Tax reforms to fund defence are targeting over EUR 500 million in annual revenue from 2027.

The Lithuanian Parliament (Seimas) has approved for further consideration of a package of tax law amendments designed to increase state revenues, primarily to finance national defence.  The proposals, put forward by the Ministry of Finance and backed by the Government, will now be reviewed by parliamentary committees before a final vote.

This announcement was made by the Ministry of Finance of Lithuania on 22 May 2025.

If fully adopted, the tax changes are expected to generate an additional EUR 346 million in 2026, rising to more than EUR 509 million annually from 2027.

Corporate income tax adjustments

The standard corporate income tax rate is being raised from 16% to 17% and the preferential rate for small businesses from 6% to 7%, which is expected to generate over EUR 45 million annually. The tax rate on dividends, including withholding tax on payments to foreign entities, would also increase to 17%.

Key measures include extending the 0% corporate tax rate for qualifying small businesses from one year to two years, while removing the previous employee limit of 10—though the EUR 300,000 income cap remains in place.

Additionally, companies will be allowed to fully deduct the purchase cost of certain fixed assets, such as machinery and software, in the tax year when these assets are put into use. The amendments also introduce deductions for scholarships awarded to students in science, technology, engineering, and mathematics (STEM) fields, as well as for researchers engaged in research and development projects.

VAT and excise revisions

The VAT rate on books and non-periodical publications is proposed to be reduced from 9% to 5%, while other goods currently taxed at 9% will see an increase to 12%.

The VAT exemption for heating will be removed, offset by expanded compensation for eligible consumers. These changes could generate over EUR 80 million annually.

An excise duty on sweetened beverages containing added sugars or sweeteners is also proposed, with rates linked to sugar content. Natural sugars from fruit or milk will be exempt. This is projected to raise around EUR 25 million yearly.

New security contribution and real estate tax

A new Security Contribution would impose a 10% tax on premiums from non-life insurance policies (excluding mandatory vehicle liability insurance), expected to yield about EUR 110 million annually for the State Defence Fund.

Real estate tax amendments propose progressive rates on non-commercial property values up to 2030, with rates ranging from 0% for properties under EUR 50,000 to 1% for those above EUR 600,000. Commercial properties would face an additional 0.2% rate. These changes could generate about EUR 70 million yearly.

Personal income tax changes

The Seimas has begun considering amendments to the Personal Income Tax (PIT) law. The proposals include introducing a more progressive tax structure for higher incomes and applying uniform tax rates to most income types, except dividends, capital gains, and certain social benefits.

The proposed tax rates are:

  • 20% on annual incomes up to 36 times the average wage (~EUR 6,900/month in 2026)
  • 25% on incomes between 36 and 60 times the average wage
  • 32% on incomes above 60 times the average wage

This removes the previously proposed 36% rate for the highest incomes to maintain incentives for attracting skilled professionals.

Certain incomes—such as long-held shares, life insurance and pension benefits, and specific social allowances—would remain taxed at 15%.

The PIT changes could add over EUR 217 million annually to the budget starting in 2027.

Earlier, Lithuania’s Government approved the tax law amendments proposed by the Ministry of Finance on 14 May 2025.