Salaries increase 28.9% due to major tax reform in Lithuania

    Jul 30, 2019 @ 02:36 PM / by Jeremy Piccoli

    Lithuania as seen during a recent on-site survey. Photo taken by AIRINC surveyor Oscar Rasson.  

    Lithuania as seen during a recent on-site survey. Photo taken by AIRINC surveyor Oscar Rasson.  

    Country Tax Update: Lithuania  

    Major tax reform has been implemented in Lithuania for 2019. One goal of the changes is to shift the tax burden from employers to employees. Employer contributions to social security have been substantially reduced.

    Employee contributions to social security have increased from 9% uncapped to 19.5% partially capped. Individual income tax rates have increased from a flat 15% to a progressive tax rate schedule with rates ranging from 20% to 27%.


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    What is the net effect of these tax changes?

    The net effect of these changes is a material increase in tax and social security for all incomes. A new labor law rule has been implemented in coordination with the tax changes. Because tax reform shifts the tax burden from employer to employees, a statutory increase in gross salaries is required to offset the increased tax and social contribution costs. Salaries must be increased by 28.9% effective January 1, 2019. For example, a salary of EUR 100,000 must be increased to EUR 128,900.


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    Topics: International Tax, Data Points, Insights and Experience, Tax, International Tax Summaries, International Tax Guide, Residual Tax, Lithuania

    Jeremy Piccoli

    Written by Jeremy Piccoli

    Jeremy joined AIRINC in the fall of 2012 and is responsible for managing AIRINC’s International Tax Guide and tax calculator products, as well as consulting with clients. Prior to joining AIRINC, Jeremy spent more than 6 years with PricewaterhouseCoopers’ International Assignment Services practices in Hartford and Boston, providing tax compliance and consulting services to multinational companies and their expatriate population. He received his B.S. with a concentration in Accounting and a Master of Science in Accounting from the University of Connecticut. Jeremy is an Enrolled Agent, a federally licensed tax practitioner who specializes in taxation.