How to Pay Yourself from an MB

Member Withdrawals, Management Fees and Profit Distribution

Updated 8 September 2026

An owner of a Lithuanian Small Partnership (MB) can receive money through management or service fees, withdrawals for personal needs, and profit distributions commonly called dividends. Each route has a different purpose and tax treatment. Choosing the right one starts with understanding what the payment represents and where the owner is tax resident.

For international founders, the distinction matters twice: a payment can affect the MB’s taxable profit in Lithuania and create a separate personal tax obligation abroad. Money in the company’s bank account does not automatically become the owner’s personal income.

Can an MB owner receive a salary?

An MB member cannot have an employment relationship with their own MB. This means the member cannot sign an employment contract with that MB and receive an ordinary employee salary. The restriction concerns the member’s own MB; it does not prevent employment with another company. See Article 7 of the Law on Small Partnerships.

However, members can participate in the MB’s activities and receive the types of payments described below. It would be too broad to say that every member must work exclusively under a services agreement: membership itself provides a basis for participating in the business, and personal-needs withdrawals and profit distributions do not require a services contract.

What a civil law services agreement means

For an owner who manages the company, “management services agreement” is a natural, reader-friendly term.

This is a contract under which the individual provides agreed services to the MB for a fee. It sets out the scope of services, responsibilities, remuneration and payment terms. It is governed by civil-law rules rather than being an employment contract. A monthly management fee may provide regular income, but calling it a salary can confuse its legal and tax treatment.

Members may also contract to provide other services or perform work for their MB. The arrangement must not have the characteristics of employment, and the remuneration must reflect market value. The combined statutory ceiling for services and work under these member agreements is €100,000 per calendar year, including management services. Splitting one arrangement into several contracts does not create separate allowances. See VMI guidance on member service agreements.

Management fees and company expenses

A properly supported fee for genuine services can be a deductible business expense. That reduces the MB’s taxable profit and, where corporate income tax is payable, reduces that tax. The agreement should describe real business services, and the accounting records should substantiate the charge. The deduction is subject to the applicable requirements and member-payment limit. See VMI guidance on MB deductions.

For example, suppose an MB has €50,000 of taxable profit before a deductible €20,000 management fee. After that expense, taxable profit falls to €30,000. At an assumed 17% corporate tax rate, company tax falls from €8,500 to €5,100: a €3,400 reduction. The owner separately receives €20,000 of gross fee income, on which personal taxes may arise.

For 2026, Lithuania’s standard corporate income tax rate is 17%. A 7% rate or 0% relief may apply where the company meets the relevant conditions; MB status alone does not guarantee either. At a 7% rate, the same €20,000 deduction would save €1,400. At 0%, it would produce no immediate corporate tax saving. Rates are set out in VMI’s business tax overview.

Where management fees are taxed

If the member is tax resident in Lithuania, Lithuanian personal income tax rules apply. In 2026, qualifying non-employment income, including relevant member management fees, is taxed at 15% within the combined 12 VDU threshold of €27,745.80. Above that threshold, progressive 20%, 25% and 32% rates can apply, depending on total annual income. The threshold is shared with other qualifying income, rather than being a separate allowance for every contract. See VMI’s 2026 income tax rules.

If the member-manager is genuinely non-resident for Lithuanian tax purposes, VMI identifies their remuneration for managing the MB as outside the Lithuanian personal income tax base. The owner must then assess taxation and reporting in their country of tax residence. This is the basis for many arrangements in which the Lithuanian MB deducts a management expense while the owner pays personal income tax abroad. See VMI’s explanation of non-resident member-manager income.

That treatment should not be extended automatically to every payment labelled “civil agreement.” Rent from Lithuanian real estate, for example, can remain taxable in Lithuania. The actual income category, residence status and applicable treaty must be checked. Nationality or the location of the receiving bank account does not establish tax residence. Retain evidence of the member’s foreign tax residence and identify the services accurately.

Member withdrawals for personal needs

An MB member can also take funds for personal needs. Amounts classified as employment-related income for tax purposes are generally reported under income code 02. This tax classification does not create an employment contract. Profit distributions are a separate category, normally reported under code 26. See VMI’s member income guidance.

Personal-needs withdrawals can carry both personal income tax and social insurance obligations. For members subject to Lithuanian social security, Sodra states that the VSD contribution base is 50% of the relevant withdrawals from January through June 2026, increasing to 90% from 1 July 2026. The ordinary VSD rate is 13.83%, with an additional 3% for applicable pension accumulation participants. Health insurance contributions, exemptions and contribution ceilings must also be considered. See Sodra’s MB member guidance.

For corporate tax, the deductible withdrawal amount is linked to the amount on which VSD contributions are calculated and paid. See VMI’s rules on allowable MB expenses.

Receiving dividends from an MB

A dividend is a distribution of profit to the owner. It is not payment for management services and does not reduce the company’s taxable profit. The company first determines its profit and corporate tax liability; it then distributes the available profit under the applicable approval and accounting rules.

Lithuania’s personal income tax rate on profit distributions is 15%. These distributions are outside the progressive income-tax bands that apply to certain other earnings. A Lithuanian-resident MB member normally declares and pays the tax themselves. See VMI’s guidance on MB member income.

Consider €10,000 of pre-tax company profit, assuming accounting profit equals taxable profit and no losses or distribution restrictions apply. At 17% corporate tax, the MB has €8,300 left. A 15% dividend tax on that amount is €1,245, leaving the owner €7,055. The combined Lithuanian tax is €2,945, or 29.45% of the original profit—not 32%, because the two taxes apply to different amounts.

Using the same assumptions, a 7% company tax rate leaves the owner €7,905 after 15% dividend tax. With qualifying 0% company tax, the owner receives €8,500. These calculations exclude any additional foreign personal tax and do not establish eligibility for a company tax relief.

Where foreign owners pay dividend tax

There is no general EU rule under which dividends are taxed only in whichever country has the higher rate. The company’s country may tax the dividend at source, while the owner’s country of residence may also tax it. National laws and the relevant double-tax treaty determine the result. The residence country may grant a foreign tax credit or another form of relief. See the European Union’s explanation of double taxation.

For dividends paid by an MB to a non-resident individual, the MB generally handles Lithuanian withholding. The domestic dividend rate is 15%, subject to any applicable treaty reduction. The owner may still need to declare the gross dividend and Lithuanian tax in their residence country. VMI distinguishes payments to non-resident members in its income reporting guidance.

Greece example with a 5 percent dividend rate

Greece’s tax authority lists a 5% dividend tax rate. Assume an individual who is tax resident in Greece receives a €10,000 gross dividend from a Lithuanian MB and is subject to the ordinary regime. See AADE’s published income tax rates.

The Lithuania–Greece treaty permits source-country tax of up to 15% for an individual beneficial owner. Its 5% source-tax ceiling is for qualifying corporate holdings, not an individual MB member. Lithuania can therefore withhold €1,500. Greece’s 5% calculation is €500; with the appropriate credit, no additional Greek dividend tax would ordinarily remain. Excess Lithuanian withholding over that €500 is not automatically refunded by Greece. This illustrates Articles 10 and 24 of the Lithuania–Greece tax treaty.

The treaty also contains an underlying company-tax credit provision. Its application and documentation should be checked locally. The example isolates the ordinary dividend withholding and credit mechanism and assumes no special personal tax regime.

Example where the residence country taxes dividends at 25 percent

Now assume a €10,000 dividend, 15% Lithuanian withholding and a hypothetical 25% residence-country tax. If that country allows a full credit for the €1,500 Lithuanian tax, the owner owes another €1,000 there. The total personal tax is €2,500, paid across two countries. This is an illustration, not a statement about a particular country’s rules.

A higher combined rate can therefore result from the credit calculation. It does not mean the owner chooses one country and pays all the tax there. Treaty limits, credit restrictions and special regimes can produce different outcomes.

Documentation before paying yourself

For a management fee, keep the signed agreement, evidence of the services, an appropriate accounting document and the payment record. For a profit distribution, arrange the necessary financial statements and member decision, and confirm that distributable profit and payment conditions are satisfied. A bank balance alone is not sufficient evidence of distributable profit.

For cross-border payments, obtain residence evidence and confirm who must report and pay each tax. Where treaty relief reduces Lithuanian withholding, VMI describes the DAS-1 procedure. DAS-2 is used to request a refund of over-withheld Lithuanian tax, and DAS-3 provides certification of Lithuanian income and tax paid. See VMI’s treaty documentation guidance.

Choosing how to pay yourself from an MB

The useful comparison is the total cost of each valid payment route: company tax, personal income tax, social contributions and administration. Regular fees may suit genuine ongoing management services. Dividends suit the distribution of accumulated profit. Personal-needs withdrawals require attention to their income-tax classification and social insurance consequences.

An accountant can model a combination using the company’s actual profit, your expected annual income and your tax residence. The lowest Lithuanian company-tax bill does not necessarily produce the highest personal take-home income.

If you are planning company registration in Lithuania, discuss owner payments before making the first transfer. BalticIncorp can help with MB formation and Lithuanian accounting arrangements, while an adviser in your country of residence can confirm the foreign tax treatment.

Frequently Asked Questions

Can I pay myself every month?

A management services agreement can provide for monthly fees for ongoing services. Record them as the appropriate contractual remuneration. Other recurring withdrawals need their own valid basis and accounting treatment.

Do I pay dividend tax twice if I live abroad?

Both countries may have taxing rights, but treaty relief can reduce double taxation. You may still have reporting obligations in both countries, and the available credit may not cover every charge. Individual outcomes depend on tax residence, the payment’s classification, treaty eligibility and the circumstances of the business.