Lithuania payroll and tax overview.

Your guide to doing business in Lithuania

Doing Business in 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. Following reforms in the 1990s, Lithuania became one of the fastest growing economies in the EU with falling unemployment levels and a highly skilled and multilingual workforce: over 50% of Lithuania’s population speak more than two languages and EU citizens do not require a permit to work in the country. Lithuania is a gateway to a range of lucrative markets, with free-movement road and rail routes to the rest of the Eurozone and four international airports. Lithuania is a stable, democratic republic with a business-friendly tax environment and an excellent communication infrastructure. In 2019, Lithuania had an estimated GDP of $54 billion, with a growth rate of 3.9%. Lithuania is a member of the EU, the UN, NATO, the OECD, and the Nordic Investment Bank, and was ranked 11 on the World Bank’s Ease of Doing Business Survey 2019.

Registering a Company and Establishing an Entity in Lithuania

Businesses can be set up electronically in just a few days provided the entity’s establishment documents comply with the standard forms of documents. Companies will need an in-country bank account in order to register, this generally takes no longer than one day to complete. In order to reserve a company name, the Register of Legal Entities and the Centre of Registers must be visited for an electronic signature.

Lithuania currently ranks 14th in the world for ease of business according to the World Bank’s Doing Business 2019 report.

Business Banking in Lithuania

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.

Working Days and Working Hours in Lithuania

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.

Basic Facts about Lithuania

Full name: The Republic of Lithuania

Population: 2.794 million

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 $31,030 (World Bank, 2017)

Internet Domain: .lt

International Dialing Code: +370

 

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 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).

Tax & Social Security in Lithuania

The tax year runs from 1 January to 31 December.

It is not necessary to be licensed to make any tax and/or social security filing on behalf of a customer.

Employment income is taxed at a flat rate of 20%. A progressive PIT rate of 32% will be applicable if employment income exceeds 84 average monthly salaries.

Social security contributions consist of two parts:

  • Employee part (amount deducted from agreed gross salary) 19.5% (or 21.3%/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

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

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 not a regular working day (weekend, public holiday).

Personal Income Tax should be paid by the 15th of the following 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.

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

Calculation Example

The tax calculation below is prepared on the assumption that:

  • the employee is not a limited working capacity person
  • the employee's income per year does not exceed 84 average monthly salaries (i.e. progressive 32% PIT and social security contributions' ceilings are not included in the example)
  • the employee is classified as belonging to the I group (lowest risk group regarding accidents at work and professional diseases)
  • the employee does not participate in additional pension accumulation system

Reporting in Lithuania

Monthly

Report:                                                           Monthly PIT

Legal name of report:                                   GPM312

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 or last day of the 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 15th February of the next year.

New Employees in Lithuania 

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 day before the employee begins work. 

Leavers in Lithuania 

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 Office must be informed of any leavers by submitting a 2-SD Form (notification of termination) within one working day of the dismissal.  

Pension Schemes in Lithuania 

Social Security contributions consist of:

  • 8.72% pension insurance
  • 2.09% illness insurance
  • 1.71% maternity insurance
  • 6.98% 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 2.1% and it will increase gradually to 3%. The gradual growth of contribution is indicated below:

2020 – 2.1%

2021 – 2.4%

2022 – 2.7%

2023 – 3%

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

Payroll in Lithuania

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

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

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