Corporate Income Tax in Lithuania: What You Need to Know in 2026

Updated April 2026

Lithuania has long positioned itself as one of the more business-friendly environments in the European Union. Low administrative burdens, a straightforward company registration process, and competitive tax rates have attracted entrepreneurs from across Europe and beyond. But 2026 brings a set of meaningful changes to the corporate income tax (CIT) framework — changes every business owner should understand before filing their next return.

The standard corporate tax rates have changed

Effective from 2026, Lithuania has revised both of its corporate income tax rates upward by one percentage point each. While modest in absolute terms, the adjustment affects a broad range of businesses.

REDUCED RATE (SMALL BUSINESSES)

6%→7%

STANDARD RATE

16%→17%

The standard 17% rate applies to the majority of Lithuanian companies — those with annual revenues exceeding €300,000 or with more than ten employees. The reduced 7% rate is reserved for smaller enterprises that meet specific criteria, most notably the €300,000 revenue threshold. The practical impact of the one-point increases will vary by business size and profitability, but business owners should factor this into their 2026 financial planning accordingly.

The most important benefit: 0% tax for new companies

For anyone thinking about starting a company in Lithuania, the most compelling feature of the tax system is a provision that has been retained and remains extremely generous: newly established companies pay 0% corporate income tax for their first two full tax years — provided they do not exceed €300,000 in annual revenue.

Key rule: If you open a new company in Lithuania and your annual revenue stays below €300,000, you pay no corporate income tax at all for the first two years. From year three onward, the reduced rate of 7% applies — as long as you remain under that €300,000 threshold.

This is not a deferral or a partial exemption — it is a full zero-rate period designed specifically to give new businesses breathing room during their critical early stages. For a startup or a small consulting firm reinvesting its early profits, this can represent a substantial advantage over comparable jurisdictions in the EU.

How the tax journey looks for a new company

Years 1 – 2 (revenue under €300k)

0% corporate income tax. No CIT liability regardless of profit.

Year 3 onwards (revenue still under €300k)

7% reduced rate applies to taxable profit.

Year 3 onwards (revenue exceeds €300k)

17% standard rate applies to taxable profit.

Who qualifies — and how to register

The zero-rate benefit is available to companies opened directly under the founder's personal name. There are two main routes depending on your residency status:

Lithuanian residents have a notable convenience advantage: the State Enterprise Centre of Registers (Registrų centras) allows them to incorporate a private limited company (UAB) or small partnership (MB) entirely online, without visiting a notary. The process can be completed in a matter of hours, with a minimum share capital of just €1 (for MB). Non-residents must still work through a local notary for the incorporation, but the process remains relatively straightforward compared to many other EU countries.

Why this matters for entrepreneurs and freelancers

Lithuania's combination of a simple registration process, a genuine two-year tax holiday, and a low post-holiday rate of 7% makes it one of the more attractive EU jurisdictions for small business owners, digital nomads, and early-stage founders. When you add access to the EU single market, a modern banking infrastructure, and increasingly robust fintech options, the case becomes even stronger.

The 2026 rate increases — from 6% to 7% and from 16% to 17% — are modest enough that they do not fundamentally change this picture. Lithuania remains competitive within the EU, and for companies staying under the €300,000 threshold, the effective tax rate in the early years is still zero.

Whether you are relocating, setting up a subsidiary, or simply exploring your options, understanding these rates and incentives is essential to making an informed decision. As always, the specific tax treatment of your company will depend on its structure, activities, and individual circumstances — consulting a local tax advisor before registering is strongly recommended.

This post reflects the corporate income tax rules in effect from 2026 based on Lithuanian tax law. It is intended for general informational purposes and does not constitute legal or tax advice. Always consult a qualified professional for advice specific to your situation.