Personal taxation

Income tax
Income tax is levied on individuals who are resident in Lithuania for tax purposes or on individuals who are not resident but receiving Lithuanian source income.

Residence
The residence of an individual is judged by the circumstances in each case. The criteria are laid down in the laws and principally include the requirements such as domicile in Lithuania, personal, social or economic interests location, spending a certain period of time in Lithuania (i.e. as residents are recognised foreign individuals staying in Lithuania with or without brakes for not less than 183 days in a calendar year or staying in Lithuania with or without breaks for not less than 280 or more days during 2 consecutive calendar years, where stay in Lithuania during one of these years with or without brakes lasted at least 90 days).

Taxable income
Permanent residents pay income tax on their worldwide income.

The income tax payable by a non-resident of Lithuania is imposed on:

• the income earned from individual activities undertaken through a permanent base;
• the income earned from a source in Lithuania, however, not through a permanent base: interest, income from distributed profits including annual bonus paid to the members of the Board or Supervisory Council, income from the lease of immovable property located in Lithuania, royalties, remuneration in respect of labour or similar relations, income from sporting and artistic activities, income from the lease, sale and other forms of transfer of the ownership of movable property if this kind of property is subject to legal registration in accordance with legal provisions of the Republic of Lithuania as well as and immovable property, compensations for breach of authors and neighbouring rights.

Rates
The standard income tax rate is 15 %. 20 % income tax rate shall apply to distributed profits.

The income from the activities specified by the legislation may be exercised under a business certificate that is subject to a fixed amount of income tax determined by municipality councils.

Non-taxable income
The most notable tax exempt income is: statutory compensations, except for compensation for unused vacations and redundancy payments upon the termination of employment contracts; certain life insurance payments and non-life insurance compensations; interest on loans if the repayment commences not earlier than 366 days after the date of the loan; capital gains from the sale of movable property, if this property must be registered in the Republic of Lithuania and this movable property is registered in the Member State of European Economic Area, as well as real estate located in the Member State of European Economic Area if the movable property or real estate was acquired more than three years prior to its sale or other transfer into ownership; income from the sale of securities if the securities are sold or otherwise transferred into ownership not earlier than 366 days after the date of their acquisition and the person alone or together with related persons 3 last years did not hold more than 10% of the shares (stocks) of the entity, where securities were sold; lottery winnings from the entities registered with the European Economic Area that are subject to tax from the turnover of the lottery; etc.

Employment income
There is no separate wage tax in Lithuania – employment income is subject to 15 % amount income tax rate, which is automatically deducted by the employer.

Income and capital gains from substantial shareholdings
Capital gains on the disposal of a substantial shareholding in a company are taxed according to the general principals of income tax - the income tax at a rate of 15 % is imposed on the capital gain.

Tax returns and payments
The tax period is the calendar year. Depending on the particular type of income, the tax is paid monthly or annually. All income is divided into classes "A" and "B".

Income of A class comprises:

• income received from a Lithuanian entity, foreign entity through its permanent establishment and non-resident of Lithuania through his permanent base, except for winnings from gaming and lotteries, income received by a member of an unlimited civil liability entity from the said entity, income from individual activities other than specified in this paragraph, and also income, not specified in this paragraph, from the sale or other transfer into ownership of property other than that used for the purpose of individual activities. Income from sports activities, performing activities received from Lithuanian entities, foreign entities through their permanent establishments and non-resident of Lithuania through their fixed base as well as income from the sale or other transfer into ownership of property other than that used for the purpose of individual activities, which is received from the sale or other transfer into ownership of movable property where such type of property is subject to legal registration under the legal acts of the Republic of Lithuania and where it is (or must be) registered in Lithuania or from the sale and other transfer into ownership of immovable property located in Lithuania, and also income from individual and non-individual activities received from the sale or other transfer into ownership of non-felled forest, roundwood, base metal scrap shall also be attributed to income of A class;

• income received from residents of Lithuania incidental to employment relations or relations in their essence corresponding to employment relations, income from sports activities, income from performers' activities, interest and royalties.

Income of B class includes all income which is not attributed to A class.

Personal income tax from A class income is withheld by entities, whereas personal income tax from B class income is paid by individual upon the end of taxable period.

Persons, who get income of B class, must fill the annual tax returns after the end of calendar year before 1 May of the following calendar year.

Inheritance and gift taxes
Inheritance tax is levied on a beneficiary. Residents pay the inheritance tax on all inherited property – immovable and movable property, money, securities, etc. Non-residents pay the inheritance tax on inherited immovable property located in Lithuania and movable property, which is subject to legal registration. The rate of the inheritance tax must be calculated subject to the 70% value of the inherited property. The rate of the inheritance tax depends on the value of the inherited property: the property which taxable value does not exceed LTL 500,000 (EUR 144,810) is subject to 5 % inheritance tax rate, and the property which taxable value exceeds LTL 500,000 (EUR 144,810) is subject to 10 % inheritance tax rate.
The exemptions from the inheritance tax are when the taxable value of the inherited property does not exceed LTL 10,000 (EUR 2,896), also when the property is inherited by children (adopted children), parents (adoptive parents), guardians (custodians), wards (foster children), grandparents, grandchildren, brothers or sisters.
There is no separate gift tax – the gifts are subject to individuals’ income tax. Income received as gift from spouses, children (adopted children), parents (adoptive parents) brothers, sisters and grandparents, as well as the sum (value) of income received by gift from other individuals during the calendar year, which shall not exceed LTL 8,000 (EUR 2,317), is non-taxable.