Taxation in Lithuania

The first taxes (duoklė ("tribute"), dėkla (grain and hay trubite) and mezliava [lt]) were paid in farm products.

The Customs also administer the part of value added tax and excise duties where they relate to goods imported and exported.

[1] Such ratio is slightly below the OECD average of 33.8%, but higher than of several other developed economies such as USA, Australia and Switzerland.

[6] Personal income tax (Lithuanian: Gyventojų pajamų mokestis or GPM)[7] is levied on residents and certain non-residents.

Thresholds are adjusted annually based on the national average wage and overall rates may also depend on personal circumstances (number of children, disability reliefs, etc).

They consist of two main taxes: state social insurance (Lithuanian: Valstybinis socialinis draudimas or VSD) and compulsory healthcare insurance (Lithuanian: Privalomasis sveikatos draudimas or PSD).

[10] Individuals other than employees, including the self-employed, sport persons, artists and farmers, may be subject to social security contributions at different rates.

Non-resident companies are taxed on certain income that is considered to originate in Lithuania, such as dividends, interest and royalties, although exceptions exist.

Non-profit organisations, social enterprises, businesses engaged in shipping or some other activities may be taxed on a different basis.

The value added tax (Lithuanian: Pridėtinės vertės mokestis or PVM)[15] is levied on goods and services that are subject to VAT according to law.

The VAT in Lithuania is part of the European Union value added tax system.

[18] The relatively low rates in Lithuania are mostly driven by the presence of a significant black market for cigarettes, which are illegally imported from Russia and Belarus.

At the same time, the excise taxes on alcohol products are substantially higher than the minimum levels required by European Union, exceeding them already in 2004, especially for spirits.

The increases have been driven by budgetary and public health considerations (alcohol consumption in Lithuania is among the highest in Europe),[19] but have attracted criticism for contributing to the widespread black market.

The black market benefits from close proximity to Russia and Belarus, widespread tolerance among the population and the prices of legally available goods being high relative to income.

Therefore, further increasing excise taxes beyond the minimum level set by European Union has been criticized as counter-productive.