Payroll in Lithuania: 10 Frequently Asked Questions

Payroll in Lithuania

As in any other country, there are specific particularities and requirements considering payroll in Lithuania. In this article we will answer the most frequently asked questions about this topic.

What are the legal requirements for withholding taxes and social security contributions from employee pay?

In Lithuania, the state requires employers to withhold personal income tax (PIT) and social security contributions from the employee pay. The PIT rate varies depending on the employee’s income level (from 20% to 32%), and the social security contribution rate is at around 24% for most employees. For more insights on the topic, read: The Minimum Wage in Lithuania: 2023.

How often must payroll taxes be remitted to the government?

Taxes regarding payroll in Lithuania, including PIT and social security contributions, must be remitted to the government on a monthly basis. Employers must file a monthly declaration and make the necessary payments by the 15th day of the following month.

What are the penalties for failing to comply with payroll tax laws in Lithuania?

Employers who fail to comply with payroll tax laws can face penalties including fines, interest charges, and penalties for late payments. In addition, employers may be subject to criminal liability for certain types of non-compliance.

How do I calculate the amount of payroll taxes that need to be withheld from employee pay?

Employers can use the employee’s gross salary and the current tax and social security contribution rates to calculate the amount of taxes regarding payroll in Lithuania that need to be withheld from employee pay. You can also use our salary calculator which is taking everything into account.

What are the rules for calculating vacation pay and other benefits?

In Lithuania, you should count the vacation pay based on the employee’s average salary during the average of 3 months preceding the vacation. You should count additional benefits such as sick leave pay, maternity leave pay, and paternity leave pay based on the employee’s average salary.

How do I register my company for payroll tax purposes?

To register a company for payroll tax purposes, employers need to submit an application to the Lithuanian State Tax Inspectorate. The application must include information about the company, its owners, and its employees. Employers must also provide a certificate of registration from the Register of Legal Entities.

Are there any specific laws or regulations that apply to foreign workers in Lithuania?

Foreign workers in Lithuania are subject to the same payroll tax laws and regulations as domestic workers. However, employers may need to obtain work permits for foreign workers from outside of the EU, for instance, D-type visas. 

How do I handle payroll for remote or international employees?

Employers must handle payroll for remote or international employees in the same way as for domestic employees. However, employers may need to register the employee with the appropriate tax and social security authorities in the employee’s home country. On the contrary, if you are hiring a remote employee in Lithuania, you need to organize the payroll as if your company was in Lithuania. In such situations it makes sense to outsource. We provide this service, so contact us any time. 

What is the process for paying severance or termination pay?

You should calculate severance pay and termination pay based on the employee’s average salary over the 3 months preceding the termination of the contract. Employers must make these payments on the last day of the employment or within 10 days from the last day of the employment.

How do I handle changes to employee information, such as address or tax withholding status?

Employers must inform the Lithuanian State Tax Inspectorate of hiring or firing employees, as well as of their monthly salaries. Employers must also update their own records to reflect these changes.In conclusion, payroll in Lithuania might take a lot of attention and patience. It’s always a good idea to enhance this process with outsourcing or purchasing specialized payroll software. Thankfully, we provide both, so if you need payroll services in Lithuania, don’t hesitate to contact us! You can also read more about our software here.