Summary
Lithuania uses a two-rate progressive income tax (gyventoju pajamu mokestis, GPM) with a standard rate of 20% and a higher rate of 32% for income above the threshold. Employees pay social insurance contributions (Sodra) for pension and health insurance directly from their gross salary. Since 2019, Lithuania shifted most social contributions from employer to employee, making the employee-side rates significant.
How it works
Your take-home pay is your gross salary minus three main deductions:
- Income tax (GPM) — 20% on income up to the threshold, 32% above it
- Pension contributions (Sodra VSD) — 12.52% of gross salary
- Health insurance (Sodra PSD) — 6.98% of gross salary
Lithuania also provides a tax-free amount (NPD — neapmokestinamasis pajamu dydis) that reduces taxable income for lower and middle earners.
Income Tax Rates (2025)
| Annual taxable income | Rate |
|---|---|
| Up to EUR 126,532 (60 average salaries) | 20% |
| Above EUR 126,532 | 32% |
The non-taxable income amount (NPD) is calculated using a formula that provides the maximum benefit for low earners and phases out as income rises:
- Maximum NPD: approximately EUR 747/month (EUR 8,964/year) for minimum-wage earners
- The NPD decreases as monthly income rises and reaches zero for higher earners
Taxable income = Gross salary - Social contributions (Sodra) - NPD.
Social Security Contributions (Employee Share, 2025)
| Component | Rate | Notes |
|---|---|---|
| Pension insurance (VSD — pensiju draudimas) | 12.52% | Of gross salary |
| Health insurance (PSD — sveikatos draudimas) | 6.98% | Of gross salary |
| Total employee share | 19.50% |
These contributions are deducted from the employee’s gross salary. The employer pays an additional 1.77% (approximate) for accident and guarantee fund contributions.
Worked Example
For a gross annual salary of EUR 25,000 (single, no dependants):
-
Social contributions (Sodra):
- Pension (VSD): EUR 25,000 x 12.52% = EUR 3,130.00
- Health (PSD): EUR 25,000 x 6.98% = EUR 1,745.00
- Total Sodra: EUR 4,875.00
-
Income after social contributions:
- EUR 25,000 - EUR 4,875.00 = EUR 20,125.00
-
Non-taxable amount (NPD):
- At EUR 25,000 gross (approximately EUR 2,083/month), the NPD is partially reduced
- Approximate annual NPD: ~EUR 4,800 (this varies by the exact formula)
-
Taxable income:
- EUR 20,125.00 - EUR 4,800 = EUR 15,325.00
-
Income tax (GPM):
- EUR 15,325 is within the 20% bracket (well below EUR 126,532)
- EUR 15,325 x 20% = EUR 3,065.00
-
Total deductions:
- EUR 4,875.00 + EUR 3,065.00 = EUR 7,940.00
-
Take-home pay: EUR 25,000 - EUR 7,940 = ~EUR 17,060/year (~EUR 1,422/month)
Note: The NPD amount is approximate. The exact value depends on the formula set annually by the government and varies with income level.
Assumptions and Limitations
- 2025 rates only — uses thresholds and rates effective for the 2025 tax year
- Employment income only — does not model self-employment (individual activity), dividends, or rental income, which use different rates
- Simplified NPD — the non-taxable amount varies by a formula based on monthly income; the example uses an approximation
- No additional deductions — does not model life insurance contributions, pension (III pillar), or other deductions that reduce taxable income
- Single taxpayer — does not account for child allowances or disability relief
- Standard employment — assumes a standard employment contract under the Lithuanian Labour Code