Personal Income Tax in Lithuania for Foreign Residents (2025 Guide)

If you live or work in Lithuania as a foreigner—whether in Vilnius, Kaunas, or Klaipėda—understanding your tax obligations is essential. In 2025, personal income tax in Lithuania for foreign residents depends primarily on your tax residency status, not your nationality or residence permit alone.

Many expats assume that if their employer withholds tax, everything is settled. In reality, issues often arise with foreign income, remote work, investments, rental income, or multiple income sources. This guide explains the legal framework, compliance steps, and common mistakes, written in clear, practical English for international professionals and business owners.

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Legal Background in Lithuania

Personal income tax in Lithuania is regulated mainly by the Law on Personal Income Tax and administered by the State Tax Inspectorate (VMI). The key legal concept for foreigners is whether you are classified as a Lithuanian tax resident or a non-resident.

Tax residency vs immigration status

A residence permit (TRP) does not automatically determine your tax status. Tax residency is based on factual and legal tests, including:

• Having a permanent place of residence in Lithuania
• Having your center of personal, social, or economic interests in Lithuania
• Being physically present in Lithuania for 183 days or more in a calendar year
• Meeting the 280-day rule over two consecutive years (with at least 90 days in one year)

If you meet any of these conditions, you may be considered a Lithuanian tax resident for personal income tax purposes.

Why tax residency matters

For personal income tax in Lithuania for foreign residents, the distinction is critical:

• Tax residents are generally taxed on worldwide income, subject to double taxation relief
• Non-residents are taxed only on Lithuanian-source income

Personal income tax rates in 2025 (overview)

In 2025, Lithuania applies a progressive tax system for employment-related income:

• 20% on income up to the annual threshold
• 32% on income exceeding that threshold

The exact threshold is defined by law and linked to national wage indicators, so it may change annually. Other income categories (such as dividends or individual activity income) may follow different rules.

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Step-by-Step Legal Process

Following a structured approach helps avoid penalties and missed refunds.

Step 1: Determine your tax residency

Track your physical presence in Lithuania and document where your main life and economic activities are based. This is especially important if you travel frequently or work remotely.

Step 2: Identify all income sources

Do not focus only on salary. Foreign residents often overlook:

• Foreign employment income
• Freelance or consulting income
• Rental income (Lithuanian or foreign property)
• Dividends, interest, or capital gains
• Employer-provided benefits

Step 3: Understand withholding vs self-declaration

Salary from a Lithuanian employer is usually taxed via payroll withholding. However, many other income types must be declared manually in your annual tax return.

Step 4: File the annual tax return

Annual personal income tax returns are filed electronically through the VMI system (EDS). The usual deadline is around 1 May of the following year.

Step 5: Pay tax or claim a refund

After filing, you either:

• Pay any outstanding tax, or
• Receive a refund if excess tax was withheld

Step 6: Keep records

VMI may request documents later. Keep all relevant records for several years in case of review.

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Key Legal Requirements & Documents

Foreign residents should maintain a complete personal tax file, including:

• Identity and status

  • Passport or national ID
  • Lithuanian residence permit (if applicable)
  • Lithuanian personal code (if issued)

• Employment income

  • Employment contracts
  • Payslips and annual income summaries
  • Bonus or benefit statements

• Tax residency evidence

  • Travel records and calendars
  • Lease agreements or property documents
  • Proof of family or economic ties

• Foreign income

  • Foreign payslips or contracts
  • Certificates showing tax paid abroad
  • Bank or brokerage statements

• Individual activity or freelancing

  • Activity registration documents
  • Invoices issued and received
  • Expense documentation (where allowed)

• Annual filing

  • Copies of submitted tax returns
  • Correspondence with VMI

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Common Legal Mistakes to Avoid

Assuming payroll withholding is enough

Employers only withhold tax on salary. Foreign income and side activities are your responsibility.

Misunderstanding tax residency rules

Many foreigners focus only on the 183-day rule and ignore the center of interests test, leading to unexpected residency status.

Ignoring double taxation relief

If you paid tax abroad, failing to apply treaty relief correctly can result in double taxation.

Missing the filing deadline

Late filing or payment can lead to penalties and interest, even if no additional tax is due.

Incorrect use of the non-taxable amount (NPD)

Lithuania applies a non-taxable amount linked to income level. Errors here often lead to under- or overpayment.

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Frequently Asked Questions (FAQ)

Who is considered a foreign tax resident in Lithuania?

A foreigner who meets Lithuania’s tax residency tests (days, permanent home, or center of interests) is treated as a Lithuanian tax resident for personal income tax purposes.

Do foreign residents pay tax on worldwide income?

Yes. Lithuanian tax residents are generally taxed on worldwide income, but double taxation treaties may reduce or eliminate double tax.

What is the personal income tax rate in Lithuania in 2025?

Employment income is generally taxed at 20% up to the annual threshold and 32% above it, with specific rules for other income types.

Do I need to file a tax return if I only earn salary?

Often yes, especially if you want to correct withholding, apply deductions, or claim a refund.

How do I avoid double taxation?

By applying the relevant double taxation treaty and claiming foreign tax credits or exemptions where allowed.

Is a residence permit the same as tax residency?

No. Immigration status and tax residency are legally separate concepts.

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Conclusion

In 2025, personal income tax in Lithuania for foreign residents is manageable when handled correctly, but mistakes can be costly. The key is understanding your tax residency, identifying all income sources, and filing an accurate annual return.

Foreign professionals living in Vilnius, Kaunas, or Klaipėda should treat personal income tax as a legal compliance matter—not just an administrative formality. Proper planning and documentation help prevent penalties, reduce tax risks, and ensure long-term compliance in Lithuania.