Tax changes from 2022

Amendments to the Law on Personal Income Tax from 2022

1. From 2022 the minimum monthly wage increases

• minimum monthly wage 730 EUR;  
•  minimum hourly wage 4,47 EUR.

2. Tax-exempt amount of income (hereinafter - TEA)

The TEA calculation formula and the size of the TEA for people with disabilities will change from 2022. Below is a comparative table of changes of TEA from 2022.

* Abbreviations used in TEA calculation formulas

• MI – the monthly income of the resident related to the employment relationship or to the relationship that is consistent with the essence of employment relationship.
• AIR - annual income of the resident. 

TEA no longer applies when the monthly wage exceeds 2 865 EUR. The threshold for applying the annual TEA in 2022 remains the same as in 2021, i.e., 34 370,67 EUR.

3. Personal income tax (hereinafter - PIT)

The employee's annual income threshold, at which the PIT rate of 32% is applied, changes. The PIT rate of 32% will be applied to the part of the employee's income from employment exceeding 60 average wages (hereinafter - AW; 90,246 EUR).

4. The State Social Insurance Fund Board taxes

Employers must pay social security tax from at least the minimum monthly wage. From 2022 with the increase in minimum monthly wage in Lithuania, the minimum amount from which social security tax must be calculated is 730 EUR. The table below provides a comparative analysis of social security tax changes.

Amendments to the Law on Corporate Income Tax from 2022

1. Special rule for the elimination of the cause of non-compliance with the tax system (enters into force on 1 January 2023)

The Law on Corporate Income Tax (hereinafter - CIT) has been supplemented with a special rule for eliminating the cause of non-compliance with the tax procedure. The special rule eliminates one of the causes of tax inconsistencies - different legal regulation or treatment of the taxable unit (hybrid entity) - and thus prevents the consequences of tax inconsistencies.

The reason for the discrepancies in the tax procedure is eliminated by treating the Lithuanian hybrid entity as a Lithuanian taxable entity. In order to avoid double taxation of the same income, the tax base of such an entity includes the part of the income that is not otherwise.

2. Special income tax exemption for large projects that carry out research and experimental development activities (enters into force on 1 January 2023)

The amendment to Article 58 of The Law on CIT stipulates that the income tax exemption for the income from the use of the relevant intellectual property assets of companies carrying out large investment projects for large projects shall apply only to those taxpayers which are engaged in research and experimental development activities and subsequently receives revenue from the use of the relevant intellectual property assets.

3. The inventory write-off method used in the financial accounting for tax purposes (enters into force from 1 May 2022, but may be used to calculate taxable profit for the entire 2022 tax year)

Paragraph 4 of Article 57 of The Law on CIT is repealed, so it will no longer be necessary to obtain permission from the tax administrator if, in calculating taxable profit, the taxpayer was required to apply for permission to use the inventory pricing method used by the entity in preparing the set of financial statements (e.g., FIFO → LIFO). The inventory write-off method used in financial accounting will be used for tax purposes.

4. On 2022 January 31 the transitional provisions applicable to the United Kingdom will expire and this country will not be considered an EU Member State

Amendments to the Law on Value Added Tax from 2022

1. Amendment and supplementation of Article 15 of the Law on Value Added Tax

An amendment to Article 15 (16) of the Law on Value Added Tax (hereinafter - VAT) entered into force on 29 December 2021, which stipulates those services subject to VAT under Article 13 of the Law on VAT or another Member State's VAT legislation must be deducted when calculating the taxable value of reimported goods.

2. Application of the reverse charge VAT mechanism to insolvent companies and timber supplies

From 1 January 2022 Article 96 (1) (4) of the Law on VAT on the reverse charge mechanism shall cease to apply in cases where the goods and services are supplied by a taxpayer against which bankruptcy proceedings have been opened and when certain timber is supplied.

3. Amendments and supplements to Articles 36 and 47 of the Law on Value Added Tax

The amendment to Articles 36 and 47 of the VAT Law shall enter into force on 1 January 2022. The amendment provides VAT exemption for goods and services procured in Lithuania by the European Commission or bodies and agencies established by the EU institutions or imported into Lithuania for the performance of tasks related to COVID-19 (coronavirus infections) and which will not subsequently be supplied or provided for profit.

Imports of such goods are not subject to VAT, and the supply of goods (or supply of services) is taxed at 0% VAT rate. 

Changes in Intrastat arrivals and dispatches reporting thresholds from 2022

Intrastat reports should be provided by those VAT payers whose annual value of dispatches and arrivals of the previous year exceeded the thresholds of submission of Dispatch Intrastat reports and/or Arrival Intrastat reports for the following year. These thresholds are calculated each year for the calendar year and published by the Statistics Lithuania.

The above information is prepared by the Leinonen Lithuania tax team.

If you have any questions, please contact Leinonen Lithuania Tax Team. Our team will be happy to provide more detailed information on the above changes.

Virginija Guleva

Head of Tax & Legal

virginija.guleva@leinonen.lt