Reduced Corporate Income Tax in Lithuania From 2026: What Businesses Need to Know

Starting from 2026, important corporate income tax changes will come into force in Lithuania. These updates will affect both newly established companies and existing small businesses operating in the country. The Lithuanian State Tax Inspectorate has published an updated commentary on Article 5 of the Corporate Income Tax Law, clarifying how the new tax rates and reduced tax incentives will be applied from January 1, 2026.

The upcoming changes are particularly important for small businesses, including private limited liability companies (UAB) and small partnerships (MB), because both the corporate tax rates and the eligibility conditions for reduced taxation are being adjusted.

New Corporate Income Tax Rates From 2026

Until the end of 2025, Lithuania applied 6% and 16% corporate income tax rates under certain conditions. However, beginning on January 1, 2026, these rates will change.

From 2026 onward, the following rates will apply:

• a reduced 7% corporate income tax rate;

• a standard 17% corporate income tax rate.

These new rates will be used when calculating corporate income tax for the 2026 tax year and all future tax periods.

Although the increase may appear relatively small, it remains highly relevant for companies planning long-term financial strategies, profitability targets, and business expansion.

0% Corporate Income Tax for Newly Established Companies

One of the most significant changes involves a special incentive for new businesses.

From 2026, newly established companies in Lithuania may qualify for a 0% corporate income tax rate during their first two taxable periods. This creates a major advantage for startups and small businesses because it allows them to reinvest more capital into growth, marketing, operations, staffing, and development during the early stages of business.

Importantly, this benefit will not apply only to companies incorporated in 2026. Businesses established in 2025 may also qualify for the 0% rate in 2026, provided their annual revenue does not exceed €300,000 and they meet the other requirements established under Lithuanian corporate tax law.

This means many companies currently being established in Lithuania will benefit from one of the most attractive small-business tax environments in the region.

Who Can Apply the Reduced 7% Tax Rate?

Starting from January 1, 2026, the reduced 7% corporate income tax rate will apply to small companies whose annual revenue does not exceed €300,000.

One of the most important changes is that the average number of employees will no longer determine eligibility for the reduced rate. From 2026, company revenue becomes the main deciding factor.

This is particularly beneficial for growing businesses that may already employ several people but still operate within relatively modest turnover levels.

The reduced 7% rate will also apply to:

• cooperatives earning more than 50% of their revenue from agricultural activities;

• income generated from the use or sale of research and development (R&D) assets.

These updates clearly demonstrate Lithuania’s intention to support innovation, entrepreneurship, and the growth of small businesses.

Revenue Limits May Be Calculated Collectively

Business owners should also pay attention to how revenue thresholds may be evaluated.

If the same shareholder or group of shareholders controls multiple companies, the revenue of those businesses may be combined when determining eligibility for reduced corporate income tax rates.

Because of this, entrepreneurs operating several Lithuanian companies should carefully review their ownership structure and assess potential tax implications in advance.

This aspect becomes especially important for founders managing multiple projects, holdings, e-commerce brands, or international business structures.

What Do These Changes Mean for Small Businesses?

The upcoming tax changes may create substantial opportunities for small and medium-sized businesses operating in Lithuania. The possibility of paying 0% corporate income tax during the first two taxable periods is especially attractive for startups and newly established companies.

These incentives may encourage more entrepreneurs to establish businesses in Lithuania, launch new projects, and expand operations into European markets.

At the same time, companies should understand that reduced tax rates apply only if all legal requirements are properly met. For this reason, it is highly recommended to consult with an accountant or tax specialist before making strategic business or tax planning decisions.

Conclusion

Beginning in 2026, Lithuania will introduce updated corporate income tax rates and revised tax incentive rules for businesses. The standard corporate income tax rate will increase to 17%, while the reduced rate will rise to 7%.

At the same time, newly established companies may qualify for a 0% corporate income tax rate during their first two taxable periods, creating a highly attractive environment for startups and small businesses.

The main eligibility criterion for reduced taxation will become the company’s annual revenue threshold of €300,000, while employee count will no longer be relevant when evaluating qualification for reduced tax rates.

These changes may significantly benefit entrepreneurs and small businesses in Lithuania, making it increasingly important for companies to prepare early and structure their operations strategically for the coming years.