Table of Contents
What Individuali Veikla Is
Individuali veikla โ literally "individual activity" โ is Lithuania's framework for working for yourself without forming a company. It's what a freelance developer, designer, consultant, translator or tutor would typically register under.
You operate as a person rather than a legal entity. There's no share capital, no company registration, no separate accounts to file. You register the activity, invoice clients, and account for tax on your own income.
Why people like it. At modest income levels, individuali veikla is genuinely lightly taxed โ the combination of a 30% automatic expense deduction and an income tax credit that brings the effective GPM rate down to around 5% is unusually generous by European standards. That advantage narrows sharply as income rises.
What Changed in 2026
If you're reading older guidance, some of it is now wrong. Two changes matter:
- Income tax is more progressive. The effective GPM rate can now climb to 20%, and higher portions of income can be taxed at 25% or even 32%.
- The credit now runs out. Above a threshold, no credit applies and your income goes onto the full progressive scale โ the same one that applies to employment income.
The practical effect: individuali veikla remains very attractive at lower incomes and becomes progressively less distinctive as you earn more.
Step 1 โ Deductions
Before any tax is calculated, you subtract business expenses. You choose one of two methods:
| Flat 30% deduction | Actual documented expenses | |
|---|---|---|
| Paperwork | Automatic โ no receipts needed | Records and receipts for everything |
| Admin | No bookkeeping burden | More admin, more scrutiny |
| Best when | Your real costs are low | Real costs exceed 30% |
| Typical for | Consultants, developers, writers | Anyone buying materials or equipment |
Whichever you use, the result is your taxable income โ and everything downstream is calculated from that figure, not from your gross invoicing.
Step 2 โ Sodra Contributions
Social contributions for the self-employed total 19.5%, made up of:
| Component | Rate | What it covers |
|---|---|---|
| VSD โ state social insurance | 12.52% | Pension and social benefits |
| PSD โ compulsory health insurance | 6.98% | Public healthcare access |
| Total | 19.5% |
The 90% base is an easy saving to miss. Sodra contributions are charged on 90% of your taxable income, not 100%. So the effective rate against taxable income is 17.55%, not 19.5%. It's a small structural discount, but people routinely over-estimate their liability by calculating on the full amount.
Paying PSD brings you into the public healthcare system โ see our healthcare guide. That's a real benefit, not just a deduction.
Step 3 โ Income Tax and the Credit
This is the part that makes individuali veikla distinctive, and the part most often misunderstood.
Rather than a flat rate, GPM is reduced by a tax credit (mokesฤio kreditas) that shrinks as your income rises. The result is a sliding effective rate:
| Taxable income | Effective GPM rate | What's happening |
|---|---|---|
| Up to โฌ20,000 | โ 5% | Full credit applies |
| โฌ20,000 โ โฌ42,500 | Rises gradually toward 20% | Credit tapers away |
| Above โฌ42,500 | 20% / 25% / 32% | No credit โ full progressive scale |
Above โฌ42,500 the progressive bands are the same as for employment income: 20% up to โฌ83,237, 25% from โฌ83,237 to โฌ138,729, and 32% above that.
The formula
The credit is set by GPMฤฎ article 18ยฒ. Article 18ยฒ(1) applies it where annual taxable individual-activity income does not exceed โฌ42,500. There are two lines to it:
| Annual taxable income | Income tax credit |
|---|---|
| Up to โฌ20,000 | taxable income ร 0.15 |
| โฌ20,000 to โฌ42,500 | taxable income ร (0.15 โ 2/300,000 ร (taxable income โ 20,000)) |
Article 18ยฒ(2) gives the first line, article 18ยฒ(3) the second. Both are in the consolidated GPMฤฎ. Taxable income here means income after your 30% or actual expense deduction, not gross invoicing.
The numbers below are our arithmetic on that published formula. The formula is the statute; the euro figures are ours. GPM is shown at 20%, the band that applies to all of these income levels.
| Taxable income | Credit rate | Credit | GPM after credit |
|---|---|---|---|
| โฌ18,000 | 0.15 | โฌ2,700 | โฌ900 โ 5.0% effective |
| โฌ30,000 | 0.08333 | โฌ2,500 | โฌ3,500 โ 11.7% effective |
| โฌ42,500 | 0 | โฌ0 | โฌ8,500 โ 20%, the full rate |
The middle row: 2/300,000 ร (30,000 โ 20,000) = 0.06667, so the credit rate is 0.15 โ 0.06667 = 0.08333.
At the top of the band the bracket closes exactly. 2/300,000 ร (42,500 โ 20,000) = 0.15, so the credit rate is 0.15 โ 0.15 = zero. That is why โฌ42,500 is the ceiling rather than an arbitrary cut-off: the taper is continuous, and the band ends at the income where the credit has run out on its own.
Watch for a lookalike formula that is not this one. Page 13 of VMI's 2026 changes PDF prints a taper that reads like the answer but belongs to the agricultural income provision under GPMฤฎ 6(9)(1). Different article, different result. Compare it against the formula above before you use it โ the one that governs this credit is 18ยฒ.
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.
Worked Examples
Using the 30% flat deduction, to show the shape of it.
| Gross income | After 30% deduction | Sodra (17.55% of taxable) | Credit (art. 18ยฒ) | GPM after credit |
|---|---|---|---|---|
| โฌ20,000 | โฌ14,000 | โฌ2,457 | โฌ2,100 | โฌ700 โ 5.0% |
| โฌ30,000 | โฌ21,000 | โฌ3,686 | โฌ3,010 | โฌ1,190 โ 5.7% |
| โฌ50,000 | โฌ35,000 | โฌ6,143 | โฌ1,750 | โฌ5,250 โ 15.0% |
| โฌ70,000 | โฌ49,000 | โฌ8,600 | none โ above โฌ42,500 | โฌ9,800 โ 20% |
Sodra figures are 19.5% ร 90% ร taxable income. The credit and GPM columns are our arithmetic on the article 18ยฒ formula, with GPM taken at 20% before the credit; percentages are against taxable income. Note that the โฌ42,500 threshold applies to taxable income after deductions โ so gross invoicing of roughly โฌ60,700 is where you'd cross it using the 30% deduction.
The threshold to keep an eye on. Using the flat 30% deduction, taxable income hits โฌ42,500 at around โฌ60,700 of gross invoicing. Below that, the credit is doing real work for you. Above it, you're on the same progressive scale as an employee โ at which point the comparison with a company structure becomes worth running properly.
When VAT Enters the Picture
Separate from income tax entirely. Once your taxable turnover from economic activity in Lithuania exceeds โฌ45,000 within a calendar year, you must register for VAT and charge it at 21%. From 1 May 2025 this is calculated over the calendar year, not the rolling last-12-months period used previously.
You can also register voluntarily below the threshold, which is often sensible if your clients are VAT-registered businesses and you have meaningful input VAT to reclaim.
For B2B services to clients in other EU countries, the reverse charge mechanism often applies โ meaning you don't charge VAT and the client accounts for it. Check before invoicing an EU client. See our VAT calculator.
There is also the small business scheme (smulkiojo verslo schema), which has been in force since 1 May 2025 โ it is not part of the 2026 reduced-rate reform, despite how often the two get run together. It allows VAT-exempt trading up to โฌ45,000 in Lithuania and โฌ100,000 of EU-wide turnover, with quarterly reporting and an identification number issued within 35 working days.
How to Register
Check you're eligible
You need the legal right to work in Lithuania โ see the section below if you're a non-EU citizen.
Register the activity with VMI
Declare individuali veikla with the tax authority, specifying the activity type. Done electronically.
Get your certificate
Confirmation that the activity is registered, with its start date.
Decide your deduction method
Flat 30% or actual expenses. If actual, start keeping records immediately.
Set up invoicing and records
You must issue compliant invoices and keep an income record.
Pay contributions and declare annually
Sodra contributions during the year, and an annual income declaration. See tax returns.
A separate bank account isn't required โ but get one anyway. Lithuanian law doesn't force sole traders to keep business funds separate. But mixing personal and business money makes your annual declaration considerably harder and your position harder to evidence if questioned. A second free account costs nothing โ see our comparison.
If You're a Foreigner
EU / EEA citizens
- Can register individuali veikla freely
- No permit needed
- Register your right of residence if staying 3+ months
- Need an asmens kodas
Non-EU citizens
- Your residence permit must permit self-employment
- An employment-based permit generally does not
- Switching basis requires a new application
- Students: check your permit conditions carefully
Don't start invoicing before checking your permit
If your residence permit is based on employment with a specific employer, self-employed activity may fall outside its terms โ and working outside your permit's conditions puts your right to stay at risk, not just your tax position. Confirm with the Migration Department before you register, not after. See our residence permit guide.
Individuali Veikla vs a Company
| Individuali veikla | UAB (limited company) | |
|---|---|---|
| Setup | Simple registration | Company formation, share capital |
| Admin burden | Low | Accounting, annual filings |
| Liability | Personal | Limited |
| Tax at low income | Very favourable (~5% GPM) | Less advantageous |
| Tax at high income | Full progressive scale | Corporate rate + dividend tax โ often better |
| Credibility with large clients | Sometimes an issue | Generally stronger |
The rough rule: individuali veikla for lower and moderate incomes, a company once you're consistently above the credit threshold โ but the crossover depends on your expenses, how much you draw versus retain, and your liability exposure. Worth an hour with an accountant rather than a guess.
Common Mistakes
Calculating Sodra on 100% of income
It's charged on 90% of taxable income. Using the full figure over-estimates your liability.
Forgetting the deduction comes first
Tax and contributions apply to income after the 30% or actual expenses, not to gross invoicing.
Assuming the ~5% rate applies at any income
It's the effective rate under โฌ20,000. The credit tapers, then disappears at โฌ42,500.
Choosing actual expenses without keeping records
If you elect actual expenses you must document everything. The 30% flat option exists precisely to avoid this.
Registering while on the wrong residence permit
For non-EU citizens this can jeopardise your right to stay. Check first.
Ignoring VAT until it's too late
The registration obligation is triggered by turnover exceeding โฌ45,000 within a calendar year. Track it.
Mixing personal and business money
Not illegal, but it makes your annual declaration harder than it needs to be.
Frequently Asked Questions
What is individuali veikla?
Lithuania's framework for self-employment without forming a company. You register the activity, invoice clients and account for your own tax โ common for freelancers, consultants and contractors.
How much tax will I actually pay?
Sodra at 19.5% on 90% of taxable income (17.55% effective), plus GPM which is around 5% under โฌ20,000, rising as the credit tapers, and reaching the full progressive scale above โฌ42,500. All after your 30% or actual expense deduction.
What is the income tax credit formula?
GPMฤฎ article 18ยฒ. Up to โฌ20,000 of annual taxable individual-activity income, the credit is taxable income ร 0.15. Above โฌ20,000 it is taxable income ร (0.15 โ 2/300,000 ร (taxable income โ 20,000)), which reaches zero at โฌ42,500 โ the ceiling in article 18ยฒ(1). Do not use the similar-looking taper on page 13 of VMI's 2026 changes PDF: that one belongs to the agricultural provision under GPMฤฎ 6(9)(1).
Should I use the 30% flat deduction or actual expenses?
Flat 30% if your real costs are below that and you'd rather avoid bookkeeping โ typical for consultants and developers. Actual expenses if your costs genuinely exceed 30%, and you're willing to document everything.
Do I need a separate business bank account?
Not legally, for a sole trader. But it makes your annual declaration far easier and your position clearer if questioned. A free second account is worth the ten minutes.
Can I do this on a student residence permit?
Check carefully. Student permits have specific work conditions, and self-employment may be treated differently from employment. Confirm with the Migration Department before registering.
Does paying PSD give me healthcare?
Yes. PSD contributions bring you into the public health insurance system.
When do I have to register for VAT?
Once your taxable turnover exceeds โฌ45,000 within a calendar year. This changed from a rolling 12-month basis to a calendar-year basis on 1 May 2025. You can also register voluntarily.
Is a company better?
Generally not at lower incomes, where the GPM credit makes individuali veikla very efficient. A company becomes more attractive as income rises past the credit threshold, or where limited liability matters. Worth modelling properly with an accountant.
Related Guides
Check the structure before you register the activity
Individuali veikla is usually the cheapest way to earn here, but not at every income. The freelancer page puts it against verslo liudijimas, MB and UAB at three income levels, so you can see where it stops winning.
Disclaimer
General guidance, not tax advice. Self-employment taxation depends on your income, expenses, activity type and residence status, and 2026 brought significant changes. The credit formula here is quoted from GPMฤฎ article 18ยฒ; the euro figures worked from it are our own arithmetic. Always check with VMI or a qualified accountant before making decisions.