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Lithuania: Individual income tax measures, effective beginning 2020

Lithuania: Individual income tax measures

The Lithuanian government has increased its progressive individual (personal) income tax effective 1 January 2020.

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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

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