Personal Income Tax Rates in Lithuania

Lithuania Payroll Outsourcing Alert – Government Announces New Personal Income Tax Rates

Lithuania payroll outsourcing leader issues a statutory alert for Lithuania.

Mercans has alerted its Lithuania payroll outsourcing clients of Personal Income Tax Rates related changes.

• Lithuania has increased its marginal personal income tax rate from 27% to 32%. Accordingly, annual income in excess of 104,277.60 EUR for 2020 shall be taxed at the rate of 32% (27% in 2019). The amount of 104,277.60 EUR also serves as a cap for social security contributions. Starting with 2021, 32% income tax rate will be applied to the annual income exceeding 74,484.00 EUR. The annual income in 2020, that does not exceed 104,277.60 EUR is taxable at a rate of 20%. Starting with 2021, 20% income tax rate will be applied to the annual income not exceeding 74,484.00 EUR.
• Also, the maximum tax exemption amount has been increased to 350 EUR from 300 EUR. In 2020, the applicable monthly tax-exempt income is calculated based on the following formula: 350 EUR – 0.17 x (Monthly salary – 607 EUR). There is no tax-exemption for monthly salaries exceeding 2,666.00 EUR. If the monthly salary is less or equal to 607 EUR then a tax exemption of 350 EUR applies.
• Employee stock options granted after February 1st, 2020 are treated as non-taxable income for purpose of personal income tax if the options are exercised at no cost or for lower than their fair market value at least three years after their grant date.