If you run a small company in Lithuania, the tax return you file next spring will be computed under rules that did not exist last year. The standard corporate rate is up, the small-business rate jumped from 6% to 7%, the 9% VAT rate has vanished entirely, and personal income tax is now fully progressive. With one quarter left in 2026, here is what changed, what it costs you, and what to do before year-end.
Corporate Tax: 17% Standard, 7% for Small Business
From tax periods starting in 2026, Lithuania raised its standard corporate income tax rate from 16% to 17%. Small businesses with annual revenue under EUR 300,000 saw their reduced rate rise from 6% to 7%. The reduced rate still carries anti-abuse conditions, so companies splitting revenue across entities to stay under the threshold remain exposed.
The increase looks small until you run the numbers on your own profit:
- EUR 50,000 profit: 6% meant EUR 3,000; 7% means EUR 3,500 — EUR 500 more
- EUR 100,000 profit: 6% meant EUR 6,000; 7% means EUR 7,000 — EUR 1,000 more
- EUR 200,000 profit at the standard rate: 16% meant EUR 32,000; 17% means EUR 34,000 — EUR 2,000 more
If your 2026 advance payments were sized under the old rates, you are underpaying every quarter and building a balance due next spring. Recompute them now rather than discovering the shortfall at filing time.
The 0% Startup Window Doubled to Two Years
There is genuine good news for new companies. The 0% corporate rate for newly registered small businesses, previously available for just one year, now runs for two years. The employee-count condition attached to the 0% rate was also removed, broadening eligibility. If you incorporated in 2025 and assumed your tax holiday ended this year, check whether year two now qualifies — that is a full extra year of tax-free profit you may not have planned for.
Immediate Depreciation for Equipment and Software
The reform introduced immediate depreciation, letting companies deduct the full cost of certain assets — machinery, equipment, and software — in the year of purchase instead of spreading it over several years. For a small manufacturer buying a EUR 40,000 machine or an agency outfitting a team with new hardware and licenses, this pulls the entire deduction into 2026. If a purchase was already on the roadmap, completing it before December 31 accelerates the tax benefit by years.
Loss Relief Got Tighter
Two changes cut the other way. Deductible tax losses are now capped at 70% of taxable profit, so a company carrying forward losses can no longer wipe out its entire bill in a recovery year — at least 30% of profit stays taxable. And intra-group loss transfers now require at least two years of group relationship, closing the door on last-minute groupings assembled purely to share losses. If your forecasts assumed full loss offset, rebuild them with the cap.
VAT: The 9% Rate Is Gone
The most operationally disruptive change is in VAT. Lithuania abolished its 9% reduced rate and reshuffled every sector that used it:
| Sector | 2025 rate | 2026 rate |
|---|---|---|
| Accommodation, passenger transport, cultural and sports event tickets, restaurant and catering services | 9% | 12% |
| District heating, hot water, firewood for households | 9% | 21% (standard) |
| Medicines, books, textbooks, non-periodical publications | 9% | 5% |
| Everything else | 21% | 21% (unchanged) |
The stated reason is higher defense spending, funded in part by this broader VAT base. Whatever the politics, the compliance burden lands on you.
If you sell in an affected sector, three updates cannot wait:
- Reprice or re-margin. A restaurant that held menu prices steady just absorbed a 3-point VAT rise out of its own margin. Decide deliberately whether customers or profits carry it.
- Update every system that computes VAT. Point-of-sale presets, invoicing templates, e-commerce tax tables, and accounting software must all move off 9%. One stale template means systematically wrong invoices.
- Review VAT-inclusive contracts. Long-term service agreements quoted gross now split differently between you and the tax authority. Renegotiation clauses tied to tax changes may apply.
Budget-planners should note the heating jump especially: district heating and hot water moving from 9% to 21% is a 12-point rise on a major winter cost line for offices, rental properties, and hospitality venues. And if your turnover is approaching the EUR 45,000 VAT registration threshold, remember it is unchanged — track it separately from the income-tax thresholds, since crossing one has nothing to do with the other.
Personal Income Tax Goes Fully Progressive
Lithuania moved to a progressive personal income tax regime covering total income — employment, self-employment, rental income, and capital gains — at 20%, 25%, or 32% depending on level. The 2026 thresholds are set in multiples of the national average wage:
- Up to 36 average wages (about EUR 83,237): 20%
- From there to 60 average wages (about EUR 138,729): 25%
- Above that: 32%
Dividends and certain capital gains stay on a flat 15%, which keeps profit extraction through dividends comparatively attractive for owner-managers weighing salary against distributions.
For the self-employed, income up to EUR 42,500 is taxed at 20%, with a lower 5–20% band applying to smaller incomes; income above the threshold joins the progressive schedule alongside other income streams. Higher-earning freelancers who previously faced a flat 15% rate on self-employment income are the biggest losers here — if your freelance income pushes into the 25% or 32% bands, the year to model salary-versus-dividend extraction through a small UAB is now.
Payroll changed too: the minimum monthly wage rose about 11.1% to EUR 1,153 from January 1, 2026. If you employ staff at or near the floor, both gross pay and the social contributions computed on it moved up.
Real Estate, Sugar Tax, and What Comes in 2027
Property owners face a reworked real estate tax. Primary residences valued below EUR 450,000 are exempt; other properties are taxed progressively between 0% and 1% depending on value; and commercial properties plus corporate-owned properties attract an additional 0.2% defense contribution. Offsetting this, the holding period for tax-exempt real estate sales was cut from 10 years to 5 — if you have held a property for more than five years, a sale you were timing for year ten can move forward.
Two smaller items round out the package: a new sugar tax on sweetened beverages, which food and hospitality businesses should price in, and the return of child-related tax relief — though that one takes effect only from 2027, so it belongs in next year's plan, not this year's return.
Five Mistakes That Trigger Nasty Surprises
1. Still invoicing at 9% VAT. Every invoice issued in 2026 must use the new rates. A template nobody updated means months of systematically wrong VAT — undercharged to customers, misreported to the VMI, and painful to correct retroactively.
2. Sizing advance payments at the old 6%. Corporate advance payments computed before the reform understate your liability by a full percentage point of profit. True them up in Q4 to avoid a lump-sum balance plus potential interest.
3. Missing your second 0% year. Companies formed in 2025 that already "used" their one startup year may now qualify for a second. Claiming it requires knowing about it — confirm eligibility before paying tax you might not owe.
4. Forecasting with full loss offset. If carried-forward losses were supposed to zero out 2026, the 70% cap just resurrected 30% of your taxable profit. Rebuild the forecast and the cash plan around it.
5. Budgeting winter heating at last year's VAT. Offices, rentals, and venues that carried 9% VAT on heating into their 2026 budgets are understating the line by 12 points. Fix the budget before the heating season peaks.
Your October Checklist
With one quarter left in the year, work through this list:
- Recompute corporate advance payments at 17% (or 7% if under the EUR 300,000 revenue threshold) and adjust Q4 payments.
- Audit every VAT rate in your systems — POS, invoicing, e-commerce, and accounting software — confirming nothing still charges 9%.
- Confirm startup-rate eligibility if you incorporated in 2025; a second 0% year may be available.
- Accelerate planned equipment and software purchases into December to use immediate depreciation for 2026.
- Rebuild loss-carryforward forecasts with the 70% cap and check group-relationship age for any planned loss transfer.
- Model owner-manager extraction — salary bands versus the flat 15% dividend rate under the new progressive PIT.
- Update payroll for the EUR 1,153 minimum wage if any staff sit near the floor.
- Review property holdings against the EUR 450,000 exemption, the 0.2% defense add-on, and the new 5-year exempt-sale window.
- File and pay through the VMI's electronic systems, and keep Lithuanian-language records the inspectorate can follow.
- Book an accountant before December. The interaction of the new CIT rates, VAT reshuffle, progressive PIT, and property rules is exactly the multi-rule puzzle where an hour of local advice pays for itself.
Keep Your Lithuanian Books Audit-Ready
Lithuania's 2026 reform rewards owners who know their numbers in real time: how close revenue sits to the EUR 300,000 small-business line, whether every invoice carries the right VAT rate, and whether advance payments still match the new liability. That means tracking income continuously — not reconstructing it from inbox invoices the night before the return is due.
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