Lithuania plans to cut its VAT gap to 10% by 2027 and 9% by 2028 through stronger tax enforcement, data-driven administration and measures to tackle the shadow economy.
Lithuania’s Ministry of Finance has outlined measures to reduce the country’s VAT gap and shadow economy, with a target of bringing the VAT gap down to no more than 10% in 2026–2027 and 9% in 2028.
Minister of Finance Taurimas Valys presented the plans to the President, focusing on three areas: prevention of tax violations, promotion of voluntary tax payment, and closer inter-institutional and international cooperation.
According to the European Commission, Lithuania’s VAT gap stood at 13.2% in 2024, compared with the latest EU average of 9.5% in 2023. Latest CASE data indicates that lowering the gap to 10% could generate around EUR 196 million in additional VAT revenue in 2026, based on an estimated EUR 70 million in VAT revenue for each percentage-point reduction.
The State Tax Inspectorate (STI) and Lithuanian Customs are expanding their use of data and automated tools to identify tax risks. The STI can analyse information from financial market participants, digital platforms, registers and international data exchanges, while Customs uses automated X-ray image analysis and a model combining 17 data sources.
Among the proposed measures, the STI could be authorised to correct a taxpayer’s return when sufficient data shows inaccuracies, without waiting for the taxpayer to make the correction.
Electronic VAT invoices are also expected to become mandatory for domestic transactions from 1 July 2030, extending the existing requirement for intra-EU transactions. The measure is intended to automate processes, improve transaction visibility and reduce opportunities to conceal taxable activities.
Customs authorities could also receive additional powers to investigate breaches of international sanctions and other restrictive measures, including restricting customs formalities in certain cases.
Further measures under consideration include revised minimum criteria for a reliable taxpayer, measures targeting deliberate tax evasion, stricter action against repeated sanctions violations, and enhanced controls over tobacco and nicotine products.
The STI is already implementing a VAT administration plan. During 2025 and the first half of 2026, it conducted 12,700 VAT-related control actions, identifying around EUR 153 million in undeclared taxes. Undeclared or incorrectly declared VAT liabilities linked to unreported sales accounted for EUR 105 million.
The STI’s automated VAT fraud identification system APSIS, in use since mid-2025, has also supported enforcement. It has been used in 85 control procedures, resulting in an additional EUR 1.3 million in assessed taxes.
