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Tax News - Taxation and Salary Changes in Lithuania - 2021

Changes of minimum monthly salary from 1 January 2021

Leinonen's team wishes to inform you that the minimum monthly salary has been increased by the Lithuanian Government as from 1 January 2021 as follows:

·minimum monthly salary will be EUR 642;

·minimum hourly salary will be EUR 3,93.


Below is the table with the comparison of minimum rates applied until 31 December 2020 and from 1 January 2021:

 

Till 2020.12.31

From 2021.01.01

Minimum monthly salary

EUR 607

EUR 642

Minimum hourly salary

EUR 3,72

EUR 3,93

 
Untaxable income amount

From 2021 there are changes in formula of untaxable amount calculation. In the table below, we provide comparative information about untaxable income amounts till the end of December, 2020 and their changes from 2021.        

 

Variable monthly untaxable income amount (MUIA) (formula)

Untaxable income amount for limited working capacity

0-25%

30-55%

Till 2020.12.31

MUIA=400-0,19*(MEI- 607)

EUR 645

EUR 600

From 2021.01.01

MUIA=400-0,18*(MEI- 642)

EUR 645

 EUR 600

The following abbreviations are used in formula:

·MEI – monthly employment income;

year.

 

MUIA is applicable if monthly salary amount is up to 2 864,22 EUR (in 2020 – up to 2 712,26 EUR).

Personal Income Tax (PIT) in Lithuania

From 2021 there are no changes of PIT rates. However, progressive PIT rate of 32% will be applicable if employment income exceeds 60 average monthly salaries (hereinafter – AMS) (in 2020 - 84 AMS). In the table below, we provide comparative information about PIT rates in 2020 and their changes from 2021.

 

Standard PIT

Progressive PIT

When progressive PIT is applied?

Till

2020.12.31

20%

32%

For the part of employment income  exceeding 84 AMS*(EUR104 277,60)

From

2021.01.01

20%

32%

For the part of employment income exceeding 60 AMS* (EUR 81 162)


*illness, maternity, paternity, parental leave pays and payments from long-term unemployment fund are not included into income from which progressive PIT is calculated.


Social Security Contribution (SSC) in Lithuania

The main changes regarding the social security contribution are:


·the higher rate of contribution of additional pension accumulation: 2,4% instead of 2,1%;

·higher social security contribution floors;

·lower social security contribution ceilings.

Starting 1 January 2021, the rate of the contribution of additional pension accumulation will be 2,4% and it will be increased gradually up to 3% till 2023.

Employers have to pay additional social security contributions for part-time employees whose monthly salary is lower than minimum monthly salary (hereinafter MMS) from gross amount of MMS. Regarding the changes of MMS from 2021, the minimum amount from which social security contributions should be paid is 642 EUR (in 2020 – 607 EUR).

In the table below, we provide comparative information about social security contribution rates and their changes from 2021.

 

 

SSC (employee’s)

Transfer to additional pension fund (voluntary)

SSC (employer’s)

Ceilings to SSC*

From 2020.01.01

19,50%

2,1% or 3%

1,77%

For the part of employment income exceeding 84 AMS (EUR 104 277,60)

From 2021.01.01

19,50%

2,4% or 3%

1,77%

For the part of employment income exceeding 60 AMS (EUR 81 162)

From 2022.01.01

19,50%

2,7% or 3%

1,77%

For the part of employment income exceeding 60 AMS

From 2023.01.01

19,50%

3%

1,77%

For the part of employment income exceeding 60 AMS

*except 6,98% of health insurance


Netting of taxes between STI and SSIFB

We would like to inform you regarding the changes in Tax Administration Law. According to Tax Administration Law No. IX-2112 amendment of Articles 14 and 87, from 1 January 2021 the overpayment of taxes, administrated by the State Tax Inspectorate (STI) can be used to net the payable amounts of taxes, administrated by the State Social Insurance Fund Board (SSIFB) and the other way around, i.e. the overpayment of taxes, administrated by SSIFB can be used to net the payable amounts of taxes, administrated by the STI.

Furthermore, according to the above-mentioned changes, the refund of the overpaid taxes can only be made if the Company will not have any payable amounts of other taxes to STI or SSIFB.

Please be noted that at the moment the exact procedure of tax netting is being developed by the State Institutions.


0% VAT rate is applicable to COVID-19 tests and vaccines in Lithuania

From 1 January 2021 Article 19 of Lithuanian Law on VAT was supplemented by Part 5, which states that preferential 0 percent VAT rate is applicable for COVID-19 vaccines. Moreover, the mentioned adjustment indicates that preferential 0 percent VAT rate is also applicable for in vitro diagnostic medical devices for the diagnosis of COVID-19 disease (coronavirus infection). Please be informed that exemption is applicable regardless of the origin of the funds paid for the vaccine and tests and is valid until 2022-12-31. We would like also to note that the application of the mentioned 0 percent VAT rate will give suppliers the right to deduct input VAT.

5% VAT rate is applicable to electronic periodical publications

From 1 January 2021 Article 19 of Lithuanian Law on VAT was supplemented by Point 3 of Part 4, which states that preferential 5 percent VAT rate is applicable for electronic newspapers, magazines and other periodical publications, whether or not they are in paper form. The mentioned exemption is not applicable for technical, bibliographic and similar databases, as well as to those publications the majority of which consist of music or video content. Moreover, the exemption is also not applicable for paper and electronic publications of an erotic and / or violent nature or which do not comply with professional ethics, which have been recognized as such by an authorized institution, and publications where paid advertising consist for more than 4/5 of the total publication.



Please do not hesitate to contact us if you have any questions.


08.01.21


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Aistė Baltutė

Aistė Baltutė

Controller/Payroll Manager

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Mobile: +370 685 06255

Email: aiste.baltute(at)leinonen.lt

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