Since you’re here, I assume that you have relocated to Lithuania, or are planning to do it in the near future. Here’s a short summary of what to expect in terms of taxation.

TAX RESIDENCY

You will be considered a Lithuanian tax resident if your permanent place of living during a tax year is in Lithuania. If you stay in a few countries, additional criteria should be considered:

• Are your personal, social or economic interests are in Lithuania rather than in a foreign country? For example, owning a business in Lithuania or immediate family living in Lithuania can trigger this criterion.
• Do you spend 183 or more days in Lithuania per year?
• Do you spend 280 or more days in Lithuania per two consecutive years and 90 or more days during one of those years?

Triggering any of those criteria means that you become a tax resident in Lithuania. As such, you are obliged to report and tax your worldwide income here (i.e. income earned abroad shall also be reported and taxed in Lithuania). The tax year in Lithuania runs from January 1st to December 31st. You should submit an annual personal income tax return until May 1st the following year.

Residency and taxation matters become more complicated if you’re regularly traveling between a few countries. If Lithuania and another country have signed a double tax treaty (check the list here) your income should be taxed only once. Please check examples below on how it works in practice.

EMPLOYMENT RELATED INCOME

This includes salary, bonuses, some of the benefits provided by a legal employer (e.g. accommodation, relocation expense coverage, school fees for children).

• 20% personal income tax rate and 19,5% social insurance contributions on annual income up to 101k euros*
• 32% personal income tax rate and 6,98% social insurance contributions on annual income exceeding 101k euros*

For example, your monthly gross salary in a contract is 3500 euros. Your net pay will be 2117.50 euros (unless you choose to additionally contribute to a voluntary pension fund).

OTHER INCOME

This includes non-employment related income, such as capital gains, interest, royalties, sale or rent of real estate:

• 15% personal income tax rate on annual income up to 202k euros*
• 20% personal income tax rate on annual income up to 202k euros*
• Exception: flat 15% income tax rate is applied on dividends, income as self-employed.

*Thresholds of 101k euros and 202k euros are applicable for 2023 and may change in other tax periods.

PRACTICAL EXAMPLES

Situation 1. Permanent move to Lithuania

Oliver lives in Germany. From 1 March 2023 he permanently moved to Lithuania and started working in a Lithuanian company. He rented out his apartment in Germany and on 1 July 2023 he received dividends.

Oliver’s income until 28 February 2023 is taxed in Germany according to German laws. Employment income from 1 March 2023 is taxed in Lithuania, the employer shall withhold and pay all the taxes to the Lithuanian budget. Dividends shall be taxed in Lithuania after submitting a personal income tax return by Oliver himself (until 1 May 2024). Rent income from an apartment in Germany should be taxed in Germany regardless of Oliver’s residency status.

Situation 2. Traveling in and out

Anna lives in Sweden together with her spouse and children, and works in an international company. From 1 February 2023 she was appointed as CFO of the Lithuanian subsidiary. Anna starts traveling to Lithuania: she spends Monday-Thursday in Lithuania while Friday-Sunday she’s back in Sweden where her family stays. On Fridays she works remotely from Sweden.

Anna can be considered as a tax resident by both Lithuania and Sweden, thus taxation of her income is determined by the rules laid out in the double tax treaty. Generally, Sweden should have a right to tax worldwide income (since Anna’s personal ties with Sweden are stronger) while Lithuania will tax only Lithuanian source income.

As a result, Anna should report income for Mondays-Thursdays in Lithuania and pay income taxes here. All other Anna’s income (including salary for remote work on Fridays) should be taxed in Sweden.

Social security contributions, however, may continue to be paid fully in Sweden if Anna is eligible for A1 certificate (certificate of coverage) in Sweden.

Situation 3. Short term appointment

Sara lives in India, she is a highly qualified engineer in an Indian company. This company has a client in Lithuania and Sara needs to go to Lithuania to provide engineering services to this client. Her business trip is expected to last for 2 to 3 months. The Lithuanian company pays for services directly to the Indian company and additionally provides accommodation for Sara during her stay.

Due to limited stay in Lithuania Sara does not become a tax resident in Lithuania, therefore, her income is taxed in India. Lithuanian social security charges also do not apply.

However, Lithuanian company provides benefit in kind for Sara (accommodation) and it should report it as such. Whether it is taxable or not will depend on the details laid out in the contract with the Indian company.

Please note that this article provides only the overview of the most common taxes. There are numerous exceptions and reliefs not mentioned here that should be considered in your specific case. Please contact your tax advisor to ensure compliance with tax laws.