Is Your Company Ready for the New Personal Income Tax (PIT) Calculation Rules?
In Lithuania, significant changes to Personal Income Tax (PIT) will come into force on January 1, 2026.
The new system aims to ensure fairer taxation – so that individuals earning higher incomes contribute more, while residents with lower incomes retain a larger share of their net earnings.
At the same time, these changes mean additional calculations for both employers and accountants.
Therefore, it is worth evaluating now how these amendments may affect your company’s financial planning.
What Will Change from 2026?
According to the updated Article 6, Paragraph 1 of the PIT Law, from January 1, 2026, a three-tier progressive PIT system will be introduced, based on the average monthly wage (AMW).
The projected AMW for 2026 is €2,304.5 (gross).
New PIT rates from January 1, 2026:
- 20% rate – applied to annual income up to 36 AMW, i.e. up to €82,962 (gross) per year.
- 25% rate – applied to income from 36 AMW to 60 AMW, i.e. from €82,962 (gross) to €138,270 (gross) per year.
- 32% rate – applied to the portion of income exceeding 60 AMW, i.e. above €138,270 (gross) per year.
In short – the higher the annual income, the higher the applicable PIT rate.
This progressive structure will primarily affect executives, highly qualified specialists, individuals engaged in individual activities, and members of small partnerships (MB) receiving remuneration for management or services rendered.
More information is available on the State Tax Inspectorate (VMI) website and the Sodra website.
Which Income Will Be Aggregated When Calculating Annual Income?
Under the new rules, when calculating total annual income, all income that is not taxed at the 15% rate will be aggregated.
The annual total will include:
- Employment income (salary).
- Remuneration for managing a small partnership (when the manager is an MB member).
- Income from the sale of property if the property was held for less than 5 years.
- Income from individual activities, if not taxed at the 15% rate.
The annual total will not include:
- Dividends and profit distribution income.
- Social insurance benefits – sickness, maternity, paternity.
- Long-term employment benefits.
- Income from the transfer of shares.
- Long-term investments where the asset was held for more than 5 years.
- Life insurance and pension benefits not exceeding the paid contributions that were previously deducted from income.
These changes will unify the tax base and allow state institutions to more accurately assess residents’ annual income and the applicable tax rate.
How Will This Affect Companies and Business Owners?
PIT changes will have both direct and indirect effects on companies:
- Payroll administration – accountants will need to apply new PIT rates, update calculation systems, and ensure all declarations are accurate.
- Executives’ and MB members’ income – individuals receiving higher remuneration or management income may fall into higher tax brackets.
- Financial planning – changes must be incorporated into 2026 budgets and remuneration plans, especially important for small and medium-sized enterprises.
- Tax optimization – new opportunities arise to more efficiently distribute income between salary, dividends, or profit distribution methods.
With proper preparation, PIT changes can become not a threat, but an opportunity to create a more transparent remuneration system, increase employee trust, and avoid unnecessary tax errors.
Tips on How to Prepare for the 2026 Changes:
- Assess your situation – review employee and executive remuneration and evaluate whether they may fall into higher PIT brackets.
- Check accounting software – ensure new PIT rates are automatically applied from 2026-01-01.
- Plan for the impact of tax changes on the budget – include higher taxes in your 2026 financial forecasts.
- Consult with accountants – professional assistance will help avoid misunderstandings and ensure correct tax application.
UAB “Germalita accounting & consulting” – When Numbers Become Peace of Mind
Changes in tax legislation are part of our daily work.
The UAB “Germalita accounting & consulting” team helps businesses smoothly adapt to new PIT rates, ensures accurate accounting, and provides tax planning consultations.
We will take care of:
- Applying PIT rates according to the new regulations.
- Payroll and MB members’ income accounting.
- Practical advice on how to optimize taxes and expenses.
Prepare for 2026 Together with UAB “Germalita accounting & consulting”
Changes are inevitable, but proper preparation is in your hands.
Want PIT changes to be clear, smooth, and hassle-free for your business? Contact us:
UAB “Germalita accounting & consulting” – a reliable accounting partner for your business.
