Our guide to Payroll in Lithuania

Doing Business in Lithuania

Investing in Lithuania

Situated in Northern Europe along the south-eastern shore of the Baltic Sea, Lithuania is the largest of the three Baltic States, the others being Estonia and Latvia. Lithuania has one of the fastest growing economies in the EU with falling unemployment levels and one of Europe’s most highly skilled and multilingual workforces. Over 50% of the population speak more than two languages and EU citizens do not require a work permit to work in the country

Strategically placed in the heart of Europe, Lithuania is the ideal hub for accessing other European markets. With three international airports and flight times to most European capitals under two hours, Lithuania has easy access to millions of people. Its central location makes the Baltic region an important intersection point for transport and trade roads in the middle of the European continent. The country is a sea state and has an ice-free port in Klaipėda with a modern container terminal, making it very important for the development of transit.

In addition, Lithuania boasts a democratic and stable political system, has a business-friendly tax environment and internet in the country is among the fastest in the world.

Basic Facts about Lithuania

Full Name: Republic of Lithuania

Population: 2,890,664 (beginning of 2025)

Capital: Vilnius

Major Language(s): Lithuanian

Monetary Unit: Euro

Main Exports: Mineral fuels (oils and distillation products), electrical and electronic equipment, furniture and related products, vehicles, plastics, and machinery.

GNI Per Capita: US $27,150 (World Bank, 2024)

Internet Domain: .lt

International Dialing Code: + 370

How to say

Hello: Sveiki

Good Morning: Labas rytas

Good Evening: Labas vakaras

Do you speak English? Ar kalbate angliškai?

Goodbye: Viso gero

Thank you: Ačiū

See You Later: Iki susitikimo

Public Holidays

Employees are generally not required to work on the following public holidays in Lithuania:

January 1 – New Year’s Day

February 16 – Day of the Restoration of the State of Lithuania

March 11 – Day of the Restoration of Independence of Lithuania

Easter Sunday and Easter Monday (according to the Western Christian tradition)

May 1 – International Labour Day

The first Sunday of May – Mother’s Day

The first Sunday of June – Father’s Day

June 24 – Midsummer Day

July 6 – Statehood Day (Coronation of King Mindaugas)

August 15 – Assumption Day (Feast of the Assumption of the Blessed Virgin Mary)

November 1 – All Saints’ Day

December 24 – Christmas Eve

December 25 and 26 – Christmas Days

Registrations and Establishing an Entity

Businesses can be set up electronically (in case the founder has proper qualified e-signature) and provided the entity’s establishment documents comply with the standard forms of documents. 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.

Setting up of a Legal Structure

Lithuania offers a clear and flexible legal framework for establishing companies, with the most common form being the private limited liability company. A private limited liability company provide liability protection, meaning shareholders are not personally liable for the company’s obligations beyond their invested capital.

A private limited liability company (UAB) is the most common business form in Lithuania, particularly for small and medium-sized enterprises. The minimum share capital is EUR 1,000. Shares of a UAB cannot be offered publicly. A UAB must have a general meeting of shareholders and a managing director, while the establishment of a board or supervisory board is optional and depends on the company’s articles of association. Due to its flexibility and lower capital requirement, UAB is generally the preferred structure for foreign investors entering the Lithuanian market.

Banking

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

Working Week

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.

Employment Law

Holiday Accrual / Calculations

Annual leave is calculated and granted in working days, bank holidays are not included in the annual leave calculation.

Minimum annual leave:

• 20 working days (if the employee works 5 days per week), or
• 24 working days (if the employee works 6 days per week), or
• if the amount of working days per week is less than 5 days or different, then the employee is entitled to 4 weeks annual leave.

Employees under the age of 18 and disabled employees are entitled to 25 working days of annual leave (if working five days per week) or 30 working days (if working six days per week). If the number of working days per week is fewer or irregular, the employee is entitled to five weeks of annual leave. Employees whose work involves increased nervous, emotional or mental strain, professional risk, or specific working conditions may be granted extended annual leave of up to 41 working days (five-day week) or up to 50 working days (six-day week), or up to eight weeks if the working week is irregular. The Government of the Republic of Lithuania determines the categories of employees eligible for such extended leave and sets the specific duration applicable to each category.

In addition, employees are entitled to additional annual leave for long-term uninterrupted service with the same employer, as determined by collective agreements. Employees raising a disabled child under 18 or two children under 12 are entitled to one additional paid day off per month (or a reduction of two working hours per week). Employees raising three or more children under 12 are entitled to two additional paid days off per month (or a reduction of four working hours per week).

Maternity/Paternal Leave

Female employees are entitled to 70 calendar days before childbirth and 56 calendar days after childbirth (in the event of complications during childbirth or the birth of two or more children, this is extended to 70 calendar days). This leave is added up and granted to the woman as a single period, regardless of the days used prior to the birth.

Fathers are entitled to 30 days paternity leave after the birth of a child, he can use this leave at any time until the child reaches one year.

The Social Security Tax Office pays paternity leave compensation from the beginning of the leave.

In addition, parental leave to care for a child may be granted, by family choice, until the child reaches the age of three, and such leave may be taken in full, in parts, or alternately.

Sickness

The employer pays compensation for the first two days of sick leave, which coincide with the work schedule of the employee. Currently, employers pay sickness leave compensations, which are equal from 62.06 % to 100% of the employee’s average salary.

National Service

Lithuania has mandatory military service (national service) for male citizens as part of its national defence system. Each year, male Lithuanian citizens aged 18–23 are called up for compulsory initial military service, typically lasting around 9 months to prepare them for defence duties; women may serve voluntarily. The conscription process is based on annual lists of eligible conscripts drawn up and administered by the military authorities.

General Labour Law

Lithuanian labour relations are primarily regulated by the Labour Code of the Republic of Lithuania. Employment relationships are based on a written employment contract, which must define essential terms such as job function, remuneration and workplace. The Labour Code establishes rules on working time, rest periods, annual leave, termination of employment and employee protections. Employees are protected against unlawful dismissal, discrimination and unfair working conditions, and labour disputes are generally resolved through the Labour Disputes Commission before going to court.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Tax Rates

From 2026, a progressive PIT rates are applied for employment income in Lithuania:

• The 20% PIT rate is applied to the portion of income up to 36 of average salary in Lithuania (AS) (up to EUR 83,237.40 in 2026).
• The 25% PIT rate is applied to the portion of income from 36 to 60 AS (from EUR 83,237.40 to EUR 138,729.00 in 2026).
• The 32% PIT rate is applied to the portion of income that exceeds 60 AS (from EUR 138,729.00 in 2026).

The mentioned progressive PIT rates are applied to all annual income of individuals (e.g. income from individual activity, rent, property sale, etc.). The exemption applies to dividends, income from the transfer of shares, income received through an investment account, life insurance and pension benefits not exceeding the contributions paid, which were deducted from income, as well as sickness, maternity, paternity, childcare and long-term employment disbursements from Social Security Tax Office. These listed benefits are subject to a 15% PIT rate.

Social security contributions consist of two parts:

• Employee part (amount deducted from agreed gross salary) 19.5% (or 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%.

The Key Legislative Authorities in Lithuania are:

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

Algirdo str. 19, 03607 Vilnius

State Data Agency

Gedimino Ave. 29, 01500 Vilnius

Employment Service Under the Ministry of Social Security and Labour

A. Vivulskio str. 13, 03162 Vilnius

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

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).

Penalty for late payment is charged at 0.026% interest (from 1 February 2026) for each delayed day.

Reporting:

Monthly

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 15^th of next month.

Yearly

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 15^th February of the next year.

Payroll

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

Payroll process options may be as follows:

• When a separate legal entity is established in Lithuania;
• When a legal entity from a foreign country is registered in Lithuania as a tax payer.

Reports

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

Payslip Example

Local language example:

New Employees

New starts must be registered by submitting form 1-SD (notification about the beginning of the personal social income) to the Social Security Tax Office no later than one working day before the employee begins work.

Leavers

The employer should make final payment to a leaving employee on their last working day. If the payment is delayed, the employer will pay interest for each delayed day. The Social Security Tax Office must be informed of any leavers by submitting form 2-SD (notification of termination) within one working day of the dismissal.

Minimum wage in 2026

From 2026, the minimum monthly wage (MMW) was increased from EUR 1 038 to 1 153 EUR (gross amount), and the minimum hourly wage (MHW) was increased from EUR 6,35 to EUR 7,05 (gross amount).

Employee Benefits

Generally, all employee benefits are taxed in the same way as employment-related income (see taxation above). However, there are some exceptions (see examples below):

• Gifts provided by the employer, the value of which does not exceed 200 EUR per calendar year.

• Additional health insurance provided by the employer, the contributions of which do not exceed EUR 350 during calendar year if the total amount of insurance premiums for additional (voluntary) health insurance, life insurance premiums and pension contributions per year does not exceed 25 percent of the employee's calculated employment-related income during that year.
• When the employer pays for public transport tickets for the employee's travel to the workplace.
• Benefits received by an employee under option agreements from the employer or a person related to the employer upon acquisition of shares free of charge or at a preferential price, if the shares are acquired no earlier than 3 years after the granting of the right to the option agreement.

One of the most common benefits provided to an employee is when the employee is given a company car to use for personal purposes.

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 must tax it as employment source income.

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% for income up to EUR 83,237.40 in 2026, employee part of SSC 19,50% and voluntary transfer to pension funds 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.

Visas & Work Permits

EU citizens do not require a work permit to work in Lithuania. However, if they intend to stay in Lithuania for more than 90 days within a six-month period, they must obtain a certificate confirming their right of residence in the Republic of Lithuania.

If a third-country national is to be employed, a separate work permit is not required; however, the individual must obtain a temporary residence permit in Lithuania. The procedure and requirements depend on whether the employment qualifies as highly skilled or non-highly skilled work.

Key changes for 2026

From 1 January 2026, a progressive PIT rates are applied in Lithuania:

• The 20% PIT rate is applied to the portion of income up to 36 of average salary in Lithuania (AS) (up to EUR 83,237.40 in 2026).
• The 25% PIT rate is applied to the portion of income from 36 to 60 AS (from EUR 83,237.40 to EUR 138,729.00 in 2026).
• The 32% PIT rate is applied to the portion of income that exceeds 60 AS (from EUR 138,729.00 in 2026).

The approved amount of 1 month AS in Lithuania in 2026 is 2 312,15 EUR.

The mentioned progressive PIT rates are applied to the annual income of individuals, excluding dividends, income from the transfer of shares, income received through an investment account, life insurance and pension benefits not exceeding the contributions paid, which were deducted from income, as well as sickness, maternity, paternity, childcare and long-term employment disbursements from Social Security Tax Office. These listed benefits are subject to a 15% PIT rate.

An accounting company may apply different PIT rates to the income received by employees related to employment relations only if the employee submits a written request to do so. If the employee request to apply progressive PIT rates is not received, the standard 20% PIT rate should be calculated. The employee will have to pay the unpaid PIT part to the Lithuanian Tax Authority account by declaring his annual income for 2026 by 1 May 2027.

Also, from 1 January 2026, the amount of insurance payments for additional (voluntary) health insurance, when the object of insurance is the payment of health care services of the insured person, not exceeding EUR 350 per calendar year, is exempt from PIT, if the total amount of insurance premiums for additional (voluntary) health insurance, life insurance premiums and pension contributions per year does not exceed 25 percent of the employee's calculated employment-related income during that year.