How income is taxed in Lithuania?
The residents’ income in Lithuania is taxed by way of personal income tax.
- For the income generated from independent activities (non-salaried occupations), a tax varying from 5% to 15% is levied (depending on operating profit).
- Other income, including the employment-related income, is subject to a 15% income tax rate.
The income received under an employment contract is subject to a 15% personal income tax rate, which is deducted by the employer, whereas those pursuing independent (self-employment) activities are obliged to pay personal income tax themselves.
Residents’ annual income and personal income tax returns for the previous year must be filed no later than 1 May 2016 for the previous year, e.g., by 2 May 2016, the income generated during the year 2015 must be declared. Residents are obliged to declare not only Lithuanian sourced but also foreign earned income, but only in cases when a person is recognized a permanent Lithuanian resident during the period for which tax return is filed, that is, under the following conditions:
- A person is domiciled in Lithuania, or
- The location of a person’s personal, social or economic interests during the tax period is Lithuania rather than a foreign country, or
- A person stays in Lithuania with or without breaks for no less than 183 or more days throughout a calendar year
- In other cases provided for in article 4 of the Law on Personal Icome Tax.
On an annual basis, the STI exchanges information with the Tax Inspectorates of other EU/EEA member states regarding specifications of tax returns. Foreign earned income is not taxable in Lithuania (see Is foreign earned income taxable).
An annual personal income tax return can be submitted through the STI e-declaration system (by connecting via e-banking). However, as the declaration of income can be quite a confusing process, the stuation can be resolved by appearing in person at to the territorial division of STI and requesting help from a STI staff member.
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