Expatriating to Lithuania as a European entrepreneur: 0% CIT for 2 years, then what?
Lithuania offers 0% CIT for new companies in their first two years. Vilnius has a thriving fintech scene. But the clock runs out — and Latvia's 0% never does.
The Lithuanian tax framework in 2026
A time-limited 0% startup exemption followed by a competitive but not deferral-based system.
Corporate Income Tax
Standard CIT is 17%. Small companies (under 10 employees, under EUR 300,000 revenue) benefit from a 7% reduced rate. New qualifying companies can apply for 0% CIT in their first two tax years. After that, the 7% or 17% rate applies annually on all profits.
Personal Income Tax
Lithuania applies a flat 20% PIT rate. A higher rate of 32% applies to income above approximately EUR 101,000 per year. Social security contributions for employees are 19.5%, and employers pay 1.77% on top.
VAT
Standard VAT is 21%. Reduced rates of 9% and 5% apply to specific goods and services such as books, medicines, and renovations. Lithuania uses the euro and is a full EU and Schengen member.
Fintech hub status
Vilnius has become one of Europe's leading fintech hubs. Over 200 fintech companies are licensed in Lithuania. The Bank of Lithuania's regulatory sandbox and fast licensing process attract financial services businesses across Europe.
Why entrepreneurs choose Lithuania
0% CIT for the first 2 years
New companies meeting the eligibility criteria can enjoy 0% CIT for their first two tax years. This provides genuine tax relief during the startup phase when cash flow is most critical.
European fintech licensing hub
Lithuania is the EU's fastest and most accessible jurisdiction for fintech, payment institution, and electronic money institution licensing. Ideal for financial services startups needing an EU licence.
Full EU and Schengen member
Lithuania has been a full EU and Schengen member since 2004. Euro adopted in 2015. Strong rule of law and transparent regulatory environment.
Affordable and growing Vilnius
Vilnius offers a lower cost of living than most Western European capitals, with a growing international business community and excellent quality of life. English is widely spoken in business.
The real pain points of Lithuania
0% CIT expires after 2 years
The startup tax exemption is time-limited. After two years, you pay 7% or 17% annually on all profits. Latvia's 0% on retained profits has no time limit — it applies indefinitely as long as you reinvest.
19.5% employee social security
Employee social security contributions of 19.5% are higher than Latvia's. For businesses with multiple employees, this creates a significant additional labour cost.
32% PIT above EUR 101,000
For high earners, Lithuania's PIT jumps to 32% above EUR 101,000. This significantly reduces the attractiveness for successful entrepreneurs taking large salaries.
Eligibility conditions for 0% CIT
The startup 0% CIT exemption has strict eligibility conditions. The company must be new, small (under 10 employees, under EUR 300,000 revenue), and have no connection to existing companies. Not all entrepreneurs qualify.
Latvia's 0% on retained profits does not expire after 2 years — it is permanent
Lithuania's startup 0% CIT is a 2-year benefit. Latvia's SIA offers 0% on retained profits indefinitely. For a business with a 10-year growth horizon, this difference is enormous. Both are Baltic EU and Schengen members with similar costs of living — but Latvia's tax model has no expiry date.
Full Lithuania vs Latvia comparisonLithuania vs Latvia at a glance
| Lithuania | Latvia | |
|---|---|---|
| CIT on retained profits | 0% (2 yrs), then 7-17% | 0% (permanent) |
| Personal income tax | 20% (32% above EUR 101k) | 23% |
| VAT | 21% | 21% |
| EU & Schengen | Yes | Yes |
| 0% CIT duration | 2 years only | Unlimited |
Frequently asked questions
Standard CIT is 17%. Small companies (under 10 employees, under EUR 300,000 revenue) pay 7%. New companies meeting eligibility criteria pay 0% for their first two tax years. After the two-year period, the standard 7% or 17% rate applies on all profits each year.
New Lithuanian companies can apply for a 0% CIT rate for their first two tax years. To qualify, the company must have fewer than 10 employees, annual revenue under EUR 300,000, and must not be a reorganisation or related to an existing company. After the two-year period ends, standard rates apply.
Both are Baltic EU and Schengen members with comparable costs of living. Lithuania's 0% CIT for startups is attractive but expires after 2 years. Latvia's 0% on retained profits is permanent and unlimited. For entrepreneurs with a multi-year reinvestment strategy, Latvia's model is definitively more advantageous. Lithuania's fintech licensing edge is relevant specifically for financial services companies.
Lithuania or Latvia? Let us show you the long-term difference.
Book a free call. We will model what Lithuania's expiring 0% means for your business vs Latvia's permanent deferral over 5 and 10 years.