From May 1, 2025, significant amendments to the Law on Value Added Tax (VAT) of the Republic of Lithuania have come into effect, impacting businesses and individuals operating small businesses and applying the small business scheme. These amendments were enacted following the Law on Value Added Tax passed by the Seimas of the Republic of Lithuania on April 10, 2024.
Changes for VAT payers applying the small business scheme
New obligations for small businesses conducting international transactions
From May 1, 2025, small businesses in Lithuania (with annual turnover below EUR 45,000) are required to register as VAT payers if they:
Purchase services from other EU countries,
Purchase goods from other EU countries,
Sell their services to clients in other EU countries.
Previously, businesses with an annual turnover up to EUR 45,000 were not required to register as VAT payers. However, as of this year (May 1), registration has become mandatory when conducting international transactions. The aim of this change is to ensure clearer and fairer trade within the European Union.
Application of the Small Business Scheme in Lithuania
If entrepreneurs choose to apply the small business scheme and meet all necessary conditions, goods or services provided locally in Lithuania can continue to be exempt from VAT.
In other words, businesses will be required to become VAT payers only for international transactions, while they can continue operating as non-VAT payers domestically, provided they select and comply with the conditions set out for Lithuania’s small business scheme.
Exception of the VMI
Additionally, the State Tax Inspectorate (VMI) has provided exceptions for entrepreneurs facing technical difficulties during VAT registration. If a business was unable to register in time as a VAT payer applying Lithuania's small business scheme (from May 1, 2025) due to technical issues, it will not be required to calculate and pay VAT on goods supplied or services provided within Lithuania for the period before VAT registration, provided that their annual domestic turnover remains below the EUR 45,000 threshold.
However, if the business’s turnover exceeded the EUR 45,000 threshold in the previous calendar year or during the current year, the business must immediately register as a VAT payer and cannot benefit from the small business scheme.
In conclusion
Businesses are advised not to delay and to register as VAT payers promptly, and to regularly follow the latest updates and announcements from the State Tax Inspectorate (VMI) to ensure compliance with the new requirements and to avoid potential penalties or administrative difficulties.
These changes are part of a broader EU trend aiming to simplify and enhance transparency in tax administration while ensuring fair competition among companies of varying sizes and markets across EU member states.
If you have any questions regarding the VAT changes - contact us!
