Taxes in Lithuania for IT

Lithuania is becoming an increasingly attractive country for IT companies and specialists due to the development of the technology sector, a convenient tax system, and access to European markets. For IT entrepreneurs, startups, and remote professionals, it is important to understand how the tax system works, what rates apply to income, and which incentives are available specifically for the IT sector.

A proper understanding of tax obligations helps avoid problems with local authorities, optimize expenses, and plan company cash flows or personal income. In this article, we will review the key aspects of taxation for IT specialists and companies in Lithuania: from personal income tax and corporate income tax to special incentives for technology businesses. We will also cover the specifics of working through remote platforms, accounting requirements, and opportunities for tax optimization under Lithuanian law.

Thus, even a small amount of preparation and knowledge of taxation rules allows IT companies and specialists to operate safely and efficiently in the Lithuanian market.

General overview of Lithuania’s tax system

The Lithuanian tax system combines transparency and structure, which makes it convenient for doing business, including in the IT sector. Understanding the main types of taxes and how they are applied helps professionals and companies to properly plan financial flows and avoid penalties.

Main types of taxes for individuals and companies

In Lithuania, taxes are divided into several categories:

• Personal Income Tax (PIT) – applies to wages, fees, income of freelancers and other payments. Rates depend on the level of income and the status of the residency.
• Social contributions – mandatory payments for social and health insurance, withheld from employees’ income and paid by employers.
• Corporate Income Tax (CIT) – applied to company profits. IT and technology companies may benefit from reduced rates and special taxation regimes.
• Value-Added Tax (VAT) – a mandatory tax on most commercial transactions, including IT services and software sales.
• Dividend tax and shareholder payouts – levied on distributed company profits.

Tax administration bodies

In Lithuania, tax collection and compliance control are handled by the State Tax Inspectorate (Valstybinė mokesčių inspekcija, VMI). It is responsible for taxpayer registration, tax collection, reporting oversight, and inspections.

Understanding the tax framework and cooperating properly with VMI enables IT specialists and companies to avoid fines, optimize their tax burden, and conduct business efficiently in Lithuania.

Taxes for IT specialists (individuals)

IT specialists in Lithuania, both employees and freelancers, are required to pay taxes and social contributions in accordance with local regulations. Knowledge of the tax structure helps them plan income and optimize liabilities.

Personal Income Tax (PIT)

All residents of Lithuania are subject to personal income tax. The standard PIT rate varies from 20% to 32%, depending on the level of income and the status of the taxpayer. For non-residents, specific rules and double taxation treaties may apply to foreign income.

Taxable income of IT specialists includes salaries, payments under civil contracts and income from freelance projects.

Social contributions

In addition to PIT, mandatory contributions apply:

• Social insurance – covers sick leave, maternity benefits, and pensions.
• Health insurance – provides access to public healthcare services.

Employees and employers contribute if a professional is officially hired. Freelancers pay their own contributions, calculated on the basis of their profits.

Incentives for IT specialists

The IT sector benefits from certain incentives aimed at supporting its growth:

• Tax deductions and reduced PIT rates for qualified specialists.
• Partial PIT relief when working for startups or technology companies.
• Simplified income declaration procedures for remote workers and freelancers.

These measures make Lithuania attractive for IT professionals, helping reduce the tax burden and stimulating career growth.

Taxation of IT companies

IT companies in Lithuania are subject to corporate income tax but can benefit from special rules and incentives that make doing business more predictable and profitable.

Corporate Income Tax (CIT) and specifics for tech companies

The standard CIT rate in Lithuania is 15% of company profits. Small companies with annual turnover below a certain threshold may apply a reduced 5% rate.

IT companies, especially startups and tech enterprises, can benefit from tax exemptions on reinvested profits used for technology development and R&D.

Dividend tax

Distributed profits are subject to a 15% dividend tax. For foreign shareholders and investors double taxation treaties may reduce the tax burden.

Special regimes and incentives for IT companies

Lithuania encourages IT sector growth through tax benefits such as:

• Reduced CIT rates for startups and high-tech enterprises.
• Tax deductions for R&D-related expenses.
• Simplified bookkeeping and reporting for small tech businesses.

These mechanisms help IT companies manage finances more efficiently, cut tax costs, and reinvest in projects and talent.

Working through remote platforms and freelancing

For IT specialists in Lithuania working via remote platforms or with foreign companies, it is essential to properly report income and pay taxes to avoid penalties.

Declaring income from foreign companies

Income received through freelance platforms or contracts with foreign clients must be declared in Lithuania. For residents, PIT is applied to world income, including foreign income. Freelancers independently calculate their tax base and pay social contributions in the same way as with local income.

Taxation rules for residents and non-residents

• Lithuanian residents must declare and pay taxes on global income but may rely on double taxation treaties.
• Non-residents are taxed only on Lithuanian-source income.

This is especially relevant for professionals who temporarily work in Lithuania or receive payments from foreign companies while residing abroad.

Accounting and tax reporting

For IT companies and professionals in Lithuania, proper accounting and timely tax reporting are crucial to maintain compliance and prevent penalties.

Key requirements

Companies must keep accounting records in accordance with Lithuanian standards, recording all income, expenses, taxes and payments to employees.

Freelancers and self-employed professionals have simpler requirements, but must keep documentation for all income and include it in their tax return.

Electronic reporting through state portals simplifies sending and provides automatic compliance verification.

Deadlines and penalties

Timely payment of taxes is crucial:

• PIT and CIT must be declared and paid within the established terms, which differ for residents and non-residents.
• Proper accounting and reporting minimize risks and optimise cooperation with tax authorities.

Proper accounting and reporting minimize risks and streamline cooperation with tax authorities.

Tax optimization opportunities

For IT companies and specialists in Lithuania, competent tax planning helps legally reduce the tax burden, improve efficiency, and increase net income.

Legal methods of tax optimization

• Using tax incentives for tech companies, including startup regimes.
• Applying double taxation treaties for foreign income.
• Structuring income across different activity types (e.g., self-employment and company income) to minimize the tax base.
• Deducting expenses that reduce taxable profit, such as software development, employee training, and licenses.

Examples of effective tax strategies

• For companies: registering as a limited liability company (UAB) and using preferential CIT, optimizing dividend payouts.
• For specialists and freelancers: timely income registration, expense deductions for work tools and training, applying PIT incentives available for IT.

Such strategies help IT businesses legally lower tax costs, strengthen financial stability, and plan sustainable growth.

Conclusion

Proper tax planning in Lithuania is crucial for both IT companies and specialists: it allows them to legally minimize tax liabilities, to avoid fines, and to effectively manage finances.

Professional support significantly reduces the risks of accounting errors, reporting delays or tax disputes, helping to choose the best tax schemes and take advantage of available incentives.

Our team is ready to provide consultations on all aspects of taxation in Lithuania, assist with tax compliance, reporting, and strategic planning for both companies and individual specialists. With us, you can focus on growing your business and career without worrying about tax risks.