Lithuania’s parliament on Tuesday rejected the government’s primary proposal to significantly expand the tax on residential property but agreed to begin debate on a related, secondary piece of legislation.
Lawmakers voted down proposed amendments to the Law on Real Estate Tax that would have introduced new property tax rates and required municipalities to set a non-taxable threshold for the value of a primary residence, commonly referred to as a “floor”.
The bill, submitted by the government, failed to pass the initial submission stage. A total of 62 members of the Seimas voted in favour, 40 opposed, and 24 abstained – falling short of the support needed to move the bill forward.
Some of the MPs of the governing coalition failed to support the bill. These included 10 out of 19 lawmakers from the Nemunas Dawn party who were present during the vote, three of 15 members from the Democrats "For Lithuania" party, and one representative from the Social Democratic Party.
In a follow-up vote, the bill was returned to the government for revision.
Despite this setback, the Seimas approved the introduction of a complementary bill that outlines procedures for municipalities to set specific property tax rates on assets within their jurisdictions. The measure passed with 62 votes in favour, 26 against, and 21 abstentions.
The accompanying legislation also stipulates that municipal councils must submit their decisions on tax rates, exemptions, non-taxable thresholds, and the necessary data for tax calculation to the central tax administrator within one month of adopting such resolutions.
The property tax reform has been a point of contention in Lithuanian politics, with advocates arguing that a broader tax base would improve public finances and enhance equity, while critics warn it would burden homeowners.
The government is expected to revise the main bill and may reintroduce it in the coming months.
Tax reform package moves ahead
The property tax bill is part of a larger package of the government’s effort to raise additional revenue for military spending.
Lithuanian lawmakers on Tuesday accepted eight out of nine tax bills for further consideration after a vote of 70 in favour and 50 against.
The accepted bills will be further discussed on June 3-10.
Following the votes, Prime Minister Gintautas Paluckas said he will have a serious talk one of the coalition partners, the Nemunas Dawn party, whose MPs did not support the bill.
Paluckas also called the vote a minor misunderstanding and said it will be corrected on Thursday.
He did not rule out that the bill will be slightly adjusted to take the comments of the coalition partners into account.
The tax changes package includes three progressive personal income tax rates.
In addition, the bill proposes increasing the corporate tax rate by one point, to 17 percent, taxing all non-life insurance contracts, with the exception of third-party liability insurance for private cars, and to introducing a “sugar tax”.
The amendments are to be adopted by July to come into force next year.
The proposed package of tax changes is expected to raise an additional 278.8 million euros for the government in 2026 and 551.9 million euros in 2027. The bulk of the revenue will be earmarked for national defence.
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