Lithuania

Situated in Northern Europe, Lithuania is the largest of the Baltic States, and is bordered by Latvia to the north, Belarus to the east, and Poland to the South.

Its southeast border connects to the Russian enclave, Kaliningrad Oblast while its west coast meets the Baltic Sea. 

General Information

• Full Name: The Republic of Lithuania
• Population: 2.831 million (World Bank, 2022)
• Capital: Vilnius
• Major Languages: Lithuanian, English, Russian, German and Polish
• Monetary Unit: 1 euro = 100 cents
• Main Exports: Mineral fuels including oil, machinery, furniture, plastics, vehicles, wood and tobacco
• GNI per Capita: US $23,870 (World Bank, 2022)
• Internet Domain: .lt
• International Dialing Code: +370

How Do I Say in Lithuanian?

• Hello: Sveiki
• Good Morning: Labas Rytas
• Good Evening: Labas Vakaras
• Do you speak English?: Ar tu kalbi angliškai
• Good Bye: Atsisveikinimas
• Thank You: Ačiū
• See you later: Susitikime vėliau

Dates and Numbers

Dates are usually written in the year, month and day sequence. For example, 2019.06.07

Numbers are written with a comma to separate thousands and a period to denote fractions. For example, €3,500.50 (three thousand five hundred euro and fifty cents).

Lithuania, a vibrant Baltic state, has rapidly emerged as a compelling destination for business and investment in Europe. With its strategic location at the crossroads of East and West, Lithuania offers unparalleled access to the European Union (EU) and Eastern markets, making it an ideal gateway for businesses aiming to expand their footprint. 

Lithuania's prime geographical position allows for easy access to major European markets, including Scandinavia, Russia, and the CIS countries. The country boasts an efficient transportation and logistics infrastructure, including well-developed road, rail, and sea links, facilitating smooth trade and commerce across borders.

Lithuania has experienced significant economic growth, driven by a competitive business environment, a highly skilled workforce, and strong governmental support for innovation. The country ranks impressively in global ease of doing business indexes, reflecting its simplified business registration processes, favorable tax regime, and supportive policies for startups and foreign investors.

Lithuania is recognised as a hub for innovation and technology in the Baltic region. The country has made significant investments in ICT infrastructure, fostering a dynamic ecosystem for tech startups, particularly in fintech, biotech, and information technology. Lithuania's commitment to digital transformation is evident in its government services, making it one of the most digitally advanced countries in Europe.

The Lithuanian workforce is well-educated, skilled, and multilingual (over 50% of Lithuania’s population speak more than two languages), with a strong emphasis on IT, engineering, and sciences. The country’s universities and technical institutions collaborate closely with businesses to ensure that the education system meets the evolving needs of the labor market. This access to talent is a key driver for companies looking to innovate and grow.

Lithuania, a country that harmoniously blends centuries-old traditions with a forward-looking approach to technology and business, presents a compelling case for investment. Its dynamic economy, strategic location, and innovative spirit make Lithuania an attractive destination for global investors. 

Lithuania's geographic position at the crossroads of Europe offers seamless access not only to the Baltic States but also to the broader European, Scandinavian, and CIS markets. Its well-developed infrastructure, including the ice-free Port of Klaipėda, modern road and rail networks, and efficient logistics services, ensures easy movement of goods and services. Lithuania serves as a strategic gateway for businesses aiming to penetrate these diverse and lucrative markets.

Lithuania's government is committed to fostering a supportive environment for business and investment. This commitment is reflected in competitive tax rates, straightforward business registration procedures, and a transparent regulatory environment. Incentives for foreign direct investment include tax exemptions, financial grants, and dedicated support for research and development projects, particularly in high-tech and innovation-driven sectors.

Renowned for its vibrant technology sector, Lithuania is home to a flourishing ecosystem of startups, tech companies, and innovation hubs. The country has gained international recognition in fields such as fintech, information technology, and biotechnology. Government initiatives aimed at promoting digitalisation and innovation have positioned Lithuania as one of the most digitally advanced nations in Europe, offering a conducive environment for tech-driven businesses.

Lithuania offers an exceptional quality of life with a low cost of living compared to other European countries. This combination makes it an attractive location for expatriates and international talent. For businesses, operating costs, including labour, real estate, and utilities, are competitive, contributing to an overall cost-effective environment for investment and growth.

Investing in Lithuania offers a unique blend of opportunities, from accessing a vast and diverse market to tapping into a pool of talented and innovative professionals. The country's pro-business policies, strategic location, and commitment to innovation and sustainability make it a standout choice for investors looking to establish or expand their presence in Europe. Whether you're a startup in the tech space, a manufacturer seeking a cost-effective base, or a service provider looking to access the European market, Lithuania provides a fertile ground for growth and success.

Lithuania has positioned itself as a vibrant and welcoming hub for foreign direct investment (FDI) in the Baltic region, driven by its strategic location, dynamic economy, and innovative business environment. The country’s commitment to fostering economic growth and technological advancement has made it an attractive destination for international investors.

Lithuania offers a range of incentives for investors, including tax exemptions, financial grants, and support for research and development activities. The government actively encourages foreign direct investment (FDI) through the Lithuania Investment Promotion Agency (Invest Lithuania), providing comprehensive assistance to investors exploring opportunities in the country. These include:

Tax Incentives

• Reduced corporate income tax rates for specific investment projects.
  Tax exemptions for investments in free economic zones (FEZs) and industrial parks.

Financial Support

• Grants for research and development (R&D) projects, aimed at fostering innovation.
• Access to EU structural funds for investments in infrastructure, technology, and human capital development.

Real Estate Incentives

• Preferential lease terms and rates for land and premises within FEZs and industrial parks.
• Exemptions from real estate tax for investments that meet certain criteria.

Support Services

• Comprehensive assistance from Invest Lithuania, the national investment promotion agency, including consultancy services, assistance in dealing with governmental institutions, and help in finding local partners and talent.

Workforce Development Incentives

• Subsidies for employee training and skills development to meet the specific needs of investors.
• Support for workforce requalification programs, ensuring that companies have access to the necessary skills and competencies.

Thriving FDI sectors in Lithuania include:

• Information Technology: Lithuania's IT sector is booming, with a strong focus on software development, cybersecurity, and IT services.
• Fintech: The country is a rising star in the fintech space, supported by progressive regulations and a conducive ecosystem for fintech companies.
• Manufacturing: Lithuania has a robust manufacturing sector, specializing in machinery, automotive components, and electronics.
• Life Sciences: The life sciences industry, particularly pharmaceuticals and biotechnology, is fast-growing, supported by research institutions and a highly skilled workforce.
• Renewable Energy: With a commitment to sustainability, Lithuania encourages investments in renewable energy sources, including wind and solar power.

Foreign direct investment in Lithuania is supported by a favorable investment climate, strategic advantages, and a comprehensive package of incentives designed to facilitate business growth and innovation. By leveraging these opportunities and incentives, investors can tap into Lithuania’s potential as a hub for business excellence in Europe. The country's focus on technology, skilled workforce, and commitment to economic development make it an attractive destination for businesses looking to thrive in a competitive global landscape.

It is not mandatory to make payments to employees and the authorities from an in-country bank account.

Most banks open at 8am and close early, normally around 3pm.

Lithuania offers a dynamic ecosystem for businesses, combining a strategic location, a skilled workforce, and a pro-business regulatory environment. Whether you're looking to establish a startup, expand your existing business, or explore new opportunities, Lithuania has different types of business entities available for the differnt needs of businesses. 

Business Entities in Lithuania

Individual Enterprise (IĮ)

An Individual Enterprise, or "IĮ," in Lithuania is a perfect fit for solo entrepreneurs who prefer a straightforward business structure. Key features of this entity type are:

• Simplicity in Management: With no requirement for a board of directors or shareholders, the sole entrepreneur retains full control over business decisions and operations.
• Ease of Taxation: Offers a simplified tax regime, potentially reducing the administrative burden on the entrepreneur. The income of the IĮ is taxed as personal income of the owner, streamlining the tax filing process.
• Personal Liability: The owner has unlimited personal liability for the business's debts and obligations, meaning personal assets could be at risk.

Private Limited Liability Company (UAB)

The Private Limited Liability Company, or "UAB," is the most popular business structure for small to medium-sized businesses in Lithuania, offering:

• Limited Liability Protection: Shareholders are only liable to the extent of their own investment in the company, protecting personal assets from business liabilities.
• Flexibility in Ownership and Management: A UAB can have one or more shareholders (with a maximum of 250), and the management structure is defined by the company's articles of association.
• Capital Requirements: There is a minimum share capital requirement of EUR 2,500, which must be fully paid up before registration.
• Taxation: Subject to corporate income tax on profits, with opportunities for tax planning and optimisation through Lithuania's network of double taxation treaties.

Public Limited Liability Company (AB)

Designed for larger ventures, the Public Limited Liability Company, or "AB," provides a framework for:

• Raising Capital: An AB can offer shares to the public, making it easier to raise significant capital for expansion or development projects.
• Regulatory Oversight: Being able to issue public shares comes with increased regulatory requirements and transparency, ensuring the protection of investors.
• Management Structure: Requires a more complex management and supervisory structure, including a board of directors and, depending on the size, a supervisory board.

Partnerships

Partnerships in Lithuania are divided into two main types, offering flexibility for businesses operated by more than one individual:

• General Partnership (TŪB): In a TŪB, all partners have unlimited liability for the partnership's obligations, similar to individual entrepreneurs. This setup is suitable for businesses where all owners wish to be actively involved in management and operations.
• Limited Partnership (KŪB): A KŪB consists of at least one general partner with unlimited liability and one or more limited partners, whose liability is restricted to their contribution to the partnership. This structure allows for investment in the business without direct involvement in management.

Branches and Representative Offices

For foreign companies aiming to explore or establish a presence in the Lithuanian market without forming a separate legal entity, branches and representative offices offer a solution:

• Branches: Operate as extensions of the foreign company, carrying out business activities directly under the name and responsibility of the parent company. Branches are subject to Lithuanian corporate income tax on the income generated from Lithuanian sources.
• Representative Offices: Primarily focused on non-commercial activities such as market research or promotional activities for the parent company. Representative offices cannot engage in commercial activities but serve as a liaison or marketing outpost.

Registration Process in Lithuania

Registering your business in Lithuania is streamlined and user-friendly, involving the following key steps:

1. Legal Entity Selection: Decide on the most suitable form of legal entity based on your business needs and goals.
2. Company Name Reservation: Choose a unique name for your company and get it approved by the State Enterprise Centre of Registers.
3. Documentation: Prepare the required documents, including the memorandum and articles of association, proof of address, and identification documents for shareholders and directors.
4. Bank Account: Open a corporate bank account in Lithuania and deposit the initial capital required for your chosen entity type.
5. Registration with the Centre of Registers: Submit your application and accompanying documents to the Lithuanian Centre of Registers. This step can often be completed online via the Lithuanian government's e-services portal.
6. Tax Registration: Register with the State Tax Inspectorate (VMI) to obtain a tax identification number (TIN) and fulfill VAT registration requirements if applicable.
7. Social Security and Health Insurance: Ensure registration with SODRA, Lithuania's social security and health insurance fund, for you and your employees.

Embrace the Digital Advantage

Lithuania stands out for its digital infrastructure, offering an e-residency program that allows entrepreneurs from around the world to establish and manage a Lithuanian business online. This digital-first approach simplifies the registration process, making it accessible to international investors and entrepreneurs aiming to tap into the Lithuanian and EU markets. Businesses can be set up electronically provided the entity’s establishment documents comply with the standard forms of documents and the shareholder of the company is a Lithuanian citizen or has e-residency and can access governmental online systems. Companies will need an accumulative account in order to register, this generally takes no longer than a few days to complete. In order to reserve a company name, the Register of Legal Entities must be addressed.

Visa and work permit requirements in Lithuania is crucial for businesses and individuals looking to work or establish operations in the country. There are The are two main categories:

1. Non EU Citizens
2. EU Citizens 

Non-EU Citizens

For non-EU citizens involved in business activities, Lithuania offers several types of visas and permits, catering to different needs and circumstances:

• National Visa (D): Intended for longer stays (up to a year), this visa is suitable for individuals planning to engage in business activities or start a business in Lithuania. Applicants must demonstrate the purpose of their stay, such as business meetings, establishment of a business, or investment activities.
• Temporary Residence Permit: Beyond the visa, non-EU citizens looking to stay and conduct business in Lithuania for longer than a year will need a temporary residence permit. This is particularly relevant for entrepreneurs who plan to actively manage a business or invest in the Lithuanian economy. The permit can also cover startup founders, provided their business is recognised as innovative or beneficial to the Lithuanian economy.
• Blue Card: Aimed at highly skilled non-EU nationals, the EU Blue Card permits residence and work in Lithuania for individuals in possession of a job offer or work contract in a high-skilled occupation. This is an attractive option for businesses looking to bring in talent from outside the EU.

Residence Permit for Non-EU Citizens in Lithuania 

Non-EU citizens need a visa to enter Lithuania for stays shorter than three months, which is typically covered by a Schengen visa. This visa allows travel and stay within the Schengen Area, including Lithuania, for up to 90 days in any 180-day period.

For stays exceeding the duration allowed by a Schengen visa, non-EU citizens must apply for a temporary residence permit. This permit is necessary for those intending to reside in Lithuania for longer periods, whether for work, study, or other reasons.

Work Permit for Non-EU Citizens in Lithuania

Individuals from outside the EU generally need to obtain a work permit to legally work in Lithuania. The work permit is issued by the Employment Services of Lithuania and must be arranged by the employer before the foreign national arrives in the country.

There are exceptions to the work permit requirement for non-EU citizens, particularly if the individual's qualifications are in high demand in the Lithuanian market or if other specific grounds are met.

It is the employer's responsibility to apply for and obtain the work permit on behalf of the foreign national. This involves demonstrating that the position cannot be filled by a Lithuanian citizen or an EU/EEA national.

In some cases, non-EU citizens may apply for a combined residence and work permit, streamlining the process for those intending to live and work in Lithuania for extended periods.

Documentation and Application Process for Non-EU citizens in Lithuania 

Applicants for both residence and work permits will need to provide various documents, including proof of employment, accommodation, health insurance, and sufficient financial means to support their stay in Lithuania.

Temporary residence permits and work permits have expiration dates and must be renewed if the holder intends to stay longer. After continuously living in Lithuania for a certain period, non-EU citizens may be eligible to apply for a permanent residence permit.

EU Citizens

EU citizens and their family members have the right to live and work in Lithuania without the need for a work permit, embodying the EU's commitment to the free movement of persons. This also extends to members of the European Economic Area (EEA) and Switzerland. However, there are still some administrative steps for businesses and employees to follow:

While EU citizens do not need a visa for entry and can stay freely for up to three months, they must register their residence with the local municipality if they plan to stay in Lithuania for longer than three months. This registration typically requires proof of employment, self-employment, sufficient resources to support themselves, and comprehensive health insurance.

Upon registration, EU citizens receive a certificate of registration of residence, confirming their right to live in Lithuania. This certificate is often required for various administrative processes, including but not limited to banking and healthcare services.

Business and Investor Visas

For business owners, investors, or those looking to start a business in Lithuania, specific provisions and programs may facilitate their entry and residence in the country, including incentives for innovative startups or significant investments that contribute to the economy. These programs often offer a pathway to temporary residence with the possibility of renewal or eventual permanent residency based on the business's success and contribution to the Lithuanian market.

The tax year runs from 1 January to 31 December.

Income Tax in Lithuania 

In Lithuania, personal income tax is levied on various sources of income, including wages, salaries, business profits, interest, dividends, and rental income. The tax system is progressive, meaning that the rate increases as your income grows, ensuring that those with higher earnings contribute more to public finances.

Lithuania employs a progressive tax rate system for personal income, which is divided into two main brackets:

1. 20% Tax Rate: This lower rate applies to annual income up to a specific threshold, designed to encompass the majority of earners and provide a fair tax rate for middle-income individuals. A flat rate of 20% applied to income amounts not exceeding EUR 114,162 in 2024. 
2. 32% Tax Rate: Higher earnings above the established threshold fall into this tax bracket, reflecting a progressive approach to taxing higher incomes. A rate of 32% will be applicable if employment income exceeds EUR  114 162  in 2024 for the exceeding parts:
   1. Payments to Board or Supervisory Board Members
   2. Income derived under copyright agreements 
   3. Income under civil agreement received by a manager of small partnership and is not a member of the small partnership
   4. Employment-related income

Income from dividends and any other profit distribution is taxed at a PIT rate of 15%.

Tax payments are typically made through payroll deductions for employed individuals, while self-employed persons must make regular prepayments throughout the year, with a final settlement upon filing their annual return.

Personal Income Tax should be paid by the 15^th of the current month if salaries were paid from 1st – 15th of the month. If salaries are paid after 15^th of the month then they must be paid by the end of the month.

Tax Deductions and Allowances in Lithuania

Lithuania's tax system offers various deductions and allowances to reduce taxable income, including but not limited to:

• Standard Personal Allowance: A basic deduction available to all taxpayers, reducing the amount of income subject to tax.
• Additional Deductions: These may include specific allowances for dependents, educational expenses, and health-related expenditures, among others.

The Key Legislative Authorities in Lithuania

The State Social Insurance Fund Board under the Ministry of Social Security and Labour - Konstitucijos Ave. 12, 9308, Vilnius

State Tax Inspectorate Under the Ministry of Finance of the Republic of Lithuania - Vasario 16-th str. 14, 01514 Vilnius

State Labour Inspectorate of the Republic of Lithuania - 19 Algirdo str., LT-03607 Vilnius

Statistics Lithuania - 29 Gedimino Ave, LT-01500 Vilnius

Employment Department Under the Ministry of Social Security and Labour - 3 A Geležinio Vilko str., LT-03131 Vilnius

In Lithuania, the social security system covers a broad range of benefits, including pensions, healthcare, maternity and paternity leave, sickness, and unemployment benefits. The system is primarily funded through social security contributions paid by employers, employees, and self-employed individuals.

• SODRA (Social Insurance Fund): The cornerstone of Lithuania's social security system, managing most social insurance contributions and benefits, including pensions, sickness, and maternity benefits.
• Health Insurance: Funded through contributions to SODRA, ensuring that residents have access to healthcare services. Individuals are required to register with a primary healthcare provider.
• Pensions: Lithuania offers a state pension based on an individual's contributions during their working life. The system is designed to provide income security in retirement, with the possibility of supplementary pensions through voluntary private pension schemes.
• Unemployment Insurance: Provides financial support to individuals who lose their job, aiming to support them while they search for new employment. Eligibility and benefit levels depend on the individual's work history and contributions.
• Family and Child Benefits: The Lithuanian government provides various benefits to support families, including child allowances, parental leave benefits, and support for families in need.

Social security contributions consist of two parts:

• Employee part (amount deducted from agreed gross salary) 19.5% (or 22.2%/22.5% if the employee participates in additional pension accumulation system)
• Employer part (amount calculated on top of agreed gross salary) 1.77%. If the time-limited work agreement is signed, employer’s social insurance contributions for such agreements are increased up to 2.49%.

Social Security contributions consist of:

• 72% pension insurance
• 99%illness insurance
• 81% maternity insurance
• 98% health insurance

Employees can participate in an additional pension accumulation system. Inclusion into the accumulation system is used as one of the most effective methods to induce people to accumulate for additional pension if they have not started yet. However, it is not a coercive mechanism because any employed person may refuse accumulation if she/he does not want or has some other priorities.

The rate of the contribution is 3% in 2024.

If an employee accumulates additional pension funds, the government contributes an additional 0,9% to 1.5%. If the employee wants to pay more from the beginning, he/she should notify the company of pension accumulation.

Penalty for late payment is charged at 0.03% interest for each delayed day.

Payment of Social Security Tax contributions and Social Security Tax reports must be made by the 15th of the following month, or by the first preceding regular working day, if the 15th is a not a regular working day (weekend, public holiday).

Monthly Tax Reporting in Lithuania 

Report: Monthly PIT

Legal name of report: GPM313

Information required to complete form: Total amount of earned and paid salary during the current month.

The documents should be sent to the Tax Authorities by the 15th of next month.

Yearly Tax Reporting in Lithuania 

Report: Yearly PIT

Legal name of report: GPM312

Information required to complete form: Employee’s name, surname, ID code, earned and paid income during the financial year.

The documents should be sent to the Tax Authorities by 15th February of the next year.

When hiring new employees in Lithuania, employers are required to adhere to several key legal and administrative requirements to ensure compliance with local employment and social security laws.

Ensure that the employee has a Lithuanian Personal Identification Number (Asmens Kodas), which is essential for all legal, employment, and residency procedures in Lithuania. Foreign employees must apply for this number upon receiving a residence permit.

New employees must be registered with SODRA (Social Security Tax Office) by submitting form 1-SD (notification about the beginning of the personal social income) no later than one working day before the employee begins work. This form notifies SODRA about the commencement of an employment relationship, ensuring that the employee is covered for social security and health insurance purposes.

In addition to social security, the employee must be registered for health insurance with SODRA. This ensures that the employee has access to the Lithuanian healthcare system. The registration is typically part of the process when submitting form 1-SD.

For certain types of employment contracts or in specific situations (such as hiring unemployed individuals registered at the Labour Exchange), additional reporting to the Lithuanian Labour Exchange might be required.

Managing the departure of employees in Lithuania involves a series of administrative and legal steps to ensure that the process is handled in compliance with local labour laws and social security regulations.

Final Payment

• Last Working Day: The employer is required to make the final payment to the leaving employee on their last working day. This final payment should include any outstanding salary, accrued but unused vacation pay, and any other compensations or bonuses due to the employee as per the employment contract or applicable laws.
• Interest on Delayed Payment: If the employer fails to make the final payment on time, they are liable to pay interest for each day of delay. The rate of interest and the method of calculation are typically defined by Lithuanian law or regulations.

Submit Form 2-SD to SODRA

• Notification of Termination: Employers must notify SODRA of the termination of employment by submitting a 2-SD Form (notification of termination) within one working day of the employee's departure. This form serves to update the social security records, indicating that the individual is no longer employed by the company and terminating the employer's obligation to pay social security contributions on behalf of that employee.
• Employers should maintain records of the termination, including the reason for termination, final payment records, and the submission of the 2-SD form. 

It is legally acceptable in Lithuania to provide employees with online payslips, these are normally provided via email.

Reports

Employment agreements must be archived for 50 years after the termination and payroll sheets should also be archived for 50 years.  

Lithuanian Payslip Example

Local language example:

English language example:

Holiday Accrual and Calculations in Lithuania

In Lithuania, annual leave is a statutory right, intended to provide employees with rest and recreation away from work. The calculation of annual leave is based on the number of working days an employee is scheduled to work per week, excluding bank holidays from the annual leave calculation.

The minimum annual leave entitlement is determined by the employee's work schedule:

• 20 working days for employees working a standard five-day workweek.
• 24 working days for employees working a six-day workweek.
• For those with irregular work schedules (less than five days per week or variable), the entitlement is standardised to 4 weeks of annual leave, ensuring equity in rest periods regardless of work pattern variations.

Enhanced Holiday Accrual and Calculations Entitlements in Lithuania 

Certain groups of employees are entitled to additional annual leave in recognition of their specific needs or circumstances. This includes:

• Employees under the age of 18, acknowledging the importance of additional rest and recreation during developmental years.
• Employees who are single-handedly raising a child under the age of 14 or a disabled child under the age of 18, recognising the additional responsibilities and challenges faced by these employees.
• Disabled employees, to accommodate for additional rest and recuperation needs related to their disability.

These employees are entitled to an extended annual leave of:

• 25 working days for those working a standard five-day workweek.
• 30 working days for those working a six-day workweek.

Employees are entitled to receive their regular salary during periods of annual leave. This payment should be made before the start of the leave period, allowing employees to plan and enjoy their time off without financial concerns.

Maternity Leave in Lithuania 

In Lithuania, the maternity leave periods before and after childbirth are combined into a single, continuous period of leave, ensuring the mother has an uninterrupted time for preparation, childbirth, and initial care of the baby. The total duration adjusts based on the actual birth date and any qualifying conditions for extended leave.

Before Childbirth

Female employees are entitled to 70 calendar days of maternity leave before the expected date of childbirth..

After Childbirth

Following the birth, the entitlement is 56 calendar days of leave to allow the mother to recover and bond with the newborn.

Extended Leave

In cases of childbirth complications or the birth of two or more children, the post-childbirth leave period is extended to 70 calendar days. This additional time recognises the increased recovery needs or the greater care responsibilities in these situations.

During maternity leave, employees are entitled to a maternity benefit paid by "SODRA" (Social Insurance Fund), rather than their regular salary from the employer. This benefit is intended to replace income during the leave period, calculated based on the employee's average earnings covered by social insurance contributions. The maternity benefit is usually paid in advance for the entire period of leave, allowing the mother to manage her finances without concern during this time.

Lithuanian law protects the employment rights of women on maternity leave, ensuring they can return to their job or an equivalent position with the same employment conditions after their leave period ends.

Paternity Leave in Lithuania 

Fathers are entitled to 30 calendar days of paternity leave. This leave is designed to be flexible, allowing fathers to take it at any point until the child reaches one year of age. This flexibility ensures that fathers can choose the most suitable time for their family situation, whether immediately after birth or at a later stage within the first year.

The paternity leave compensation is paid by the Social Security Tax Office (SODRA) from the beginning of the leave period. This ensures financial support for the family during this significant life event.

The compensation for paternity leave is calculated based on the father's average earnings covered by social insurance contributions over a specified period before the leave. This approach aims to provide a reasonable level of income replacement during the leave period.

Fathers on paternity leave are protected under Lithuanian law, ensuring that their job or an equivalent position is secured upon their return to work. Employers cannot terminate employment due to taking paternity leave.

The right to paternity leave is protected, and fathers are entitled to this leave without fear of negative consequences on their employment status, career progression, or salary.

Parental Leave in Lithuania

Parental leave in Lithuania is a provision designed to support parents or legal guardians in taking care of their child during the crucial early years, balancing work and family life.

After the maternity or paternity leave period ends, either parent (or both, sharing the leave) is entitled to parental leave until the child reaches three years of age. This allows parents to take an extended break from work to focus on childcare. Parents have the flexibility to take this leave in parts or all at once, offering the opportunity to return to work temporarily and then go back on leave, depending on what suits their situation best.

During parental leave, parents are entitled to receive a parental benefit paid by "SODRA" (Social Security Fund). The amount of the parental benefit can vary, calculated based on the parent's average insured income prior to taking the leave. There are caps and floors to the benefit amount, ensuring minimum and maximum levels of support.

The benefit is paid at a higher rate for the first year of the child's life (extending the period covered by maternity/paternity benefits) and at a reduced rate for the remaining period up until the child turns three.

Employees on parental leave are entitled to return to their job or an equivalent position with the same salary and employment conditions upon the end of their leave. Employees taking parental leave are protected against dismissal due to their absence, except in cases of gross misconduct or the expiration of a fixed-term contract.

Employees continue to accrue relevant service benefits, such as vacation entitlement, during their parental leave.

Sick Leave in Lithuania 

In Lithuania, employees are entitled to take sick leave when they are unable to work due to illness or injury.

• First Two Days: The employer is responsible for compensating the employee for the first two days of sick leave. This compensation is aligned with the employee's work schedule, meaning it only covers days the employee was scheduled to work. For these initial two days, employers pay sickness leave compensation that ranges from 62.06% to 100% of the employee’s average salary. The specific rate within this range can depend on the employer's policies and the collective agreements in place.

• From the Third Day Onwards: Starting from the third day of sickness, compensation is typically provided by "SODRA" (Social Security Fund), rather than the employer. This ensures that the financial burden of prolonged illnesses does not fall solely on employers. The compensation from SODRA is calculated based on the employee's insured income and specific percentages set by law. It aims to provide a substantial portion of the employee's average earnings, ensuring financial support during extended periods of illness.

To qualify for sick leave compensation, employees must obtain a medical certificate from a healthcare provider.

Employees on sick leave are protected under Lithuanian labor laws, ensuring that their job or an equivalent position is secure during their absence due to illness. Medical conditions and the specific reasons for sick leave are subject to confidentiality protections, safeguarding the employee's privacy.

National Service in Lithuania

Lithuania has a national service, also known as conscription or mandatory military service.

Mandatory military service in Lithuania applies to male citizens aged 18 to 23. Women can serve on a voluntary basis. The service period is typically 9 months.

Each year, the Lithuanian government decides on the number of conscripts required. Eligible individuals are selected through a lottery system.

Employers are required to ensure that conscripts can return to their previous job or an equivalent position once their service is completed. While conscripts receive an allowance from the state during their service, employers are not required to continue paying wages or provide financial support during this period.

The current national minimum wage in Lithuania in 2024 is set at €924 per month, considering 12 payments per year and an increase in minimum hourly pay from 5.15 euros to 5.65 euros before tax.

This figure reflects an increase of 84 Euros per month from 2023, representing a 10% rise for 2024.

The working week in Lithuania is generally Monday to Friday, however it may be extended to six days.

Working hours are generally 40 hours per week and must not surpass 48 hours per week (this may be extended up to 60 hours per week for employees in several positions), and 12 hours per day.

There are multiple statutory holiday schedules within Lithuania. Below are the statutory national holidays in Lithuania for 2024.

General expenses can be paid out via the payroll or via expense reports. Some businesses pay general expenses separate from an employee’s salary due to more frequent periodically payments of general expenses.

If a company car is used not only for business, but also for personal purposes, it is considered that the employee has received benefit in kind and the company has to tax it as employment source income. Company car benefit-in-kind (BIK) reliefs have been extended to 2024, with a temporary universal relief of €10,000 and extension of relief on battery electric vehicles to 2025.

Benefit in kind amount for the month is calculated and from the benefit in kind amount payroll taxes (PIT, SSC) are calculated.

Payroll taxes are divided into two groups:

1. “employee taxes” (PIT 20%, employee part of SSC 19,50% and voluntary transfer to pension funds 0%, 2,7% or 3%) which are deducted from the employee salary
2. “employer taxes” (employer part of SSC 1,77% if the agreement is termless) which are calculated on top of the gross salary calculated

The company may decide to cover “employee taxes” but such expenses would be considered as not deductible expenses for CIT purposes. “Employer taxes” are considered as deductible costs for CIT purposes.

If the employee is allowed to use fuel purchased by the company, it is required to calculate VAT from the fuel used for private purposes.

In Lithuania, there have been several key changes to income tax, social security, and employment law that came into effect in 2024:

Average Monthly Salary for Tax Purposes

• The average monthly salary used for tax calculations has been set at EUR 1,902.70.

Social Security Contributions (SSC)

• The ceiling for SSC (excluding mandatory health insurance contributions and employer’s contributions) is EUR 114,162 (up from EUR 101,094 in 2023).
• Standard SSC rates for income up to the SSC ceiling are 1.77% for the employer and 19.5% for the employee (with an additional 3% for employees participating in certain second pillar pension accumulation funds).
• For income exceeding the SSC ceiling, the rates are 1.77% for the employer and 6.98% for the employee.

Personal Income Tax (PIT)

• A 20% rate is applied to total annual employment-related income up to EUR 114,162 (previously EUR 101,094 in 2023).
• A 32% rate is applied to income exceeding EUR 114,162.

Minimum Monthly Wages

• The minimum hourly wage increased by 10%, going from EUR 5.15 to EUR 5.65.
• The minimum monthly wage (MMW) increased from EUR 840 to EUR 924.

Non-Taxable Amount (NTA)

• For individuals earning up to EUR 2,167 monthly, the NTA increased by 20%, going from EUR 625 to EUR 747.
• For those earning more than EUR 2,167 monthly, the NTA is now EUR 400.
• There are increased NTAs for individuals who are incapacitated to work or of retirement age with special needs.

SODRA Wages

• The new SODRA threshold has been set at 60 average wage VDU (EUR 114,162).

These changes reflect the government's efforts to adjust the tax and social security system in line with economic developments and social needs. Employers and employees should take these changes into account for taxation, budgeting, and payroll purposes.

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.