Seimas enacted new personal income tax rate, separate taxation for farmers, additional tax-exempt amount of income

Press release, 26 June 2025 (News ● Photos ● Broadcasts and videos)

The Seimas passed amendments to the Law on Personal Income Tax (PIT) enacting a new PIT rate, introducing separate taxation for farmers and an additional tax-exempt amount of income (ATEA) for persons with children, and including income from individual activities in general progressive taxation.

The amendments to the Law on PIT (draft No XVP-436(2)) were passed by 78 votes in favour, with 46 votes against.

New PIT rate introduced

The Seimas decided to introduce a new 25% PIT rate alongside the rates of 20% and 32% already in place.

Under the new provisions, annual income below 36 amounts of average monthly earnings (AME) will be subject to a rate of 20%, though there will also be exceptions according to which lower rates will apply to such annual income.

Annual income other than income incidental to employment relations or relations in their essence corresponding to employment relations which does not exceed 12 amounts of AME will be subject to a PIT rate of 15%. Annual income other than income from individual activities derived from the sale of waste which does not exceed 12 amounts of AME will be subject to a PIT rate of 15%.

Annual income between 36 and 60 amounts of AME will be subject to a rate of 25%, and the annual part of income in excess of 60 amounts of AME will be subject to a rate of 32%.

Farmers will be subject to 15% and 20% PIT rates

At the time of passing of the legislation, the Seimas decided to establish a progressive taxation system for income from agricultural activities that would be separate from other types of income.

According to the amendments to the law passed by the Seimas, the annual part of the taxable income of natural persons engaged in agricultural activities that does not exceed 60 amounts of AME will be taxed at an income tax rate of 15% and an income tax credit will be applied. The part of income in excess of 60 amounts of AME will be taxed at an income tax rate of 20%.

Income from individual activities will be subject to general progressive taxation

The Seimas decided to include income from individual activities in general progressive taxation, however at the same time the lower-income taxation regime will be maintained and the effective tax rate for higher income will be increased gradually.

Annual taxable income from individual activities not exceeding EUR 42 500 will be subject to a tax rate of 20%, while income not exceeding EUR 20 000 per year will be subject to a 15% tax credit, thus maintaining the 5% threshold for the effective PIT rate.

The amendments introduce a decreasing tax credit, with the effective PIT rate reaching 15% for taxable income in the amount of up to EUR 35 000 and 20% for taxable income in the amount of up to EUR 42 500 (thus maintaining the current tax burden on taxable income not exceeding EUR 35 000). Annual taxable income from individual activities in excess of EUR 42 500 will be taxed at the basic PIT rates.

The Seimas increased the income threshold above which income from activities conducted under a business certificate will be taxed at a rate of 15%. A fixed amount of income tax (for those conducting activities under a business certificate) may be levied on income from individual activities not exceeding EUR 50 000 per tax period, also income from the leasing of property immovable by nature (currently, this threshold is equal to EUR 45 000).

ATEA – from 2027

The Seimas enacted an additional tax-exempt amount of income for persons with children, however at the time of passing of the amendments, it was agreed to apply it from 1 January 2027. 

It was agreed to apply an additional amount of EUR 87 of tax-exempt income per month for each child/adopted child, which will make up EUR 1 044 per year or EUR 208.8 (after tax) per child. This will apply to both employees and self-employed persons.

Other relevant developments

The amendments also provide for the taxation of employee benefits exceeding EUR 350 in value when the employer pays for self-insured health insurance contributions.

A 15% income tax rate will apply to income from the sale or other transfer into ownership of shares (interests, member shares) acquired otherwise than through an investment account if these shares were acquired earlier than five years before the date of their sale or other transfer into ownership.

The same rate will be applied by a decision of the Seimas to income from the sale or other transfer into ownership of shares acquired through options from an employer or a person related to the employer, or by other means of granting shares to employees, if the employee sold or otherwise transferred the shares not earlier than three years after the date of emergence of the right to acquire the shares.

Rimas Rudaitis, Adviser, Press Office, Information and Communication Department, tel. +370 5 209 6132, e-mail: [email protected]