recent Developments:
In the parliamentary elections held in October 2024, the opposition Social Democrats emerged as the leading party. The new government, led by Prime Minister Gintautas Paluckas, has expressed intentions to increase taxes for high earners and enhance funding for healthcare and education. This administration also emphasizes continued financial support for Ukraine and maintaining defense spending at 3.5% of GDP.
Note: Tax laws and regulations are subject to change. For the most current information, it is advisable to consult the State Tax Inspectorate or seek professional tax advice.
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