The Lithuanian government has increased its progressive individual (personal) income tax effective 1 January 2020.
The changes have the effect of eliminating a planned reduction of the income tax burden for certain “high-earning specialists.”
The 2019 tax reform changed the individual income tax from a flat-rate of 15% to progressive rates in the range of 20% - 27% for employment-related income. The change was intended to reduce the effective taxation of income exceeding the ceiling for social security contributions by 5.52 percentage points to attract highly-skilled specialists to Lithuania by providing a favorable tax environment.
However, this reduced tax burden has been eliminated as of 2020, with an increase of the progressive individual income tax rate from 27% to 32%.
The legislation introducing the changes were approved by the Lithuania parliament in December 2019, and then signed by the president in late December 2019. The effective date of the changes is 1 January 2020.
Read a January 2020 report prepared by the KPMG member firm in Lithuania
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.