Non-taxable income in Lithuania from 2026: what should businesses know?

From 1 January 2026, important tax changes will take effect, impacting both individuals and employers. Some of the most relevant updates include the revision of non-taxable income rules according to the amendments to Article 17 of the Personal Income Tax Law (GPMĮ) and adjustments to the NPD formula.

For companies, these changes matter not only for payroll calculations but also because they directly influence the taxation of vacation pay, daily allowances, and other employment-related payments.
To ensure smooth preparation, it is important to clearly understand what is changing and how it will affect your business accounting.

What changes from 2026 – key highlights

From 2026, several significant tax elements will be updated:

Article 17 of the Personal Income Tax Law is updated, defining which income is non-taxable.
The Non-taxable Income Amount (NPD) and its calculation formula are changing.
The minimum monthly wage (MMA) is increasing, along with related thresholds, such as the non-taxable limit for daily allowances.

These changes affect not only employees’ net pay but also the company's tax burden.

Amendments to Article 17 of the Personal Income Tax Law: non-taxable income from 2026

According to the updated wording of Article 17 of the Personal Income Tax Law, from 2026 the definition of non-taxable income is being clarified and expanded. Among the key changes relevant for businesses and individuals:

1. Income from the sale of assets – income from selling property held for more than 5 years remains non-taxable.
The updated wording more precisely defines when the holding period is counted without interruption (important in inheritance and donation cases).

2. Employer-paid insurance contributions – from 2026, the rules on the portion of insurance contributions paid by the employer that may be exempt from personal income tax (GPM) are clarified.
The non-taxable amount is linked to annual limits applicable to supplementary health or life insurance.

3. Compensation and payments to employees – Article 17 is supplemented and clarified regarding:

Daily allowances paid for business trips.
Compensations for mobile work.
Payments for the use of personal property.

The key point – the non-taxable portion of these payments is linked to the employee’s salary, which is directly affected by MMA changes.

How are the 2026 changes related to the non-taxation of daily allowances?

The increasing MMA (1,153 € gross) from 2026 directly changes the taxation thresholds for daily allowances.

Daily allowances are non-taxable if the salary specified in the employee’s employment contract is not lower than 1.65 × MMA.

This means:

From 2026, this threshold will be 1,902.45 € gross.
If an employee earns less, only up to 50% of their salary amount can be paid as non-taxable daily allowances.

This is important when planning travel budgets, salary policies, and tax risk management.

Changes to NPD: what is different from 2026?

NPD is one of the most sensitive topics for employees, especially those earning low and average wages.

From 2026:

The NPD formula will change.
The non-taxable portion of income will increase for lower-income individuals.
The reduction of NPD as salary increases will be adjusted.

What does this mean in practice?

Some employees will receive higher net salaries.
Companies will need to recalculate payroll systems, salary sheets, and accounting models to avoid errors when declaring personal income tax.

3 steps to prepare for the 2026 changes:

Evaluate the current situation – review employment contracts, employee salaries, travel policies, and additional payment systems.
Update calculation models – adjust accounting to reflect the new NPD, the updated Article 17, and the new daily allowance thresholds. This is especially important for companies with many travelling employees.
Prepare the 2026 budget – the payroll fund will change from 2026 due to new MMA, NPD, and GPM rules. The earlier you calculate this, the smoother next year's planning will be.

UAB “Germalita accounting & consulting” – a reliable partner during tax changes.

We will take care of:

Recalculating payroll under the new rates.
Checking the taxation of business trips and daily allowances.
Correct application of Article 17 of the Personal Income Tax Law.
Calculating NPD according to the 2026 rules.
Updating documents, internal policies, and accounting systems.

Prepare for the 2026 changes with “Germalita accounting & consulting”.

Our goal is for your business to face the upcoming changes calmly and without risk.

Change is inevitable, which is why proper preparation helps turn it from a problem into an opportunity to strengthen your operations.

If you want clarity, accuracy, and professional support – contact us:

+370 5 203 1024
info@germalita.com

UAB “Germalita accounting & consulting” – when accounting becomes peace of mind.