The Lithuanian government on Wednesday approved a revised package of tax amendments proposed by the Ministry of Finance, which will now move to the Seimas for parliamentary debate.
Prime Minister Gintautas Paluckas said the changes are expected to generate approximately €280 million in additional revenue in 2026. By 2027, the measures could bring in between €560 million and €580 million.
“Despite some colourful and factually inaccurate arguments in public discussions, I want to emphasise that these tax changes will directly channel €345 million into the Defence Fund in 2026 and €513 million in 2027,” Paluckas said during the Cabinet meeting.
He acknowledged that the government did not reach consensus on every proposal, and unresolved issues will be taken up by the parliamentary Budget and Finance Committee.
Paluckas emphasised that the changes will not dramatically undermine business competitiveness or place a disproportionate burden on society’s most vulnerable groups, but will address strategically important national challenges.
“These are not structural reforms but targeted legislative amendments,” Finance Minister Rimantas Šadžius said. “Compared to earlier drafts, we have adjusted the proposals to address critical and sometimes unexpected concerns that bureaucratic drafting might overlook.”
Real estate tax model overhauled
One of the most debated proposals – the residential real estate tax – underwent multiple revisions. Under the latest model, municipalities would be allowed to define a tax-exempt value threshold for primary residences.
Property value exceeding that threshold would be taxed at rates ranging from 0.1 percent to 1 percent.
The tax on commercial property remains unchanged, with municipalities setting rates between 0.5 percent and 3 percent. An additional 0.2 percent levy would also apply.
Šadžius noted that commercial properties formerly used for agricultural purposes but no longer active would be exempt from tax for five years, acknowledging their limited liquidity.
Personal income tax changes
The government scrapped a proposed 36-percent personal income tax rate for earnings above 10 times the average wage. Instead, it plans to introduce a new 25-percent bracket alongside the current 20 and 32 percent rates.
The Ministry of Finance also proposed applying a 15-percent income tax rate not only to dividends but also to gains from selling shares or stakes held for more than 10 years.
“This addresses economic logic – that one-off income should not be overtaxed – and mirrors how dividends are treated if one retains their equity stake,” said Šadžius. “The 10-year holding requirement may be debated, but it’s intended to encourage long-term investment in corporate equity.”
Corporate and consumption tax adjustments
The standard corporate tax rate would increase by 1 percentage point to 17 percent, and the reduced rate would rise from 6 percent to 7 percent.
The package also includes new excise taxes on sugary drinks and employee health insurance benefits exceeding €350 per year, when paid by employers.
Significant changes are proposed to the value-added tax (VAT):
- The VAT on district heating, hot water, and firewood would rise from 9 percent to the standard 21 percent.
- The reduced VAT on books and non-periodical publications would drop from 9 percent to 5 percent.
- Preferential VAT rates for accommodation services, passenger transport, and cultural events would increase from 9 percent to 12 percent.
Additionally, all non-life insurance policies, except for mandatory civil liability insurance for personal vehicles, would be subject to a new 10-percent tax.
If passed by the parliament, Seimas, before July 1, the amendments would take effect on January 1, 2026.
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