From 2026, Lithuania will set the corporate income tax rate at 17% for local entities and PEs, apply a 10% flat tax to certain income of foreign entities without a PE, and allow small businesses under EUR 300,000 annual revenue to pay 0% tax for the first two years and 7%.
Lithuania’s tax authority (VMI) has updated its commentary on the Law on Corporate Income Tax on 30 September 2025 to reflect recent legislative changes and provide clarity on the application of various tax rates and exemptions. These updates are effective from the 2026 tax year.
The key updates are:
Corporate income tax rate
Starting in 2026, the standard corporate income tax rate will rise to 17% for taxable profits of Lithuanian entities and permanent establishments (PEs).
Taxation of foreign entities
A flat 10% tax rate, with no deductions, will apply to specific income categories earned in Lithuania by foreign entities without a PE. Other income types, such as rent, performance fees, and certain other payments, will be taxed at 17%.
Dividends tax rate
Dividends will generally be taxed at 17% with certain exceptions.
Innovation and intellectual property (IP) income
Income from self-developed, patented, or copyright-protected assets, such as software and inventions, will be taxed at 7%.
Reduced tax rates for small entities
Small businesses earning under EUR 300,000 annually may qualify for a 0% tax rate for their first two years and a 7% rate thereafter, provided they meet conditions such as individual ownership and limits on restructuring, liquidation, or ownership changes for three consecutive years.
Agricultural and cooperative entities
Cooperatives deriving over 50% of their income from agricultural activities will be taxed at a reduced rate of 7%.
