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Lithuania Added a Third Tax Band in 2026
GPM (gyventojลณ pajamลณ mokestis) is Lithuania's personal income tax. On 1 January 2026 the system changed from two tiers to three: what used to be a straightforward 20% / 32% split now has a 25% band in the middle.
For most people this changes nothing โ if you earn under roughly โฌ6,936 per month, you're still paying 20%. The new band only bites at higher incomes.
What changed in 2026: the old two-tier 20% / 32% structure became a three-tier 20% / 25% / 32% system. Dividends remain separate at a flat 15%.
| Annual income | Monthly equivalent | Rate |
|---|---|---|
| Up to โฌ83,237 | Up to ~โฌ6,936 | 20% |
| โฌ83,237 โ โฌ138,729 | ~โฌ6,936 โ โฌ11,561 | 25% |
| Above โฌ138,729 | Above ~โฌ11,561 | 32% |
Thresholds are 36ร and 60ร the 2026 average monthly wage (VDU), โฌ2,312.15 โ 36 ร โฌ2,312.15 = โฌ83,237.40, 60 ร โฌ2,312.15 = โฌ138,729.00.
Two separate deductions โ don't confuse them
- GPM is charged on your gross pay minus the NPD allowance
- Sodra (19.5%) is charged on your full gross pay, with no allowance
- Both come out before you're paid โ see what Sodra is
Working out which band your income actually falls into gets harder once more than one source or country is involved.
Need an English-speaking accountant?
Lithuanian tax is manageable until it isn't โ individuali veikla, VAT registration, or income from more than one country. Get matched with an accountant who works in English and knows the rules for foreigners.
The NPD: Lithuania's Tax-Free Allowance
The NPD (neapmokestinamasis pajamลณ dydis) is the slice of your income that GPM isn't charged on. Unlike a flat personal allowance, it shrinks as you earn more and disappears entirely at higher salaries โ which makes the effective tax rate progressive even within the 20% band.
In plain terms: at the minimum monthly wage (MMA) of โฌ1,153 you get the full โฌ747 allowance. Every euro you earn above that reduces the allowance by 49 cents, until it runs out entirely around โฌ2,677.49.
Additional NPD applies for each dependent child, and a higher allowance applies if you have a recognised reduced capacity for work.
Worked Example: โฌ2,000 per Month
Here's how the numbers actually fall for a typical Vilnius salary:
| Step | Amount |
|---|---|
| Gross monthly salary | โฌ2,000.00 |
| NPD: 747 โ 0.49 ร (2,000 โ 1153) | โฌ331.97 |
| Taxable income for GPM | โฌ1,668.03 |
| GPM at 20% | โโฌ333.61 |
| Sodra at 19.5% (on full gross) | โโฌ390.00 |
| Net salary | โฌ1,276.39 |
That's an effective deduction of about 36% โ roughly 64% of gross lands in your account. The percentage you keep falls as your salary rises, because the NPD tapers away.
Other Income: Dividends, Capital Gains and Rent
Not everything is taxed under the progressive employment bands. These are handled separately:
| Income type | Rate | Notes |
|---|---|---|
| Dividends | 15% | Flat, separate from employment income |
| Interest | 15% | Treaties may reduce this for non-residents |
| Capital gains | 15% then the bands | 15% up to โฌ27,746, then 20%, 25% and 32% |
| Property sale | Often 0% | Exempt if held 5+ years (reduced from 10) |
The five-year property exemption is worth knowing about if you're buying property in Lithuania โ it was shortened from ten years, which materially changes the maths on a medium-term hold.
Are You a Lithuanian Tax Resident?
This determines whether Lithuania taxes your worldwide income or only what you earn here. You're generally a tax resident if you:
- Have your permanent place of residence in Lithuania, or
- Spend more than 183 days in Lithuania during a calendar year, or
- Have your centre of personal, social or economic interests here
Residents are taxed on worldwide income. Non-residents only on Lithuanian-source income. If you moved partway through a year, or you're working remotely for a foreign employer, this is the question that matters most โ and the one worth paying an accountant to answer properly. Our tax on foreign income page sets out all four alternative tests in article 4 and the relief that follows.
What counts as Lithuanian-source income for a non-resident is a specific list rather than a general rule: income through a fixed base here; employment income for work physically performed in Lithuania; interest, dividends and royalties from Lithuanian sources, withheld at source and reduced to the treaty rate where the non-resident produces their own state's residency certificate on form FR0021; rent from and sale of Lithuanian immovable property, and of registrable movable property here; and income from artistic or sporting activity performed here, taxed regardless of who pays it or from where. Non-residents do not file GPM311 โ their return is GPM314, with annexes GPM314A and GPM314B, and some income is self-assessed on a short cycle after receipt rather than annually.
Filing Your Return
If you're an employee, your employer withholds GPM at source and you may have nothing to do. You'll still need to file an annual declaration if you have multiple income sources, freelance income, or want to claim a refund.
- Deadline: generally 1 May for the previous calendar year
- Where: online through VMI's Electronic Declaration System (EDS)
- Good news: the form is largely pre-filled โ often you just review and confirm
See our full guide to filing a Lithuanian tax return.
Deductions Worth Claiming
Lithuania allows a limited set of deductions on your annual return. Commonly claimed:
- Voluntary pension contributions (Pillar III)
- Life insurance premiums
- Certain education and vocational training costs
Caps and conditions apply, and the list changes. Check the current year's rules on VMI before assuming something qualifies.
What Foreigners Usually Get Wrong
Assuming 20% means you keep 80%. You don't โ Sodra takes another 19.5%. Together they're roughly 36% of a โฌ2,000 salary. Budget on net, not gross.
Comparing a Lithuanian gross offer to a foreign net one. Employers here quote gross. Run any offer through the calculator before you accept.
Ignoring the 183-day rule. Cross it and Lithuania can tax your worldwide income โ including income from your home country. Track your days.
Forgetting to file when owed a refund. If you had multiple employers or an unused NPD entitlement, you may be owed money. No one chases you to claim it.
Assuming a double tax treaty handles it automatically. Lithuania has treaties with many countries, but relief usually has to be claimed, not applied by default.
Frequently Asked Questions
What is the income tax rate in Lithuania in 2026?
Employment income is taxed progressively: 20% up to roughly โฌ83,237 per year, 25% between that and about โฌ138,729, and 32% above. Dividends are taxed separately at a flat 15%.
What does GPM stand for?
GPM is gyventojลณ pajamลณ mokestis โ literally "residents' income tax". You'll see it on every Lithuanian payslip.
Is Sodra included in the 20%?
No. GPM and Sodra are separate. GPM is charged on gross pay minus the NPD; Sodra's 19.5% is charged on the full gross. Both are deducted before you're paid.
What is NPD and do I have to apply for it?
NPD is the tax-free allowance. Your employer normally applies it automatically once you've submitted a request โ but only one employer can apply it, so if you have two jobs, make sure it isn't being applied twice.
Do I pay Lithuanian tax on income from abroad?
If you're a Lithuanian tax resident, yes โ residents are taxed on worldwide income. Double tax treaties may prevent you being taxed twice, but relief usually has to be claimed. Get advice if you have foreign income.
When is the tax return deadline?
Generally 1 May for the previous calendar year, filed online through VMI's EDS system.
I have seen both 1 May and 4 May quoted as the deadline. Which is it?
Both, and neither is a mistake. The statutory date in the law is 1 May of the following year. In 2026 that falls on Labour Day, a public holiday, and article 162 of the Law on Tax Administration moves a deadline landing on a non-working day to the following working day โ with a Saturday and Sunday immediately after, the whole thing rolls forward to Monday 4 May 2026, which is what VMI publishes for the 2025 tax year. Two further dates are not 4 May at all and are easy to miss. If you are permanently leaving Lithuania, you must declare income for the part of the year you were here by the day you depart, not the following May. And if you became a Lithuanian tax resident during 2025, article 28 gives you until 31 December 2026 instead.
I live in Lithuania but work remotely for a foreign employer. What do I owe here?
The question is residency, and it is the one worth paying an accountant to settle rather than guessing. You are generally a Lithuanian tax resident if you have your permanent place of residence here, or spend more than 183 days in the country during a calendar year, or have your centre of personal, social or economic interests here. Residents are taxed on worldwide income; non-residents only on Lithuanian-source income. So the foreign salary of a resident is within scope regardless of where the employer sits or where it is paid. A double tax treaty may stop you being taxed twice โ Lithuania has treaties with many countries โ but relief usually has to be claimed rather than applied by default, and moving partway through a year makes the arithmetic harder rather than simpler. Track your days from the moment you arrive.
I have children, or a reduced capacity for work. Does that change my allowance?
Yes, and by more than most people realise, because these sit outside the taper. The child allowance is added on top of whatever NPD your income already gives you: โฌ70 a month for one child, โฌ210 for two, โฌ350 for three and โฌ490 for four or more โ the first child is worth โฌ70 and each further child โฌ140. A recognised reduced capacity for work replaces the formula rather than adding to it: a fixed NPD of โฌ1,127 a month applies, which is above the โฌ747 anyone else can reach and does not shrink as your salary rises. One limit applies in both cases โ the total allowance can never exceed your gross pay.
I am selling a flat, or some shares. Which rate applies?
Neither goes through the employment bands. A property sale is often taxed at 0% because the gain is exempt where you have held the property for five years or more โ that period was shortened from ten, which materially changes the arithmetic on a medium-term hold, so check the rule that applies to your acquisition date rather than an older guide. Capital gains are income not from employment relations: the part up to twelve average monthly wages, โฌ27,746 in 2026, is taxed at 15%, and above that the ordinary bands apply โ 20 percent, then 25, then 32. The older arrangement of 15 percent up to 120 average wages and 20 percent above it ended on 1 January 2026, which moved the boundary down roughly tenfold rather than up, so a large disposal in a single year meets the higher rates much sooner than pre-2026 material suggests. Interest is 15%, and treaties may reduce that for non-residents. Dividends are a separate flat 15% regardless of what else you earn. If your gains come from an investment account, different rules again apply.
Disclaimer
This is general information, not tax advice. Rates, thresholds and allowances change โ verify against VMI, the State Tax Inspectorate, or consult a qualified Lithuanian tax adviser before making decisions.
Put your own gross figure through the bands
The NPD taper and the three GPM rates are hard to hold in your head at once, and Sodra sits on top of them. The calculator applies all of it to the salary you were actually offered.