Quick answer
The standard corporate income tax rate in Lithuania is 17%. A newly registered small company pays 0% for its first two tax periods and 7% after that, as long as its annual income does not exceed €300,000. The 0% rate is available only when all owners are private individuals and the company is not sold, reorganised or wound up within its first three years. The annual return is filed by 15 June, and new companies make no advance payments in their first year.
Lithuania taxes company profit every year, whether or not the owners take it out. For a founder running a business in Lithuania from abroad, that makes the Lithuanian corporate tax rate the first number to know. The second is whether the Lithuanian UAB qualifies for the reduced rates for small businesses. For a company with a few owners and modest turnover, those rates decide whether the tax bill is zero, a few thousand euros or considerably more.
The rules on corporate tax in Lithuania changed on 1 January 2026, and many English-language guides still describe the old ones. The standard rate rose from 16% to 17%, the small company rate from 6% to 7%, and the 0% rate for new companies was extended from one tax period to two. At the same time the old limit of ten employees was dropped, so headcount no longer matters: what decides the rate is the company’s income, who owns it and whether the structure stays in place for three years. This guide covers the current corporate tax rates in Lithuania, the conditions for the reduced ones and how a UAB declares and pays the tax, as of October 2026.
Lithuania Corporate Tax Rate: 17%, 7% and 0%
Corporate income tax (pelno mokestis, often translated as profit tax) is governed by the Law on Corporate Income Tax and administered by the State Tax Inspectorate (VMI). Three corporate income tax rates matter for an ordinary trading company.
| Rate | Who pays it |
|---|---|
| 17% | All companies that do not qualify for a reduced rate |
| 7% | Small companies with annual income of up to €300,000 |
| 0% | Newly registered small companies, for the first two tax periods, if the owners are private individuals |
Special rates for banks, shipping and large investment projects do not concern a typical foreign-owned UAB. The reduced rates are not something you apply for: if the company meets the conditions in a tax period, it simply uses the lower rate in its annual corporate income tax return.
| What changed | Before | From 1 January 2026 |
|---|---|---|
| Standard rate | 16% | 17% |
| Small company rate | 6% | 7% |
| 0% for new companies | First tax period only | First and second tax periods |
| Employee limit for the reduced rates | 10 employees | Removed |
0% Corporate Income Tax for New Companies: Who Qualifies
The 0% rate is the reason many founders choose a company in Lithuania over other EU options, so it is worth reading the conditions in full rather than stopping at the headline. All of them must be met.
| Condition | What it means in practice | Where founders go wrong |
|---|---|---|
| Newly registered company | The 0% rate covers the tax period in which the company is registered and the one after it | A ready-made company has already used its first period, and transferring its shares to you breaks the three-year condition below |
| Income of up to €300,000 | All income counts, including income that is itself exempt from tax; each tax period is assessed on its own | A strong second year above the limit means 17% on the whole profit of that year, not just on the excess |
| Shareholders are private individuals only | Every shareholder is a natural person, resident or not | A holding company as shareholder rules the 0% rate out entirely |
| No related companies above the limit | If the same shareholder, or their family, holds more than 50% of several companies, the income of all of them is added together | A second company owned by the same founder or their spouse can push the group over €300,000 |
| Three years of stability | For three consecutive tax periods, starting with the first, the company is not suspended, liquidated or reorganised, and its shares are not transferred to new shareholders | Selling even part of the company in year three loses the relief for the earlier years |
When the Owner Is a Company
Foreign founders often hold their Lithuanian UAB through a holding company at home, for good reasons of their own. For the 0% rate this is the single most important decision. A Lithuanian LLC with a corporate shareholder cannot use it, however small the business. It can still use the 7% rate if its income does not exceed €300,000, so the difference in the first two years is 7% of taxable profit rather than nothing. Whether that is worth changing the structure for depends on the profit you expect: on €50,000 of profit it is €3,500 a year.
A typical situation: a consultant wants an existing holding company abroad to own the new UAB, so that the Lithuanian profit can later move into the holding tax-free. That is a sound structure for a company that will reinvest or grow, but it gives up two years at 0%. If the profit is going to be paid out to the founder anyway, holding the shares personally first and moving them into the holding after the third tax period usually produces the better result.
Related Companies and the €300,000 Limit
The income limit is tested for the company together with its related companies, not for each company separately. Companies are related when the same shareholder, the same group of shareholders, or a shareholder together with their family members holds more than half of each of them on the last day of the tax period. If the combined income of the related companies exceeds €300,000, none of them may use the 0% or 7% rate, even if each one on its own is well below the limit. Owning several companies is not a problem in itself: two companies with €100,000 of income each both keep the reduced rate.
Another typical situation: a founder already owns a company with €250,000 of annual income and registers a second UAB for a new line of business. The new company’s own income is small, but the two together are over the limit, so both pay 17% for that year. The law does not limit the rule to Lithuanian companies, so a company you own abroad may count as well. Anyone who already runs another business should check this before relying on the reduced rate.
What Makes You Lose the Relief Later
The 0% rate comes with a three-year condition. If within the first three tax periods the company suspends its activity, is liquidated or reorganised, or its shares pass to new shareholders, the relief is lost and the tax for the periods already taxed at 0% is recalculated as if the 0% rate had never applied. The law sets no threshold for the share transfer, so even a small stake sold to a new partner counts. A founder who plans to bring in an investor or sell the company within three years should therefore budget for the tax as if the 0% rate did not exist.
The 7% Small Company Rate After the First Two Years
After the two 0% periods the company moves to the 7% rate, and it keeps it for as long as its income stays at or below €300,000 and it is not caught by the related companies rule. There is no time limit on the 7% rate and no requirement that the shareholders be individuals, which is why a UAB owned by another company pays 7% from its first year rather than 0%. The income test is applied to each tax period separately: a company that earns €320,000 in one year pays 17% on that year’s profit and returns to 7% the following year if its income falls back under the limit.
How Much Corporate Tax a Lithuanian UAB Pays: A Worked Example
The table shows the tax on €50,000 of taxable profit in the most common situations, together with what the owner receives if the whole profit is paid out as a dividend. Dividends paid to an individual are taxed at a flat 15% in Lithuania, which a tax treaty may reduce for a non-resident.
| Situation | Corporate income tax | Dividend tax | Owner receives |
|---|---|---|---|
| New UAB, owner is a private individual, first or second year | €0 | €7,500 | €42,500 |
| Same UAB from the third year, income up to €300,000 | €3,500 | €6,975 | €39,525 |
| UAB owned by a foreign holding company, income up to €300,000 | €3,500 | €0 if the participation exemption applies | €46,500 to the parent company |
| Any UAB with income above €300,000, owner is a private individual | €8,500 | €6,225 | €35,275 |
Over the first two years the difference between an individual owner and a holding company on this profit is €7,000, which is why the ownership question matters more than the headline rate.
When the Profit Is Paid Out
Corporate income tax is only the first layer of Lithuanian company tax. When the UAB pays dividends, the recipient is taxed again. An individual shareholder pays a flat 15% personal income tax, which the company withholds; a double tax treaty between Lithuania and the shareholder’s country of residence may bring the rate down. Dividends paid to a foreign parent company carry withholding tax at 17%, deducted by the UAB, unless the participation exemption applies. The exemption requires a parent in the EEA or a treaty country that holds at least 10% of the shares for twelve months. The 0% rate does nothing to change any of this: it reduces the tax at company level, and the dividend is taxed as usual.
What Counts as Taxable Profit
The taxable profit of a Lithuanian UAB is its income for the tax period less its allowable deductions. Deductible costs are the ordinary expenses of earning the income: salaries, rent, software, subcontractors, professional fees, travel and depreciation of fixed assets. Some costs are deductible only in part, representation expenses being the usual example, and costs that have nothing to do with the business are not deductible at all.
Two reliefs are worth knowing even for a small company. Research and development costs can be deducted three times over, which lets a software or product company bring its taxable profit down sharply, and profit from intellectual property created in such work is taxed at 7% rather than 17%. Since 2026 the full purchase price of machinery, equipment, computers and software can also be deducted in the year the asset is first used, instead of being depreciated over several years, provided the company keeps using it for at least three years. Both reliefs have detailed conditions, so they are claimed with an accountant rather than on the founder’s own estimate.
Losses are carried forward without a time limit, as long as the company continues the activity that produced them, but in any one year they can reduce taxable profit by at most 70%, a limit that does not apply to small companies taxed at 7%. Dividends a UAB receives from a subsidiary are normally exempt from corporate income tax, which is what makes a Lithuanian holding company workable.
Filing and Paying Corporate Income Tax in Lithuania
For almost every UAB the tax period is the calendar year; a new company’s first period runs from its registration date to 31 December. The annual return, form PLN204, is filed electronically through VMI’s declaration system (EDS) by the 15th day of the sixth month after the end of the period, which for a calendar-year company means 15 June. The tax is paid by the same date. A return is required even when the company made a loss or paid 0%, and it is prepared from the same accounts as the annual financial statements the company files separately with Registrų centras.
| Obligation | Form | Deadline |
|---|---|---|
| Annual corporate income tax return and payment | PLN204 | 15 June of the following year |
| Advance tax returns, only above the threshold | FR0430 | 15 March and 15 September |
Advance payments are the part most guides get wrong for small companies. They are required only when the company’s taxable income for the previous tax period exceeded €300,000, and the test is on revenue, not profit. A company in its first tax period is exempt by law. A small company below the limit never pays advance tax at all. Larger companies choose at the start of each year whether to base the advances on last year’s result or on a forecast for the current one, and pay them in quarterly instalments.
Filing in EDS requires a Lithuanian login, which most foreign directors do not have, so the return is usually filed by an accountant in Lithuania authorised to act for the company.
Corporate Income Tax and Your Lithuanian UAB With Eesti Firma
Most of the tax saving in Lithuania is decided before the company exists: who the shareholders are, whether another company of yours counts as related, and whether you can commit to keeping the structure for three years. We go through those questions with you before registering your company in Lithuania, so that a Lithuanian LLC set up for the 0% rate actually gets it. We also provide the registered address in Vilnius and arrange the filings that follow.
Frequently Asked Questions
No tax is due on a loss, and the loss is carried forward against future profit. The company must still file the PLN204 return by 15 June, and it must still prepare and file annual financial statements with Registrų centras.
7% on taxable profit, as long as the company’s annual income is €300,000 or less and it is not caught by the related companies rule. A newly registered small company owned by private individuals pays 0% for its first two tax periods before moving to 7%.
Yes, as long as the companies’ combined income for the tax period is €300,000 or less. Companies count as related when you, or you and your family, hold more than half of each. If the combined income goes over the limit, all of them pay 17% for that year, whatever each earned on its own.
Yes, if it meets the conditions. A company that had its first tax period at 0% under the old rules gets its second one at 0% under the new ones, so a company registered the year before the change pays 0% in its second year as well. A company in its third or later tax period moves to 7%.
No. The 0% rate is reserved for companies whose shareholders are all private individuals. A UAB with a corporate shareholder pays 7% from the start if its income is €300,000 or less, and 17% if it is above.
For that tax period, yes: the whole profit is taxed at 17%. The income test is applied to each period separately, so a company that returns below the limit the following year can use the reduced rate again.
Estonia taxes company profit only when it is distributed, at 22/78 of the net dividend, so a company that reinvests everything pays nothing. Lithuania taxes profit every year at 17%, 7% or 0%, and then taxes the dividend separately at 15%. For a small company that pays out its profit in its first two years, Lithuania’s 0% rate can produce the lower total; for a company that keeps its profit inside, Estonia’s deferral usually does. Which is better depends on how much you plan to take out and when.
