Lithuania’s Cabinet of Ministers on Wednesday approved a package of tax changes proposed by the Finance Ministry which will now be forwarded to Parliament for its consideration.
Prime Minister Gintautas Paluckas says that the changes will have a fiscal impact of around EUR 280 million in 2026, boosting GDP growth by nearly 0.3%. In 2027, the impact is expected to reach between EUR 560 and 580 million, as well as a boost of 0.6% in GDP.
“Despite some very interesting arguments, discussions and facts in the public sphere that have nothing whatsoever to do with reality, I wish to make it clear that these changes mean that EUR 345 million in defence funding will go directly into our Defence Fund in 2026, followed by EUR 513 million in 2027,” Prime Minister Paluckas told his Cabinet.
He also insisted that the changes will not “dramatically undermine” business competitiveness or place “economic or financial pressures” on the most vulnerable groups in society, but they will help to address strategically important issues and challenges.
The real estate tax is the most controversial element in the package, and it has been revised several times. The latest version approved on Wednesday states that municipalities can set tax-free thresholds for primary residences, while property values above those limits would be taxed at a rate ranging from 0.1% to 1%.
Rates between 0.5% and 3% that are set by municipalities would continue to apply to commercial real estate. The government has proposed that the rate be raised by another 0.2%.
A previously proposed 36% personal income tax on earnings which exceed 120 average monthly wages (the average monthly wage is around EUR 1,600) has been scrapped. A new 25% rate is to be introduced in addition to existing 20% and 32% brackets.
Finance Minister Rimantas Sadzius says the 15% income tax rate that is currently applied to dividends will also apply to profits from the sale of shares, stakes or company equity held for ten years or more.
The standard corporate tax rate is to rise by 1% to 17%, while the reduced rate will also increase by 1% to 7%.
The government is also proposing excise taxes on sweetened beverages and on employee benefits exceeding EUR 350 in value in those cases in which employers pay for private health insurance.
The value added tax on district heating, hot water and firewood is to rise from 9% to 21%, with a reduced VAT rate on books and non-periodical publications dropping from 9% to 5%. The 9% VAT rate on accommodations, passenger transport and cultural events is to be raised to 12%.
The proposal also includes a 10% tax on all non-life insurance contracts except for mandatory third party liability insurance for personal vehicles.
If Parliament passes the tax package by July 1, the changes will take effect next year.
Source: BNS
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