Finance Minister Gintarė Skaistė has presented tax reforms that have been in the pipeline for several years. If it goes through, small businesses and self-employed workers will be the most affected.
The Finance Minister has announced her intention to bring the taxation of self-employed workers to the same level as those on salaries. According to Skaistė, there is inequality in self-employment where high earners “pay relatively much less tax”.
Now, expenses that would be excluded from taxation would fall from the current 30% to 20% for the self-employed. Income tax (GPM) rates would also change: the amount taxed at 5% would halve from 20,000 to 10,000 euros, while the top rate would increase from the current 15% to 20%. The highest rate would apply once a self-employed person earns 35,000 euros per year.
The total tax rate for those self-employed would reach 37.6% in 2026. For those on salaries, it would be 40.6%.
Those working with business certificates, which have lower, fixed taxes, would have to register as self-employed if their incomes reach 20,000 euros a year. Previously, the threshold stood at 45,000 euros annually.
Read more: Lithuania’s tax reform: 10 key changes
According to the minister, the changes will target top earners like lawyers and bailiffs, who have high incomes but are registered as self-employed and therefore pay less in tax.
"We can see that these decisions are probably not easy. For a certain group of people, the situation will not be better. But if we want to fix the situation fundamentally, those decisions must be made," says Skaistė.
According to the minister, self-employed workers would now benefit from more social guarantees, for example, they could receive unemployment benefits.
But according to Daiva Čibirienė, president of the Association of Accountants and Auditors, the increased taxation will affect almost everyone, as “all self-employed persons” earn at least 10,000 euros per year, the level from which higher taxes apply.
If the ministry aims to regulate the top earners who pay fewer taxes, the reforms should target these sectors and not affect everyone “who are not earning millions”, Čibirienė says.
Those working with business certificates are not “flying on private jets and sailing on private yachts [...], they are purely the middle class”, she adds.
Dalia Matukienė, chair of the Small and Medium Business Council, says the proposed changes would amount to a purge of small businesses.
"We are probably cleaning up small businesses and they will simply disappear. This is a reckless move and needs to be stopped as soon as possible,” she says.
The changes will have a negative effect in the long run, according to Sigitas Gailiūnas, president of the Association of Chambers of Commerce, Industry and Crafts.
“It may encourage people engaged in certain activities to move abroad and emigrate," he adds.
Supporters of the reforms, however, say doing business will be easier – it will be more convenient to declare earnings, and the cap on the number of employees for small businesses will be removed.
Also, some applaud the idea to allow small-scale entrepreneurs to open business accounts, as well as proposals to allow investment accounts.
Tweaks possible
On Monday, Prime Minister Ingrida Šimonytė said reforms could be tweaked once the proposals reach the parliament.
"Certain corrections are possible following discussions [...] and that bill that will be put before the Seimas may not necessarily be 100 percent the same as it is currently under discussion,” she told LRT Radio, adding that she hopes the reforms will be adopted.
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